Medical Marijuana Is No Get-Rich-Quick Scheme
Posted Dec 1, 2010 2:48 AM CDT
By Stephanie Francis Ward
The gray areas of medical marijuana laws might seem to create a lot of green for lawyers, but that’s not always the case, says Matt Kumin, a partner with San Francisco’s Kumin Sommers.
If a potential client contacts the firm about starting a medical marijuana collective, the client must first attend a two-hour consultation, which costs $850.
For an incorporation package the firm charges a flat fee of $5,000. Compliance work, to ensure that medical marijuana collectives stay on the right side of the law, runs around $20,000 annually.
“We do have some nice things going on, but it’s not like it’s going super-duper,” says Kumin, adding that many people interested in forming the collectives come from industries that recently took big hits, like real estate. He even got an inquiry from a Chicago hedge fund manager.
“Some people come in and have this perception, fueled by places like Oakland, that this is a gravy train,” he adds. “We have to dissuade people of that notion,” Kumin says.
(See related feature "Up in Smoke.")
Other lawyers say that they see advising medical marijuana groups as a growth industry in a down economy.
Jeffrey A. Lake, a San Diego lawyer, says that he represents more than 100 California medical marijuana collectives. He also claims to represent potential medical marijuana groups in Arizona, where the November 2010 ballot included an initiative on medical marijuana. Voters passed the initiative with a very slim 50.13 percent.
In October, Lake told the ABA Journal that there was a rumor Arizona would only allow 182 collectives if the measure passed. “In anticipation of this, we’ve already been hired by people who want to be able to submit all the application materials they need on the day it passes,” he said.
Brian Vicente, a Denver lawyer, founded and is the executive director of the nonprofit medical marijuana advocacy group Sensible Colorado.
In May, he opened a medical marijuana law firm, Vicente Consulting. Colorado allows for-profit sales of medical marijuana, and this summer lawmakers required that existing medical marijuana groups submit a 30-page application to operate.
Between July 1 and Aug. 1, Vicente Consulting helped about 40 clients file applications to meet the deadline. “We also turned several medical marijuana businesses away because of the limited time we had to prepare the applications and the volume of work needed to get the job done for our clients,” says Vicente’s legal partner, Christian Sederberg. Between June and July, Sederberg says, he worked 18-hour days, seven days a week.
Initially, Sederberg and Vicente thought they’d charge a flat fee for the applications. They soon learned that the work varied significantly and switched to charging an hourly billing rate. Vicente bills $250 an hour, and Sederberg $215 an hour.
Sederberg previously was a transactional attorney with another Denver firm. “Brian needed someone with real estate, corporate and partnership negotiating experience, and I said absolutely,” Sederberg says. “I realized the opportunity was pretty significant, in terms of volume of work I could generate.”
The new regulation has also been financially rewarding to Colorado’s real estate market, particularly the requirement that medical marijuana centers grow 70 percent of their product in state-approved structures. According to Bill E. Kyriagis—an associate with Denver’s Otten, Johnson, Robinson, Neff & Ragonetti—warehouses that have been empty for years are now in demand, to house medical marijuana crops.
Warehouses around Denver rent for about $7 a square foot, Kyriagis says, but he’s heard anecdotally that people looking to use warehouses as medical marijuana grow facilities will pay $27 a square foot.
Even so, he adds, “a lot of people just don’t want to go there.” Landlords who do, under federal law, are subjecting themselves to forfeiture of the building, Kyriagis says, and there are also criminal penalties for property owners.
Kyriagis mentions a 2009 U.S. Department of Justice memo that directs the agency to not focus prosecution resources on individuals in compliance with state medical marijuana laws. “In general there hasn’t been significant enforcement you hear about against licensed, established dispensaries,” he says. “That said, it wouldn’t take a whole lot to change that. It could be a change in the presidential administration, or just a change in the Drug Enforcement Administration.”
Landlords, Sederberg says, aren’t low-hanging fruit for federal law enforcement. However, he acknowledges, “you can’t counsel someone to do this without counseling them to break federal law.”
Maine is the only state that has an advisory opinion on providing legal work to medical marijuana groups, according to Sederberg. The 2010 document notes that the Justice Department memo makes clear marijuana is still illegal under federal law. Considering that, the advisory opinion states, a lawyer’s role advising someone about medical marijuana is limited.
“Some of the bigger law firms around Colorado have put their heads together and decided it’s not worth it for them, due to ethical concerns,” Sederberg says. He adds that Colorado voters made clear in 2000 that they wanted medical marijuana, when they passed the ballot amendment by 54 percent.
“These businesses won’t survive without our help,” Sederberg says, adding that medical marijuana groups in compliance with state law give individuals who need it safe access.
“If that access goes away because we have some nuanced ethics opinion saying we can’t do this,” he adds, “people will suffer.”