Law firm brings cannabis to the forefront

By Douglas Levy
The Daily Record Newswire

DETROIT, MI - When putting together Dykema Gossett PLLC's newly launched Cannabis Law practice group, R. Lance Boldrey said he did some surveying.

The results surprised him.

Last November he asked attorneys in the firm's Michigan and out-of-state offices about their legal experience in the marijuana industry.

"We expected to find maybe a few people across the firm who represented clients in this space," Boldrey said. "We did not expect to find we had 28 lawyers or lobbyists who had been or were engaging in substantive cannabis industry projects. And since then, it's been growing."

Boldrey, who chairs the Cannabis Law group from within Dykema's public policy department, said most business for the group centers on lobbying, legislation and rulemaking. But other sectors such as intellectual property, land use and zoning, labor and employment, product safety and taxation also make up the group.

"Nearly every area of legal practice has the potential to be involved in cannabis-based work as new laws" evolve, he said.

"It's an industry we've seen as an emerging one, but we've also seen enough work in different pockets of the firm to justify creating a practice group. It took some time for everybody to come to the conclusion that this was an industry that was going to stay and would grow and have a significant demand for legal services."

While attorneys at other large Michigan law firms have cannabis law clients sprinkled within their practice, Boldrey said Dykema is first large law firm in Michigan to classify such a business as a group.

"We're the first to formalize this effort and pull together folks from across the firm to make it a real practice," he said.

A strong trend line

Boldrey said the idea for the group began germinating during Michigan's 2008 ballot campaign. Dykema served as election law counsel for the entity that drafted and ran the campaign for the medical marijuana initiative, which got voters' approval.

"But there wasn't a lot of legal work in the area, at least in terms of business law work, until the big change we saw, which was the authorization of adult [recreational] use in Colorado and Washington state," he said. "It started to get people's attention and we started to get more sophisticated clients examining this space."

Other states in which Dykema serves clients also had medical marijuana initiatives approved. Boldrey said 24 states and Washington, D.C., have legalized marijuana for medicinal purposes, while four states and D.C. have legalized marijuana for adult recreational purposes.

"The trend line is accelerating," he said. "There are six states with potential ballot measures in November to legalize for recreational use, and four that will likely have medical marijuana ballot measures, and there are other states moving through their state legislative process. Everyone sees this trend line continuing."

Boldrey said California could end up being the biggest catalyst for nationwide marijuana reform, as it recently enacted medical marijuana regulation and has recreational use on the November ballot.

The only wild card, he said, is the fact that it's still illegal to possess cannabis, which remains a schedule 1 controlled substance.

"All of this activity in all of these state industries are really dependent on the federal government exercising prosecutorial discretion," Boldrey said. "And with a change in administration, there's a possibility things could go the other way."

Pushing for regulation

Boldrey said a change in administration is just what made things bit of a mess after the 2008 Michigan election.

When the medical marijuana initiative was crafted in 2007 for the 2008 ballot, "there was a real concern that if the initiative was going to provide for [medical marijuana] dispensaries, that would make the initiative a lot more politically challenging to get passed," Boldrey said.

"So the Michigan initiative does not specifically provide for retail sale of marijuana. That was a very intentional choice, and at the time it was crafted, people didn't foresee the political dynamics that we had in the 2008 election," he said.

He explained that in 2007 Hillary Clinton and Rudy Guiliani were considered the presidential front runners - but the political landscape shifted sharply once Barack Obama gained speed and won.

In the aftermath of November 2008, no regulatory framework was put in place for Michigan dispensaries, though Boldrey said a number of efforts could change that.

The House in 2015 passed legislation, House Bill 4877, to create a regulated system, while three recent bills - HBs 4209, 4210 and 4827 - concern cannabis extraction, a "seed-to-sale" tracking system and business protections.

"There's some hope that regulated system will be enacted yet this year. That will provide a lot more legal work as well as a much better framework for the industry itself, as well," Boldrey said. "Because instead of having all these dispensaries or caregiver centers that have arisen by virtue of local law enforcement or cities looking the other way, we will actually have a state-license system and we won't have this unregulated activity taking place."

He added, "It'll also give the municipalities a clear and defined role in enacting their own zoning and regulation of dispensaries. It will be a much cleaner system for everyone and it would mirror what we've seen in a lot of other states."

Clients big and small

But just because the system isn't "cleaner" doesn't mean cannabis business within it is nonexistent.

And that's where Dykema's practice group comes in, Boldrey said.

For example, on the product safety side, Boldrey said the group as an FDA specialist who's already advised some companies that manufacture cannabis-infused foods - more commonly known as "edibles" - on product labeling issues.

"Those products aren't covered under the food law today, but nevertheless people need to pay attention," he said. "A couple of weeks ago in Colorado, the first products liability suit was filed against an edibles manufacturer and the dispensary that sold the products."

For labor and employment, the group's lawyers advise non-cannabis businesses on the applicability of their drug policies when an employee is a medical marijuana patient.

Boldrey said biggest types of clients are the large-scale growing operations and dispensary associations, in addition to the National Patients Rights Association and some of the dispensary owners guilds, who need lobbying efforts.

"We have folks involved in preparing offering memoranda for California businesses that are raising capital to construct large-scale commercial growing operations," he said.

Meanwhile some of the smaller clients are individuals who need work with employment contracts or joint-venture agreements. Boldrey said one client is in the analytics business and is consulting with Washington state marijuana organizations on their customer bases and other opportunities.

In addition, he said ancillary businesses - particularly those in agriculture -are starting to see cannabis as a business opportunity.

"We met with a Wisconsin-based company that manufactures distilling equipment used for processing oils in the agricultural industry," Boldrey said. "They never in a million years thought of cannabis as an opportunity until some of the cannabis extraction companies discovered their products a few years ago.

"That [cannabis] extraction business base has gone from exactly none of its customer base to 25 percent of their sales today."

Boldrey said that Dykema's own business base must be handled with great care.

He said one of the biggest issues for lawyers to deal with is the ethical issues created by the sale and possession of cannabis remaining illegal under federal law.

"Under MRP 1.2, lawyers cannot counsel or assist a client with violating the law," Boldrey said. "So we have to very carefully delineate the services we can provide, such as advising a client on how to be compliant with state law, and the services we cannot provide, such as assisting a client in escaping federal liability.

"This also means doing due diligence on the clients themselves to determine if we want to take them on in the first place."

Published: Mon, Jun 13, 2016

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