“Cannabis Has Big Law Seeing Green, but the Am Law 50 Are Skipping the Party”

The title of this post is the title of this notable lengthy American Lawyer article, which has this subheadline: “Law firms are rushing to open cannabis practices as the industry booms, including many among the Am Law 200. Why is the top tier taking a pass?”. Because I am a lawyer and law professor who teaching on cannabis law, I am very interested in any and all stories at the intersection of the cannabis industry and the legal industry. Here are excerpts from this one:

Jonathan Robbins starts his day early. By 6 a.m., he’s on his home office computer scanning emails, and then he hits the hot sheets—dozens of newsletters from attorneys, advocacy groups, legislators and associations focused on the cannabis business. And there is a lot to read.

Robbins, who chairs the cannabis practice at Akerman, believes that when he began to collect clients in the industry back in 2013, he was one of the first Big Law attorneys to practice cannabis law in the United States. “Back when I first started practicing, I went to a conference in Vegas called MJBizCon,” he says. “At the time, it was just a bunch of guys selling nice bongs. This year, there were 28,000 people there.”

One thing has remained consistent through that time, however, even as state after state has legalized marijuana in some form, fueling an estimated $10 billion industry: According to the U.S. government, cannabis is a Schedule I narcotic, putting it in the same ­category as heroin, cocaine and methamphetamines. It is a controlled substance and is illegal on a federal level.

That presents a series of problems for law firms seeking to advise and profit from clients that are involved in a criminal enterprise — at least as far as the federal government is concerned. While more than two dozen Am Law 200 firms have launched formal cannabis practices in the last decade, no Am Law 50 firms are among them. Those that publicly embrace the practice tend to have a clientele consisting largely of midmarket companies — and Wall Street law firms are still conspicuously absent.

Cannabis clients have one concern above all others, Robbins says: “banking and merchant services.” The drug’s complex legal status has created a paradox. It is both driving the growth of cannabis practices within law firms and holding them back from reaching their full potential….

Most major U.S. law firms have done some work in the cannabis space at this point, and according to Morgan Fox, media relations director at the National Cannabis Industry Association, the stigma around having a cannabis practice is virtually gone—at least for small to medium firms. But the largest firms still don’t advertise it. Searching their websites reveals snippets of work done but nothing that could be considered a formalized practice.

Robbins believes there is still a more conservative bent to larger firms, which have more to lose if a client skirts legality or something goes sideways as a result of regulatory changes. Akerman did a great deal of due diligence on the potential exposure of dealing with plant-touching clients. The firm concluded it was a risk worth taking, he says….

From Robbins’ perspective, it may be a good thing that larger firms aren’t suddenly pushing ahead. “Bigger firms dipping their toes into it without having the regulatory expertise could cause problems both for the firm and the client,” he says.

There are some firms just outside the Am Law 50, like Sheppard, Mullin, Richter & Hampton, which announced a formalized 70-attorney practice in May, that are actively looking to raise the profile of their cannabis practices. But they are doing it slowly. Sheppard Mullin’s practice head, Whitney Hodges, says that although the firm made the effort to formalize its practice, it isn’t in a position to discuss financial expectations.

Some smaller firms are quite happy with the fees generated by the industry. Joshua Horn, partner and co-chair of the cannabis practice at Fox Rothschild, says that in the three years since his firm formalized its practice after dabbling in the space for years, it has gone from zero cannabis-related revenue to a multimillion-dollar practice that he expects to keep growing.

Seth Goldberg, a partner at Duane Morris and team lead of its cannabis practice, concurs. He expects the practice to expand, bolstered by the constellation of practice areas the industry touches and projections that the market could grow to $50 billion in the next decade. His firm has been pleased with its revenue results since formalizing the practice in January 2017, though he declined to share them.

Zane Gilmer, a partner in the cannabis practice at Stinson, believes the industry will grow, but his firm does not have an accounting system that measures the exact amount of money the practice is bringing in. The firm’s practice, he says, is more about servicing existing clients that have started to do business with entities dealing with cannabis. His own work focuses, in part, on advising financial institutions that are planning on dealing with companies in the cannabis space. It’s a bit of a gray area.

Although Gilmer says he has been doing work that relates to the cannabis industry since his arrival at Stinson in 2014, the firm didn’t formalize its official practice until last year, and he still sees a lot of room for maturity both in the emerging industry and those who service it. But there’s enough business to necessitate its own practice arm.