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Cannabis Practices Sprout as Big Law Firms Follow the Money

Sept. 21, 2021, 10:01 AM

Notoriously risk-adverse Big Law firms are building cannabis practice groups as a rising number of states legalize recreational and medicinal use, even though the drug remains largely banned under federal law.

Cannabis practitioners hail from a variety of specialties, reflecting the range of issues that their clients face. The lawyers have to be flexible in the rapidly changing area as voters and lawmakers act to advance—and sometimes fight—legalization.

“This is not for the weak of stomach,” said Eric Berlin, who co-leads Dentons cannabis practice and helped craft and pass the Illinois and Ohio medical cannabis laws. “You have to deal with a level of uncertainty there.”

Cannabis companies need advice on intellectual property, employment, taxes, license and regulatory compliance, lending and financial transactions, mergers and acquisitions, and a host of other specialty practice areas. That creates rich veins for lawyers to mine for billable opportunities.

“The law comes first. The expertise comes first and then you serve that industry with that. That’s what makes you a good lawyer for the industry, knowing what it is you’re talking about and applying it to the nuances of the industry,” said Shabnam Malek. The intellectual property attorney co-founded the Brand & Branch law firm in Oakland, Calif., and is the founding president of the International Cannabis Bar Association.

The legal limbo has been a stumbling block for law firms.

Attorneys “aren’t really known for a huge appetite for risk,” said Kathryn Ashton, a Dentons partner in Chicago who started the firm’s 50-lawyer practice group.

That risk aversion is subsiding now that 19 states have passed laws permitting recreational and medicinal cannabis and 34 allow medicinal use. Adding to the enticement is that the global legal market for cannabis is forecast to reach $91.5 billion by 2028, according to Grand View Research.

The U.S. market is expected to annually grow 21% and will reach $41.5 billion by 2025, cannabis market research company New Frontier Data said. Medical cannabis sales in the U.S. are forecast to reach $16.3 billion by 2025, and regulated adult-use sales are projected to top $25.1 billion.

The growth potential led Akerman to launch its cannabis law practice seven years ago, said practice chair Jonathan S. Robbins.

“It’s a big firm. It’s an old firm, an AmLaw 100 firm, and a firm that has its roots in the South. That’s significant because when we first started the practice in 2014, there was no cannabis law, at all,” Robbins said.

VIDEO: How do states legally get around the federal ban on cannabis, and what unique legal challenges do attorneys and businesses in the marijuana industry face?

It Starts With a Call

Denton’s Ashton is a finance lawyer specializing in tax-exempt organizations and health care. She came to the field in 2014 when a client asked about getting a medical cannabis license in Illinois.

Cannabis, like health care, was going to be a highly regulated market, an interesting practice, and would become a “huge U.S. industry that has grown up state-by-state in the face of federal prohibition,” said Ashton, who saw an opportunity “for Big Law to have a role because this is a multifaceted industry.”

The burgeoning practice area is only a segment of the services that most cannabis lawyers at large firms provide for clients. Ashton continues to represent a wide range of health care, senior living, and banking clients, while Akerman’s Robbins advises broker-dealers and other financial services providers.

Dentons has about 10 U.S. lawyers who spend all or almost all of their time on cannabis-related matters. Another 10 lawyers spend significant time on those matters, and about another 30-40 are regularly involved. In total about 100 Dentons U.S. lawyers have touched the space, Berlin said in an email.

“I’m a business attorney, M&A, corporate transactional attorney by trade,” said Joseph Bedwick, co-chair of Cozen O’Connor’s cannabis industry team in Philadelphia. Cannabis business clients “have the same needs as anybody, except they’re in a regulated industry that happens to be federally illegal.”

For Fox Rothschild cannabis practice co-chair William Bogot, creating the firm’s 70-lawyer practice came via gaming. Bogot was the Illinois Gaming Board’s acting general counsel and legal counsel for seven years.

“I didn’t get into cannabis—it got into me,” Bogot said. The state’s competitive bid process for cannabis is “pretty much modeled after the 10 casinos in Illinois.”

“Both are highly regulated, and both are totally different in every single state. The only difference is that gambling is not illegal federally,” Bogot said.

Foley & Lardner partner James McKee, a commercial litigator, likewise “got a call out of the blue” in 2015 as Florida began issuing medical cannabis licenses. That launched the firm’s foray into representing cannabis clients in regulatory and other matters.

“Even now I’d say probably 50%-60% of my practice is in marijuana regulatory work even though I cut my teeth on constitutional” issues, McKee said.

The growth shows at Foley, which from fiscal year 2019 to FY 2020 had a 63% increase in cannabis-related collections/revenues, firm spokeswoman Rachel Sisserson said.

Duane Morris built its 50- to 60-lawyer practice with attorneys “who are routinely working on cannabis matters in their various areas of discipline, be it corporate, trial, regulatory, IP, tax,” and other attorneys supporting the core group, said partner Seth Goldberg.

“And we certainly are looking forward to continuing to expand as the industry grows,” Goldberg said.

A Lawyer by Any Other Name

Swiftly evolving laws and regulations for legal cannabis require lawyers to be fast on their feet.

In California alone, cannabis operators must navigate 18 agencies for licensing cultivation or manufacturing, including state and local entities, said Irán Hopkins, an Akerman real estate partner in Los Angeles.

“It’s the most highly regulated industry in the world today. Anyone who commits to cannabis is doubling down on homework,” Hopkins said.

Just as the legal industry took a while to venture into cannabis practices for what lawyers said was a fear of offending other clients or harming business, attorneys slowly adopted the mantle of “cannabis attorney.”

“I resisted being labeled a cannabis attorney for a long time,” said Joshua Ashby, a Fox Rothschild partner in Seattle who handles transactions for a variety of startup clients. “Turned out, everybody who is in cannabis is in a startup industry.”

“New areas of law just don’t spring up every day,” and that put young attorneys “on a bit of a level playing field with practitioners who have been practicing 20-25 years,” said Sativa Rasmussen with Dorsey & Whitney in Seattle.

“As a whole, cannabis law creates this opportunity for young, entrepreneurial attorneys to really create a niche for themselves,” Rasmussen said.

As cannabis practices grow, so is poaching of lawyers from firms that were earlier adopters. Bigger firms that are now establishing practices are “throwing lots of money at these attorneys,” said Ackerman’s Robbins.

“The minute that you see federal prohibition end, every law firm will jump in with both feet,” Robbins said. “They’re all going to have cannabis practices.”

To contact the reporter on this story: Joyce E. Cutler in San Francisco at jcutler@bloomberglaw.com

To contact the editors responsible for this story: Tom P. Taylor at ttaylor@bloomberglaw.com; Chris Opfer at copfer@bloomberglaw.com

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