How do California’s revised Rules of Professional Conduct affect the ethical dilemma of a lawyer who is asked to provide legal services to a cannabis enterprise?
The revised rules include a new Rule 1.2.1, which essentially follows the language of American Bar Association (“ABA”) Model Rule 1.2 (d) and makes it unethical for a lawyer to “assist a client in conduct that the lawyer knows is criminal, fraudulent or a violation of any law...” Although the laws of California and many other states have become more lenient with respect to cannabis—including by the passage of Proposition 64, which allowed the recreational use of cannabis beginning on January 1, 2018—new Rule 1.2.1 may make the lawyer’s ethical position more difficult.
Since the adoption of the Controlled Substances Act in 1970, cannabis has been classified as a Schedule I drug.1 Thus, under federal law, any use of cannabis— whether for medical, recreational, or even experimental purposes—remains potentially criminal. California law was consistent with this regime until 1996, when California adopted the Compassionate Use Act (Cal. Health & Safety Code § 11362.5). While the Compassionate Use Act did not technically “legalize” cannabis, it provided that medicinal uses, in conformity with the restrictions in the law, would not be prosecuted as violations of California law. Users, prescribers, and suppliers of medical cannabis in California were nevertheless still subject to prosecution under federal law for violation of the Controlled Substances Act and other federal laws governing, for example, money laundering and bank secrecy.
In 2009, the U.S. Department of Justice alleviated some of the anxiety produced by the conflict between state and federal law by issuing a memorandum that described the enforcement priorities that the Department would follow in dealing with individuals who acted in “clear and unambiguous compliance” with state medical marijuana laws.2 Additional memoranda followed in 2013 and 2014 that clarified the Department’s policies and priorities.3 The Cole Memoranda reiterated “the Department’s commitment to enforcing the [Controlled Substances Act] consistent with Congress’ determination that marijuana is a dangerous drug that serves as a significant source of revenue to large-scale criminal enterprises, gangs and cartels,” but confirmed that the Department’s enforcement activities would focus on marijuana-related conduct that implicated one of the eight priorities identified in the memoranda (including, e.g., preventing distribution to minors, preventing marijuana revenue from going to gangs or cartels, preventing smuggling, preventing violence and use of firearms, etc.)
The ethical dilemma, however, remained. Model Rule 1.2(d) states that, “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent…” California’s ethical rules contained a similar provision, but with somewhat different wording. California Rule 3-210 provided, “A member shall not advise the violation of any law…unless the member believes in good faith that such law…is invalid.”
Thus, a lawyer who was asked to draft a lease for a cannabis dispensary or to negotiate a partnership agreement for a medical marijuana business or to advise a medical marijuana business with respect to how it might handle the proceeds of the business without violating federal banking law could technically still be accused of aiding in the commission of a federal crime and, could face charges of violating ethical duties under the Model Rules or under the California rules.
In 2015, the Bar Association of San Francisco published a thoughtful opinion in which it held that a lawyer whose client asked for assistance in “negotiating a lease, and obtaining financing, a use permit and a business license” for a medical marijuana dispensary would not violate ethical rules by providing those services. S.F. Bar Opinion 2015-14 stated:
A California attorney may ethically represent a California client in respect to lawfully forming and operating a medical marijuana dispensary and related matters permissible under state law, even though the attorney may thereby aid and abet violations of federal law. However, the attorney should advise the client of potential liability under federal law and relevant adverse consequences and should be aware of the attorney’s own risks.
S.F. Bar Opinion 2015-1 recognized that “California law obviously conflicts with federal law” and cautioned that, while the Department of Justice had provided guidance through the issuance of the Cole Memoranda, “nevertheless, violation of the [Controlled Substances Act] is still a crime under federal law and is still subject to discretionary enforcement.” Because of these risks, the opinion emphasizes that California residents require legal representation “to ensure compliance with state laws, ordinances, and regulations and to minimize the risks of criminal prosecution and exposure under federal laws and policies.” And it points out that it is the duty of the bar to make legal counsel available to those who need it.5
With admirable directness, S.F. Bar Opinion 2015-1 states, “We do not believe that the State Bar Act or California Rules of Professional Conduct should be used to discipline lawyers whose clients seek advice on how to comply with state or local laws when the client’s proposed conduct may violate the Controlled Substance Act.” While acknowledging that the plain language of California Rule 3-210 provided unambiguously that “a member shall not advise the violation of any law… unless the member believes in good faith that such law… is invalid,” the opinion argues that the Rule cannot apply to a situation that was unforeseen when the Rule was adopted. The opinion states:
However, this situation is unique. Rule 3–210 did not anticipate it. We know of no other subject in which California law permits what is forbidden by federal penal law. The state’s public policy conflicts with federal law. Even if the lawyer does not believe that the federal laws regarding marijuana are invalid, we conclude that he or she may advise and assist the client in complying with state laws.
