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As marijuana laws change, lawyers see new roles

Some 18 years after Californians decided to legalize medical marijuana, state and local politicians have finally gotten around to drafting comprehensive regulations for how the dispensaries should operate.

In San Diego, that means medical marijuana dispensaries can finally apply for city-issued operating permits, although lawyers estimate that among the unauthorized businesses in the city, estimated to number between 60 and 100, as few as 20 or less will qualify.

In Sacramento, meanwhile, committees in the Senate and Assembly last week passed competing bills that would establish firmer rules for how the market should operate, including greater roles for the California Medical Board and Bureau of Alcohol, Tobacco and Firearms.

“Cities and patients are tired of the chaos from inadequate regulation,” Assemblyman Tom Ammiano, D.-San Francisco, told reporters last week when he introduced the Assembly bill.

Medical marijuana advocates complain that some of the rules — including San Diego's tight zoning restrictions on dispensary sites — are too restrictive. And they say they don't reflect the shifting public mood on marijuana, especially if voters decide to join Colorado and Washington state by legalizing "recreational" use of marijuana in 2016, as is widely expected.

But others say that the rules give a more official stamp of legitimacy to medical marijuana businesses, which were previously operating in a Wild West atmosphere. And that, in turn, could lead to changes in the so-called “cannabis bar,” as attorneys shift from criminal defense work to broader business issues ranging from permitting and code compliance to more complex areas of securities law and intellectual property protections.

"Especially once the state decides to start issuing permits, there is going to be a lot of work for attorneys," said Jeff Lake, a Rancho Bernardo attorney who represents marijuana enterprises throughout the state. "I've heard some (enterprises) even talking about retaining in-house counsel. I'm sure the legal work will be huge, given the amount of money involved."

Changing times

The shift in the marketplace was evident Thursday, as the operators of dozens of previously unauthorized dispensaries in San Diego lined up at City Hall to apply for licenses under an ordinance recently enacted by the City Council.

At first, the ordinance will likely sharply reduce the medical marijuana business in San Diego.

The ordinance allows no more than four dispensaries to operate in each of the city’s nine council districts. And some districts might get no dispensaries because of restrictions on how close they can operate to schools, parks, churches, residential zones and competing dispensaries.

Marijuana advocates say the restrictions could create a hardship for patients using the drug to treat cancer, depression, multiple sclerosis, cerebral palsy, migraines or glaucoma.

"There are a lot of frayed nerves because the ordinance is so restrictive," said attorney Kimberly Simms, a marijuana law specialist who represented several dispensaries vying for a license last week.

"But the hope is that if these businesses can survive for the next couple years and show that the Earth didn't suddenly open up and suck us all in, and businesses are still running and kids are still going to school, then maybe — hopefully — the City Council will change its mind and ease up on the restrictions a little."

In the meantime, legislators in Sacramento are moving to tighten the loose guidelines that have previously ruled the market, which has allowed for an anything-goes atmosphere in some cities, such as the string of colorful dispensaries on the boardwalk at Venice Beach, emblazoned with huge images of marijuana leaves, sandwiched between tourist shops and fast-food restaurants.

Last Monday, the state Senate’s Business, Professions and Economic Development Committee unanimously backed a bill sponsored by the California Police Chiefs Association that would establish “the first true regulatory framework” for the medical marijuana industry.

Among other things, the bill says:

• Dispensaries must obtain local permits before getting an operating license from the state Department of Public Health.

• The health department must create uniform standards for medical marijuana usage.

• Dispensaries must meet state-imposed standards for security at their facilities, as well as transporting and storing their supplies.

• Patients must obtain their recommendations for marijuana through an established relationship with a doctor licensed by the California Medical Board, instead of getting rubber-stamp approval from health workers associated with the dispensaries.

The day after that bill made it out of committee, the state Assembly’s Public Safety Committee passed Ammiano's bill, which has many elements of the Senate bill, and would put dispensaries under the aegis of the state's ATF and ask the California Medical Board to discipline doctors who recommend marijuana for their patients without good cause.

That provision has drawn fire from many doctors’ groups because there are no medical standards for when marijuana should be prescribed.

As with most new laws, these will need lawyers who can interpret them, which means new business for the cannabis bar.

‘The cannabis bar’

Several dozen lawyers in San Diego County list marijuana law as one of their major specialties, but most are focused solely on criminal law. The eight local lawyers rated by the National Organization for the Reform of Marijuana Law, or NORML, spend an average of 85 percent of their time on criminal cases, ranging from possession to driving under the influence.

Half of them — Patrick Dudley and Kenneth Rogers in downtown San Diego, James Warner in Hillcrest and Mara Felsen in the Bay Ho neighborhood — focus completely on criminal defense.

Even Michael Cindrich, executive director of the local chapter of NORML, estimates he spends 82 percent of his time on criminal cases, compared to just 12 percent on business law and 6 percent on civil litigation.

But Lake said that among the dispensaries, there is already a strong legal role to play in helping marijuana cooperatives meet their specialized legal requirements, guiding dispensaries through the permitting process, advising on building code compliance, negotiating leases and dealing with "unlawful detainer" eviction actions from landlords, who are sometimes pressured by law enforcement agencies to either evict their marijuana-dealing tenants or face civil prosecution themselves.

Simms said that as the industry "becomes more accepted and more of a cultural norm," there will be a much broader range of opportunities. For instance, she said, the dispensaries may start to establish relationships with biotech labs, hospitals, insurers and business services, which could need lawyers to help negotiate.

Lake said other areas for legal work will probably include patent protection, as marijuana labs develop cannabis-based pills, ointments or other products; tax lawyers, especially if recreational marijuana is legalized and taxed; and securities lawyers.

"As with any burgeoning industry, there's going to be a lot of capital flowing into this, whether through private placements, venture capitalists, angel investors, financial institutions or other means," he said.

But one continuing problem for the industry is that no matter how many permits are issued by state and local authorities, it is still illegal under federal law.

Since Washington state and Colorado legalized marijuana recreational use in 2012, the Justice Department has backed off from most prosecutions except for specific violations, such as interstate or cross-border trafficking. But that policy isn't written in stone, and there’s nothing to prevent a crackdown — especially after a new administration takes over in January 2017.

Simms said she is repeatedly asked how it feels to consult with clients on activities that remain illegal under federal law. She said that after "a lot of conversation with legal ethicists," she feels this is an area where the states are sovereign and that her duty is to make sure that all her clients "are fully compliant with the laws of the state of California."

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