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Thursday, Mar 28, 2024

Pot Lawyers: Higher Demand

Clarification: While David Greene does offer non-criminal legal services to the marijuana industry, his primary practice is criminal defense. The “green rush” of legalized recreational marijuana is a boon not only for the cannabis growers and retailers of the Valley region, but also for the legal industry. A wave of new regulations that went into effect Jan. 1 has sent pot entrepreneurs scrambling for counsel from lawyers. “What we’ve got now is a transition from 20-plus years of gray area to permits and new licenses – the foundation of a billion-dollar industry,” Eric Shevin, a criminal defense attorney and founder of Shevin Law Group in Encino, told the Business Journal. “(Business owners) are leaning very heavily on lawyers to help structure their businesses and stay compliant.” As the market for recreational cannabis moves from the shadows into the mainstream economy, criminal defense attorneys such as Shevin are increasingly providing legal counsel on both criminal and business matters, creating a unique niche for themselves as “cannabis attorneys.” DUI defense Cannabis was already a multi-billion dollar industry in California before the Nov. 2016 passage of Proposition 64, the statewide legislation that created a legal structure for the sale of recreational pot. “We’re about 40 days into this new world with licenses, but the industry itself already exists through people operating without a requirement that they follow standard operating procedures,” Shevin said. “Those are the same people who are trying to transition over, and, for the most part, they’re completely lost on how to do what they’ve already been doing in a new way.” The complicated nature of selling, growing or distributing marijuana – which remains an illegal substance at the federal level – has created a need for attorneys who specialize in cannabis. Shevin’s firm has been representing dispensaries and growers in criminal cases since the plant was legalized for medical use in California in 1996. The firm began providing counsel on business matters 10 years ago. “I’ve seen an incredible increase in the need for cannabis lawyers,” Shevin said. Another criminal defense lawyer, David Kestenbaum of Kestenbaum Law Group in Van Nuys, brought on an associate to help manage the business affairs of his cannabis clients. Business attorney David Greene joined Kestenbaum Law to assist cannabis clients with contracts and other non-criminal matters. “No one attorney can cover all the areas this has opened up,” Kestenbaum said. “This is like when Prohibition ended – there’s just so much that the regulations cover.” Kestenbaum has witnessed an uptick in clients charged with driving under the influence of marijuana, which is treated by law enforcement officials as equivalent to alcohol. State law prohibits smoking or consuming the drug in a moving vehicle – either as a driver or a passenger – along with open containers of pot. There is currently no quick, accurate way to detect levels of active ingredient tetrahydrocannabininol, or THC, in an individual’s bloodstream the way there is for alcohol. That has created issues for those who are pulled over or stopped for other reasons but happen to have marijuana in the car. “There seems to be a misconception among law enforcement that when someone goes through a checkpoint, smelling marijuana doesn’t necessarily mean the driver is smoking it,” Kestenbaum said. Fellow DUI lawyer Doug Ridley, founder of Ridley Defense in Simi Valley, said that while he has not noticed the same client growth in his practice, he has received more calls to conduct seminars on the matter. Many locals fear that the laws will result in a flood of stoned drivers on the streets, but so far that has not happened, Ridley said. “I think there are just a lot of people right now who are very curious and very concerned,” Ridley said. He regularly speaks before business groups to discuss the legal consequences of getting caught driving high. “Driving under the influence is one area where good people, not just criminals, can find themselves in the crosshairs of law enforcement,” Ridley noted. On the business side, Shevin said that criminal defense attorneys who have worked with marijuana purveyors before have gained the industry’s trust; that relationship can particularly help in ensuring that entrepreneurs avoid mistakes that could put them in violation of the law. The same can be said for large funds that are trying to get a stake in the game but do not have prior “cannabiz” experience. “In a case where the penalties for falling out of compliance are not only losing your investment but potentially facing federal criminal prosecution, everyone wants to lean heavily on lawyers to ensure that, if nothing else, they’re dotting their i’s and crossing their t’s,” Shevin said. Cannabis IP A more surprising group to benefit from the green rush is intellectual property attorneys. Now that the manufacture of cannabis products is legal, some established businesses have found that pot entrepreneurs are creating weed-infused versions of their bestselling items, according to trademark and IP attorney Gary Nelson of Lewis Roca Rothgerber Christie in Glendale. “The cannabis-infused food products are blowing up,” he said. One client Nelson represented was a well-known hot sauce company that discovered a marijuana firm had created a near-identical product that was laced with weed. In this instance, the hot sauce company had the right to pursue damages for both trademark infringement and disparagement if the perpetrator had not agreed to discontinue its activity, as the client did not want its brand associated with the cannabis industry. “The bottle was the same, the label was the same – it was (the client’s name) but with an ‘r’ added,” Nelson recalled. The search for a culprit uncovered a scenario that is, in some ways, unique to the marijuana industry: There were not one but two different cannabis firms that were having their own dispute over the infringed trademark outside of the legal system. Cannabis businesses looking to trademark their brands can only do so at the state level, Nelson said. That creates a unique dynamic in which two different companies in separate regions can legally have the same trademark, because their rights are limited to their territories. “Normally when my clients get protection (for a brand), we’ll file with the U.S. Patent and Trademark Office to get nationwide rights,” Nelson said. “You can get state registration also, but we rarely do that just because it’s not necessary in order to enforce your trademark most of the time.” Since cannabis is still a banned substance federally, marijuana companies don’t have that option. If pot is ever legalized nationwide, the industry will likely find itself fraught with legal battles over trademarks that were issued to separate companies in different states unless the legislation contains a solution, Nelson explained. “Unless there’s some kind of mechanism that talks about who has priority, it’ll just be a big mess,” he said. The long-term uncertainty for the marijuana industry has a definite result of more business for cannabis attorneys. “I don’t see any slowing down in the foreseeable future,” Shevin, the criminal defense attorney in Encino, said. “(The state) needed to have some sense of licensing rules by January this year, but even those rules are subject to change. … Since California passed Prop 215 in 1996, the law has been a moving target.” The law as it stands also requires that businesses renew their licenses annually, an obligation that will create a long-term market for legal services. And, of course, the green rush has only just begun – new players will attempt to enter the industry for some time to come, Shevin anticipates. For his firm, that means more growth in the future. “It’s just going to be an ever-increasing need,” he said. “I’m seeing the need for us to continue to scale up.”

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