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Attorneys caught in haze as pot firms look for assistance

A vendor weighs buds for card-carrying medical marijuana patients.
Frederic J. Brown | Getty Images
A vendor weighs buds for card-carrying medical marijuana patients.

Attorneys are learning sometimes it may be difficult to represent medical marijuana firms due to a haze of issues involving professional ethics rules.

"I don't think you take it lying down," said Norton Arbelaez, owner and general counsel of Denver-based RiverRock Cannabis, operator of a chain of dispensaries in Colorado. "You force the issue," he said, explaining that it sometimes requires working within the current system and having a dialogue with the bar association and members to bring about change.

At present, there are a handful of state bar associations or professional conduct boards that have warned attorneys that marijuana (medicinal or otherwise) remain illegal under federal law and that counseling marijuana clients could violate professional conduct rules, reports Marijuana Business Daily.

The publication said "the warnings given in New Mexico and Ohio — and earlier in Connecticut — have triggered alarm bells among some lawyers and cannabis entrepreneurs."

"This is indicative of the first wave of issues that a jurisdiction has to deal with when they decide to regulate cannabis," said Arbelaez.

In several states — including California, Colorado, Massachusetts, Arizona, and Maine — there have been the different state bar associations "looking at this issue of whether or not one can give counsel to an entity that is arguably breaking federal law," Arbelaez said.

In Colorado, a 2014 order from the State Supreme Court made that state the first U.S. jurisdiction to formally recognize the right of lawyers to counsel pot industry clients. Other U.S. states or territories that have since followed Colorado's lead include Washington State, Oregon, Hawaii, Alaska, Oregon, Arizona and Guam.

"For the most part, after the issue is really looked at… they come on board through the practical necessity that people need counsel and that this is legal under state law," he added.

Yet, there also have been cases where warnings led to local attorneys severing ties with cannabis-related businesses.

"It's already affected the way I do business," Greg Miller, the owner of cannabis processor X-Ray Pharms in New Mexico, was quoted as telling MJBizDaily. "My New Mexico lawyers cut me off last week. What happens if I need legal representation on something as mundane as a property line dispute?"

State Bar of New Mexico Executive Director Joseph Conte told CNBC in an emailed statement that he stands by the recent opinion of the state bar's Ethics Advisory Committee.

"They give careful consideration to the issues, conduct through research and set forth reasoned opinions for members of the bar to consider when undertaking any representation in an area with apparently conflicting laws or complex ethical and/or legal issues," Conte said.

He explained that the broader issue is essentially states' rights and federal supremacy, and he believes it will be up to the courts and Congress to resolve the conflict.

"I would be purely speculating on whether [New Mexico] attorneys will be discouraged by [New Mexico's] recent Ethics Advisory Opinion on the subject and would not presume to know how individual attorneys would approach such representation," he said.

In Ohio, the State Supreme Court's Ohio Board of Professional Conduct earlier this month announced that attorneys who counsel marijuana entities will violate professional conduct rules. That follows Governor John Kasich signing a medical marijuana legalization bill into law in June.

Elsewhere, an opinion issued by the Connecticut Bar Association's Professional Ethics Committee in 2013 advised that "a lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyers know is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client."

CNBC reached out to the Ohio and Connecticut state bars but had not heard back at deadline.

The State Bar of California has not taken a formal position on lawyers representing marijuana-related entities, but a spokeswoman said some local bar associations in the Golden State have issued ethics opinions detailing how attorneys may ethically represent clients with respect to a medical marijuana enterprise.

In 2014, the Supreme Court of Nevada took a position that attorneys can represent cannabis entities but required them to advise clients about federal law and policy.

Several states, including Nevada and California, have voter initiatives on the ballot this fall to legalize recreational use of marijuana.

In California, a poll released Wednesday found nearly 64 percent of the respondents in the state support Proposition 64, a ballot measure to legalize recreational marijuana use, according to the Institute of Governmental Studies at UC Berkeley, which released the findings.

In all, there are nearly 10 states with measures on the ballot this year involving cannabis use.