Longtime Mesa law firm Udall Shumway has expanded its practice to include cannabis law, capitalizing on the growing medical marijuana market in Arizona.
The move into the legal marijuana industry may be surprising to those who know the firm’s history.
Its namesake founders – David Udall and Dale Shumway – are prominent members of The Church of Jesus Christ of Latter-day Saints, which has not openly embraced cannabis as medicine.
However, Justin Brandt, leading counsel for the firm’s new practice, said it was a non-issue.
“We’re here to service clients; we’re not here to make moral judgments,” he said.
In fact, the transition into cannabis law was a smooth one for the firm and Brandt, who has a background in business and corporate transactions. He initially provided some employment services for medical marijuana clients under that business law purview, and the cannabis law practice grew from there.
“We have a very rich business law practice group, whether it be transactional practice or business litigation,” Brandt said.
He added, “Cannabis – it’s just business, right? The only difference, and it’s a unique difference, is it’s in a highly, highly regulated industry.”
That regulation reared its head soon after the firm announced the new practice when U.S. Attorney General Jeff Sessions rescinded three Justice Department memos issued during the Obama administration that essentially directed federal prosecutors not to interfere with the cannabis industries in states that had legalized marijuana for medical and/or recreational use.
Sessions’ decision to roll back the three memos that direct prosecutors to use their discretion to pursue charges in cases involving marijuana – which is still illegal under federal law even as many states move to legalize the drug.
The new memo “simply directs all U.S. Attorneys to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis and thwart violent crime across our country,” Sessions said.
The announcement caused some concern in the medical and recreational cannabis industries. Brandt fielded calls from clients all day when the announcement was made last month.
But it is too soon to tell how it will tangibly affect the industry.
“It is more unknown than anything,” Brandt said.
Ultimately, he does not see medical marijuana businesses closing up shop because of the Justice Department’s priority change.
“I don’t think you are going to see a massive shutdown,” he said. “A lot of these businesses have certain toleration for risks.”
He noted that marijuana has been illegal at the federal level since the 1970s, and that has not changed. Even directives under the Obama administration only shifted prosecutorial priorities and did nothing to legalize the marijuana at the federal level.
“These businesses have been comfortable operating with that amount of risk, and you are not going to see them shy away just because these policies are rescinded,” Brandt said.
His advice to all clients in the industry following Sessions’ decision is simple: Stay in compliance.
The practice will focus solely on the business side of the cannabis industry with a focus on business formation. It will provide advising on transactional deals, lease deals, purchase agreements and employment, among other services, said Brandt.
“Right now, it seems we are really busy on the commercial real estate side for both retail fronts and the grow operations,” Brandt said.
While the firm has offered some compliance advising in the past, it is likely going to take a step back from that as many medical marijuana operations are now bringing in a dedicated compliance officer on staff, which Brandt sees as a good thing.
“A lot of these businesses are already operating with a target on their back, and once you are not in compliance with something, whether it’s security or seed-to-sale tracking, (regulators) are going to hop on that,” he said.
It is not difficult to see why a firm like Udall Shumway would want to break into the cannabis industry. Quite simply, the industry is booming.
A 2016 study from New Frontier Data and Arcview Market Research found that medical marijuana sales are expected to total $681 million by 2020.
The business available to firms with a cannabis law practice will go up only if Arizona eventually legalizes recreational marijuana. Prop 205 would have done just that but failed by 3 percent in 2016.
That New Frontier Study projected sales would roughly double by 2020 if voters had approved Prop 205.
There are at least two initiatives that would legalize recreational marijuana in Arizona in some form that could appear on the ballot in 2018, though their chances of passing are slim, according to one poll.
An OH Predictive Insights poll of Arizona voters from November 2017 found that only 35 percent of respondents supported legalizing marijuana for personal use versus 48 percent who opposed the measure.
“Legalizing marijuana in Arizona is much less viable in a mid-term election, however there is a strong chance we will see them take another run at it in 2020,” chief pollster Michael Noble said in a press release.
While it may be off the table in the immediate future, Brandt believes Arizona voters will eventually approve a measure legalizing recreational use.
“Certainly, it is not unreasonable to think that (marijuana) could be legalized, not just in a medicinal program but in an adult use program, in the next few election cycles,” he said.