One of the unfortunate byproducts of cannabis legalization is cannabis litigation. With each passing month of legalization in the states in which our cannabis lawyers operate (California, Oregon and Washington) we see an increase in disputes. The most common cannabis litigation matters are disputes about medical and recreational grows, disputes between former business partners now going their separate ways, disputes between employee and employer, and cases involving cannabis intellectual property. This is the first in a series of posts I will be writing on cannabis litigation.
Today’s topic is criminal law, which to at least some extent, can permeate civil litigation involving any cannabis business. Criminal law is important in civil cannabis cases because conduct that is perfectly legal under state law may well be illegal under federal law. The risk of federal criminal liability means that a cannabis litigator in a civil case should at least consider whether to rely on the 5th Amendment privilege against self-incrimination, which can be asserted in in civil proceedings or in connection with oral testimony, pleadings, or requests to produce documents.
How do evaluate whether to take five, i.e., assert the 5th Amendment? Here is an overview of the three main legal issues to help you analyze whether associating criminal counsel is appropriate in your civil law matter.
1. Prior statements in a civil cannabis case could be admissions of criminal activity in another case: A large part of every civil case is explaining the facts which support your claims, and which contradict your opponent’s. A civil litigant will make statements about facts in her pleadings, in discovery before trial, or in testimony at trial. You should assume that almost anything a litigant or her lawyer says about facts in a civil case will be admissible in a later criminal proceeding, even if the statement is not made under oath. An example might be the opening allegation in a complaint against a business partner in a grow: “Pursuant to an agreement, plaintiff and defendant worked together to cultivate cannabis crops, which they intended to be sold, and did sell, pursuant to this state’s recreational cannabis laws.” Right there you are probably admitting that you violated federal criminal drug laws.
2) Does testifying to potentially incriminating facts in the civil case waive the privilege? Courts have held that waiver of the 5th Amendment privilege in a civil case will not waive the privilege in later criminal proceedings. But the practical effect of this principle is limited. Though a defendant who has waived her privilege in a prior civil case could testify in a later criminal case, any prior incriminating statements she made in the civil case can be used against her, even without her testimony.
3) Risks of asserting the privilege in the civil case: In a criminal case, the fact finder may not infer that a defendant is guilty because she asserted the 5th Amendment. In civil cases, however, a jury may draw negative inferences against a party who declines to testify by relying on the 5th Amendment. So, a lawyer in the civil case might argue to the judge or to the jury: “Plaintiff claimed privilege when asked whether she grew cannabis. Doesn’t this suggest she did grow cannabis?”
Knowing and evaluating the legal issues is only the first step in deciding whether to assert the 5th Amendment. The more difficult next step is forecasting whether a prosecutor—now or in the future—will choose to bring criminal charges for conduct legal under state law.
In part 2 of my series on cannabis litigation I will discuss how early registration of trademarks and copyrights and protection of your trade secrets can help you both avoid litigaiton and prevail should it nonetheless be unavoidable.