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November 3, 2022

Jason Klimek Featured in New York Cannabis Insider Article on Ethical Boundaries for NYS Cannabis Attorneys

Jason Klimek, Cannabis Team co-leader, was featured in the New York Cannabis Insider article “A Conversation About Legal Ethics Among New York’s Cannabis Attorneys.” In the article, Jason and two other cannabis attorneys from New York State discuss some of the gray areas in which cannabis attorneys are operating due to the lack of clear cannabis rules and regulations.

Jason and the other interviewees listed a few different ethical principles attorneys should follow, which include: 

  • Being explicit about marijuana remaining federally illegal and including this language in engagement letters and retainer agreements
  • Adding disclosures of possible conflicts of interest, such as already representing a competitor, to engagement letters and retainer agreements

Although the Marijuana Regulation and Taxation Act doesn’t prevent attorneys from representing competing clients or from holding equity in one company while representing a competing company, attorneys should disclose these conflicts as a matter of professional ethics. However, attorneys (just like anyone else) aren’t permitted to have an ownership stake in companies of more than one license type. 

The article outlined key elements of the Office of Cannabis Management’s rules for the state’s Conditional Adult-Use Retail Dispensary (CAURD) program. The rules allow for a true party of interest (TPI) in a CAURD license that has equal to or greater than 20 percent ownership or profit distribution percentage to act as a TPI for up to three CAURD dispensaries.

While it’s legal for attorneys to accept equity in a company as payment, it isn’t advisable for attorneys to do so in the case of licensed CAURD dispensaries. “It can open up potential liability,” Jason said. “If the lawyer gives advice to a company and something happens that negatively affects the company . . . the company might have a cause of action against the lawyer, and say, ‘You didn’t give us objective advice; you were conflicted.’”

New York Cannabis Insider subscribers can read the full article here.


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