As Hawaii’s new regulated medical cannabis program rolls out, the Disciplinary Board of the Hawaii Supreme Court recently issued a formal opinion clarifying that its ethical rules preclude lawyers from assisting cannabis businesses.
Just a few days later, more than 20 Hawaii attorneys, including former Honolulu Mayor Peter Carlisle and former Attorney General David Louie, formally asked the Hawaii Supreme Court to amend Hawaii Rules of Professional Conduct (HRPC) to permit lawyers to counsel cannabis businesses. The court promptly announced it would consider the proposed amendment, and the fate of the state’s cannabis industry now rests in the hands of its five high court justices.
Let’s break down why this decision could have such massive implications for Hawaii’s new medical cannabis industry.
The Issue with Rule 1.2(d). Some context is important. Each state’s supreme court establishes rules of professional conduct that govern lawyers’ ethical obligations. Every state has a version of Hawaii’s Rule 1.2(d), which provides the following:
A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning, or application of the law.
Basically, this means lawyers can tell their clients whether doing something violates the law, but they cannot help their clients to violate the law. Television character Saul Goodman from Breaking Bad and Better Call Saul perfectly embodies why Rule 1.2(d) is necessary.
Ordinarily, this sort of ethical rule prohibits attorneys from advising a client to commit any crime under either state or federal law. This rule is obviously problematic for lawyers counseling cannabis businesses engaging in conduct that is (yes, still) criminal under federal law. This problem has prompted a growing number of states to revisit their ethical rules as they relate to their regulated cannabis businesses. For example, Colorado, Washington, Nevada, Arizona and Connecticut have all determined, in one way or another, that their lawyers can counsel cannabis businesses notwithstanding the conflict with federal law. When the cannabis business lawyers at our firm started representing cannabis businesses back in 2010, things were much murkier, and we’ve helped at least two states clarify their rules to formally permit representation of cannabis businesses.
Hawaii’s High Court Disagrees, For Now. Hawaii became the second state (after Maine) to formally prohibit its lawyers “from providing legal services to facilitate the establishment and operation of a medical [cannabis] business.” Even though Hawaii’s Disciplinary Board recognized that the state’s medical cannabis businesses “would greatly benefit from legal services,” the three-page opinion makes clear that it interprets Rule 1.2(d) to bar attorneys from advising state-legal cannabis businesses unless Congress changes federal law or the Hawaii Supreme Court formally amends this ethical rule.
What’s the hurry? Key deadlines are looming. Act 241 establishes very specific deadlines by which Hawaii’s Department of Health must promulgate rules, accept applications, and award licenses. Potential licensees must create a corporate entity that controls at least $1.2 million for a 90-day period before Hawaii’s January 29, 2016 application submission deadline. If Hawaii’s Supreme Court does not amend Rule 1.2(d) before the end of this month, many cannabis businesses will be forced to raise substantial capital without benefit of legal counsel, which can cause very messy and expensive headaches down the road.
The Hawaii Supreme Court will accept public comment on the proposed rule change until October 16th. The following week, I will be in Honolulu speaking at the University of Hawaii William S. Richardson School of Law and at the Hawaii State Bar Association’s 2015 Bar Convention about medical cannabis regulations. These events are open to the public, and attorneys can earn up to 6 hours of CLE credit at the HSBA Convention.
In the meantime, stay tuned.