S.F. Bar Opinion 2015-1 also examined the difference between California’s Rule 3-210 and Model Rule 1.2 (d). The Model Rule, the opinion notes, “contains a broader proscription and it does not just prohibit a lawyer from advising a client to violate the law.” Instead, the Model Rule states that a lawyer “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent…” The California rule “does not expressly proscribe assisting a client in conduct that the lawyer knows is permissible under state law but criminal under federal law.” Even if Model Rule 1.2 (d) applied in California, the opinion concludes, “[W]e do not believe that it should deprive California residents of candid advice and advocacy. An ethical lawyer should not be limited to the bare words of a disciplinary rule in deciding upon commitments to the client or duties to the public.” The opinion concedes, however, that states interpreting Model Rule 1.2 (d) have issued “inconsistent and sometimes, inconclusive, ethics opinions.”6
New California Rule 1.2.1 is virtually identical in its language to the Model Rule and thus is subject to being interpreted in the same way. Neither the new rule nor the comments to the rule include an explicit reference to cannabis. Indeed, a public comment “argued in favor of adding an explicit medical marijuana example in the rule but the Commission did not make that change because California laws regulating marijuana cultivation and consumption are subject to change in the near future.”7
The new rule does, however, include a new Comment  that, without specific reference to the cannabis dilemma, allows a lawyer to “advise” the client concerning California laws that might conflict with federal or tribal laws, and it allows the lawyer to “assist a client in drafting or administering or interpreting or complying with, California laws, . . . even if the client’s actions might violate federal or tribal law.” (emphasis supplied) The Comment adds, “If California law conflicts with federal or tribal law, the lawyer must inform the client about related federal or tribal law and policy and under certain circumstances may also be required to provide legal advice to the client regarding the conflict.”
While Comment  seems intended to insulate lawyers from ethical jeopardy if they provide assistance to clients that complies with California law, the plain language of the Comment does not appear to go far enough. While the rules and comments in other states allow lawyers to assist in “conduct” that complies with state law but violates federal law, the California Comment allows a lawyer to assist in “drafting or administering or interpreting or complying with, California laws.” It is difficult to understand how negotiating a lease, obtaining financing, a use permit and a business license for a marijuana dispensary8 could constitute “drafting or administering or interpreting or complying with California laws.”
In this author’s reading, new Rule 1.2.1 and its accompanying comments remain ambiguous. They are certainly not as clear as the rule changes and comments adopted in Colorado or Washington or Nevada, or the statute in Minnesota or the policy in Massachusetts, all of which were available as useful precedents for the new California rules. Ethical concepts are often hazy; an opportunity to make this new rule clearer appears to have been missed.
1 21 U.S.C. § 812(b)(1).
2 Bar Ass’n of San Francisco, Opinion 2015-1 (June 2015) (hereafter “SF Bar Opinion 2015-1”) (available at: https://www.sfbar.org/ethics/opinion_2015-1.aspx)
3 James M. Cole, U.S. Dep’t of Justice, Office of Deputy Attorney General, Guidance Regarding Marijuana Enforcement (Aug. 29, 2013); James M. Cole, U.S. Dep’t of Justice, Office of Deputy Attorney General, Guidance Regarding Marijuana Related Financial Crimes (February 14, 2014) (collectively, the “Cole Memoranda”).
4 See note 2 above.
5 S.F. Opinion 2015-1 cites with approval former Canon 2 of the the American Bar Association Code Of Professional Responsibility, which was, “A Lawyer Should Assist The Legal Profession In Fulfilling Its Duty To Make Legal Counsel Available.”
6 Among the states reviewed in the opinion are: Maine, where the Rule was interpreted to forbid attorneys from “counseling a client to engage in the (marijuana business) or to assist the client in doing so,” and Arizona, where the State Bar concluded that an Arizona lawyer “may ethically assist a client in engaging in medical marijuana,” subject to certain conditions. In several other states, ethics committees requested that the rules be amended; as a result, amendments explicitly protecting lawyers from ethical charges were adopted in Connecticut, Colorado, Washington and Nevada.
7 New Rule of Professional Conduct 1.2.1, (Former rule 3-210), Advising or Assisting the Violation of Law, Executive Summary, available at http://www.calbar.ca.gov/Portals/0/documents/rules/Rule_1.2.1-Exec_Summary-Redline.pdf
8 These are the legal services requested by the client in S.F. Opinion 2015-1.