Can a New York lawyer advise a recreational cannabis business, take equity in lieu of fees, and personally use marijuana, even though it remains federally illegal?

Plain-English summary

New York's Marihuana Regulation and Taxation Act (March 31, 2021) created a regulated recreational cannabis industry overseen by a Cannabis Control Board and Office of Cannabis Management. The inquirer asks whether a lawyer may (a) assist a client in complying with that law, (b) personally use and home-grow marijuana, and (c) accept an equity interest in a client's cannabis business in exchange for legal services, given that marijuana remains illegal under federal narcotics law.

On the first question, the committee extends its medical-marijuana opinions (N.Y. State 1024 (2014) and 1177 (2019)) to recreational cannabis. Rule 1.2(d) bars assisting conduct the lawyer knows is illegal, but the committee treats the federal-state marijuana conflict as a "highly unusual if not unique" situation outside Rule 1.2(d)'s intended scope, because federal enforcement policy forbears from prosecuting actors who comply with robust state regulatory systems, and that forbearance depends on lawyers being available to build compliance. It finds no basis to distinguish recreational from medical marijuana: federal forbearance has applied to both for nearly a decade, New York's licensing system is comprehensive, and lawyer assistance is at least as necessary.

On personal use, ownership, and home cultivation, the committee finds no Rule 1.2(d) problem and analyzes Rule 8.4(b) (illegal conduct reflecting on fitness) and 8.4(h) (other conduct reflecting on fitness). Conduct that complies with the state law and falls within federal forbearance does not involve violence, dishonesty, fraud, or breach of trust, so it does not adversely reflect on fitness, and federal forbearance gives the lawyer a reasonable good-faith belief under Comment [4] that no valid federal obligation prevents the conduct. The committee cautions, however, that excessive use may impair competence and diligence under Rules 1.1(a) and 1.3 and could require mandatory withdrawal under Rule 1.16(b)(2).

On taking equity in lieu of a fee, the lawyer must comply with Rule 1.8(a) (business transactions with clients), per N.Y. State 913 (2012): fair and reasonable terms, full written disclosure, advice to seek independent counsel, and signed informed consent. The lawyer must also assess any Rule 1.7(a)(2) personal-interest conflict and, if a significant risk exists, proceed only with a reasonable belief in competent representation and the client's informed written consent. Conduct serving non-forborne federal priorities (such as funneling revenue to criminal enterprises) would fall outside the safe harbor and violate Rules 1.2(d), 8.4(b), and 8.4(h).

In practice

Under this opinion, a New York lawyer may build a practice advising recreational cannabis clients, may personally use and home-grow marijuana within the state law, and may accept equity in a cannabis client as a fee, so long as the conduct stays within New York's law and federal enforcement forbearance. Per the opinion, equity-for-fees deals must satisfy Rule 1.8(a)'s business-transaction protections and any Rule 1.7 conflict must be addressed with informed written consent, and the safe harbor disappears if the lawyer's conduct implicates non-forborne federal priorities or if excessive personal use impairs the lawyer's competence (Rules 1.1(a), 1.3, 1.16(b)(2)).

Common questions

Q: Can a lawyer advise a recreational marijuana business in New York despite federal law?

A: Per the opinion, yes; under current federal enforcement forbearance, helping a client comply with New York's Recreational Marijuana Law is a "highly unusual" situation outside Rule 1.2(d)'s prohibition, extending the committee's medical-marijuana opinions.

Q: Can a lawyer personally use or grow marijuana?

A: Per the opinion, yes, within the limits of the state law; conduct within federal forbearance does not adversely reflect on fitness under Rule 8.4(b) or (h), though excessive use that impairs competence remains a concern under Rules 1.1(a), 1.3, and 1.16(b)(2).

Q: Can a lawyer take an ownership interest in a cannabis client instead of a fee?

A: Per the opinion, yes, subject to Rule 1.8(a) (fair terms, written disclosure, advice to seek independent counsel, signed consent) and a Rule 1.7(a)(2) conflict analysis requiring informed written consent if a significant risk exists.

Q: When does this safe harbor end?

A: Per the opinion, if federal enforcement policy materially changes, or if the lawyer's conduct implicates non-forborne federal priorities such as diverting sales revenue to criminal enterprises or covering for other drug trafficking, the conduct violates Rules 1.2(d), 8.4(b), and 8.4(h).

Background and rules framework

The opinion interprets New York Rule 1.2(d) (counseling or assisting illegal conduct), Rule 8.4(b) and (h) (illegal or other conduct reflecting on fitness), Rule 1.8(a) (business transactions with clients), Rule 1.7 (personal-interest conflicts), and Rules 1.1(a), 1.3, and 1.16(b)(2) (competence, diligence, and mandatory withdrawal). These correspond to ABA Model Rules 1.2, 8.4, 1.8, 1.7, 1.1, 1.3, and 1.16.

Citations and references

Rules of Professional Conduct:

• New York Rules of Professional Conduct 1.1(a), 1.2(d), 1.3, 1.7(a)(2)-(b), 1.8(a), 1.16(b)(2), 8.4(b), 8.4(h)
• ABA Model Rules 1.2, 8.4, 1.8, 1.7 (analogues)

Statutes:

• Marihuana Regulation and Taxation Act, Chapter 92 of the Laws of 2021 (New York)
• Rohrabacher-Blumenauer Amendment (federal appropriations rider on medical marijuana)

Other opinions cited:

• N.Y. State 1024 (2014) and 1177 (2019): assisting medical-marijuana clients under Rule 1.2(d)
• N.Y. State 913 (2012) and 990 (2013): equity interests in clients under Rules 1.8(a) and 1.7

See also

• NY State Bar Op. 1231: An Estate Lawyer's Stake in a Trust Asset-Management Company
• NY State Bar Op. 1237: Closings Referred by a Broker in the Lawyer's Own Company

Source

• Landing page: https://nysba.org/ethics-opinion-1225/