Higher Law: Pot Law and Po’Boys | Valuation Vexation | Plus: Who Got the Work

Welcome back to Higher Law, our new weekly briefing about all things cannabis. I’m Cheryl Miller, reporting for Law.com from Sacramento, which is definitely not New Orleans. I know a lot of you are in the Big Easy this week attending The Cannabis Law Sessions at MJBizCon NEXT—while you’re not strolling Bourbon Street or feasting on beignets, jambalaya and red beans and rice. Yeah, I’m a little jealous.

One of the conference speakers tells us what’s on the mind of lawyers right now. Plus, the tricky issue of placing a value on marijuana companies. Scroll down to see who got the work in some of the new cases around the country.

Tips? Story ideas? What’s on your plate (and please don’t say gumbo)? Drop me a line at cmiller@alm.com or call 916.448.2935. Follow me on Twitter at @capitalaccounts.

Pot Law and Po’ Boys


New Orleans is the place to be this week for the MJBizCon NEXT conference and the National Cannabis Bar Association‘s cannabis law panels. This is one of the first major gatherings of industry experts since President Trump told Colorado Senator Cory Gardner that his administration wouldn’t go after marijuana-legal states.

    To find out what folks are talking about, I checked in with the ubiquitous Steve Schain of the Hoban Law Group. Beyond any discussion about what’s for dinner, “the prevailing mood is cautious optimism,” Schain (at left) tells me. He adds: “Clearly people are placing great weight on the historic alliance between President Trump and Colorado’s Cory Gardner. But the skeptics say there’s nothing in writing and promising policy statements in the past have led to false optimism.”

There’s lots of talk about legal marijuana businesses’ enormous Section 280 E tax burdens but no real promise of an immediate solution, he says. Attendees are chatting, too, about bipartisan federal legislation aimed at improving marijuana businesses’ access to banks.

And there’s a lot of discussion about a Ninth Circuit ruling last week that rejected the hemp industry’s challenge to a U.S. Drug Enforcement Agency rule establishing a controlled substances code for marijuana extracts, including hemp oil. Hoban Law Group represented the Hemp Industry Association plaintiffs.

Although the ruling has been interpreted as an overall loss for hemp growers and manufacturers, Schain says the Ninth Circuit panel offered some positive news for the industry: The farm bill, which allows industrial hemp, trumps the Controlled Substances Act.

The language provides “rock solid” guidance for state and federal agencies “tortured by two warring definitions,” Schain says.

Anything else on Schain’s mind? “Well, Gene Simmons from KISS is going to speak at the conference today,” Schain says.


Valuation Vexation


Mergers and acquisitions may be a growing sector of marijuana law work, but how do you derive an accurate price tag for a business that trades in a federally illegal product, attracts a lot of scrutiny from the IRS and has few historical benchmarks? Industry lawyers and analysts tried to answer that question this week on a program put together by Expert Webcast.

Here are some takeaways from the event:

>>> “There is really a tremendous exaggeration of the potential of the market in light of the fact that all of these legal policy and regulatory issues create inefficiencies that are almost unprecedented in any other industry,” said Emily Burns, an attorney at Offit Kurman in Baltimore. “So we haven’t achieved the economy of scale necessary for even disrupting the industry. We do not have any standardization.”

“People, I think are often unaware of how many known unknowns are significantly impacting what investors are actually hearing,” Burns said. “It’s a green gold rush now but you should have been in this industry five years ago and gotten an actual understanding first hand.”

>>> Vanita Spaulding, managing director of Cogent Valuation, said buyers have to look at the intangible assets of a marijuana business. An asset approach, she said, “is very valuable for the cannabis industry, especially when it’s so new and you’re looking at a make or buy decision.”

“Do they have a trade name that’s well known, either locally or perhaps nationally? Do they have management that’s doing a great job? Do they have customers that come and buy no matter what? Do they have a great customer list?”

>>> “It’s a global industry,” said Eric Foster, a corporate finance partner at Dentons in Toronto. “Right now I’m working with Dentons lawyers in the U.S., Colombia, Germany, Uruguay, Australia on transactions in the sector, a lot of them being M&A.”

“It’s a highly regulated industry but it’s not going anywhere,” Foster said. “The U.S. may be a little bit behind right now. I don’t think that’s going to last So I think a lot of the M&A activity we’re seeing here in Canada you’re going to see more of it here and you’re going to see more of it in the U.S. … The speed at which this industry and market has become legitimized has, I think, caught a lot of people by surprise. And it’s only going to get more established.”

Who Got the Work


  • Earlier this month we noted Weedmaps’ big lobbying and campaign spending in California. The federal lobbying database shows the online dispensary locator spent $65,000 on two D.C. lobbying firms in the first quarter. Nelson Mullins Riley & Scarborough, including lobbyist and former Pennsylvania Rep. Ron Klink, got $50,000 for work on banking restrictions, tax policy and other issues affecting the marijuana industry. Weedmaps also paid Liberty Government Affairs $15,000 for work on appropriations bills and “legislation promoting federalism in marijuana laws.”
  • Nevada state Sen. Richard “Tick” Segerblom has joined the board of directors of Freedom Leaf Inc. Segerblom introduced Nevada’s first medical marijuana bill, and he championed the 2016 ballot measure that authorized recreational sales in the state. Las Vegas-based Freedom Leaf operates marijuana media companies and hemp businesses.
  • Barton Morris, principal attorney at the Cannabis Law Group in Royal Oak, Michigan, is representing medical marijuana growers challenging a newly enacted city of Troy ordinance capping the number of licensed grows in the city’s boundaries at 36, according to the Daily Tribune News. Troy is represented by city attorney Lori Grigg Bluhm.

In the Weeds


Caesars Entertainment Corp. will stop testing some job candidates for marijuana use. “We felt we might be missing some good candidates because of the marijuana issue and we felt that pre-screening for marijuana was on the whole, counterproductive,” a company spokesman said. Driving jobs subject to federal regulations will still require pre-hire drug screens. [Las Vegas Review-Journal]

Marijuana Public Policy founder Rob Kampia is leading efforts to fund a super PAC that will target U.S. House Rules Committee chairman Pete Sessions, R-Texas, an ardent opponent of cannabis legalization. “Everyone knows who he is and that he’s our biggest problem on Capitol Hill,” Kampia told the Washington Examiner. A Sessions campaign spokesman said the congressman “will not be intimidated by liberal merchants of addiction.” [Washington Examiner]

California’s cannabis excise tax revenues are falling short of projections. The legislative analyst’s office says first quarter receipts came in at $34 million. The governor’s January budget proposal predicted revenues for the 2017-18 fiscal year would total $175 million. Gov. Jerry Brown will issue revisions to his initial budget on Friday. [California Legislative Analyst’s Office]

Meanwhie, in Colorado: “Denver has seen the tax collections from the nascent industry climb steadily, rising by 45 percent since 2015 to more than $44 million.” Orrick, Herrington & Sutcliffe partner Justin Cooper, co-chair of the firm’s public finance practice, predicts cities will issue debt backed by cannabis tax collections. [Bloomberg]

Is U.S. Attorney General Jeff Sessions the best thing that ever happened to the marijuana legalization movement? Let’s not go overboard. But Maria McFarland Sánchez-Moreno, executive policy of the Drug Policy Alliance, argues that Sessions’ rescission of the Cole memo in January has galvanized federal lawmakers trying to protect marijuana-legal states. [USA Today]

If you need more proof of how attitudes toward marijuana have changed, check out these photos of Assemblyman Reggie Jones-Sawyer, D-Los Angeles, sharing a vape pen with singer Melissa Etheridge on stage at a West Hollywood fundraiser for Jones-Sawyer’s campaign. The assemblyman chairs the Public Safety Committee. [Leafly]


What’s Next: Mark Your Calendars


—> May 17-18: Duane Morris hosts the NYC Cannabis Law Summit. Scheduled speakers include Shaleen Title, a member of the Massachusetts Cannabis Control Commission; Greenspoon Marder partner Heather Burke; and Duane Morris special counsel Patricia Heer.

—> May 17: California’s Cannabis Advisory Committee meets in Oakland. Members will consider subcommittees’ recommended changes to regulations governing the state’s recreational and medicinal marijuana licensing systems.

—> May 19-20: The CannaGrow Expo takes place in Palm Springs, California. Speakers include Dana Cisneros of the Cannabis Corporate Law Firm; Jon Jacobs of the Jacobs Law Firm; and Travis Bliss, counsel at Buchanan Ingersoll & Rooney.

—> May 21-22: The Institutional Capital and Cannabis Conference will be held in Los Angeles. Scheduled speakers include Dickinson Wright partner K. Lance Anderson; Puzzle Group Law Firm partner Aaron Herzberg; and Jamie Nawaday, partner at Kelley Drye & Warren.

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