September 20, 2017

When California voters decided to legalize cannabis, they expressed their wish to protect cannabis users and businesses from malicious prosecution. However, despite the state-wide support of Proposition 64 legalizing cannabis, several prosecutors across the state are still doggedly pursuing cannabis businesses for criminal charges.

AB- 1159[1] specifically permits attorneys to work with cannabis clients and states, to do so “is not contrary to an express policy or provision of law or to good morals, and is not against public policy.” Since the California Bar Association has been silent on the matter for 20 years, this new piece of law gives an official go ahead for attorneys working in the green space. It further explicitly protects the right of cannabis businesses to an attorney-client privilege by shielding them from the ‘crime-fraud’ exception.

The Privilege is Yours

Under longstanding American law, across all fifty states, clients enjoy a privilege that prevents disclosure of any confidential communication that occurs between client and attorney. This sacred attorney-client privilege allows the client to speak honestly without fear of disclosure, which in turn allows the attorney to provide the best legal advice possible. The privilege even remains after the attorney client relationship ends and works to continue to protect past communication.

The Exception: Crime-Fraud

Of course, as always, there are exceptions to the rule. According to the crime- fraud exception to the privilege, a client’s communication to her or his attorney isn’t privileged if made with the intention of committing or covering up a crime or fraud.

Further, if a client informs their attorney that he or she intends to commit or cover up a crime, this breaks the privilege and allows the attorney to divulge the information to proper authorities to prevent the crime from taking place. To clarify – the crime-fraud exception only applies to discussion of future acts, while all prior acts discussed remain covered by the privilege.

Advising Cannabis Businesses

Although Manzuri Law has been advising California’s cannabis businesses on compliance since 2010, the California Bar Association has been silent on the matter for 20 years. True, the Bar’s silence has been seen as tacit approval, however, recently, it has become clear that a stronger rule of law was required as we’ve seen some overzealous California prosecutors filing criminal charges against, not only the business, but their attorney as well.

Most close to home for us, was in May 2017, when the San Diego District Attorney’s office filed criminal charges for conspiracy, manufacture and money laundering against a cannabis business’s owners and critically, its lawyer, and our home girl, Jessica McElfresh.

In that case, the prosecutor used an obscure privileged email between Slatic and his lawyer to allege that attorney McElfresh conspired with her client to mislead city inspectors during an April 2015 inspection of Slatic’s business premises.

Thereafter, the DA’s office filed sealed affidavits, sought and procured search warrants for McElfresh’s home and office, seizing her computer, laptop and cell phone, all containing privileged communications with other unrelated clients. Based on the search warrant granted, the prosecutor was able to go into McElfresh’s emails (almost all of them). The DA’s office cited the crime-fraud exception as a justification for the seizure of privileged information, asserting that McElfresh conspired to commit a crime and consequently should lose attorney-client privilege. Such actions put the attorney-client privilege of her other clients at jeopardy, which is an unprecedented overreach and intrusion into all of her clients’ confidentiality. Therefore, the AB1159 comes at a critical period of uncertainty over how law enforcement and prosecutors will treat the cannabis industry.

Bill AB-1159 clarifies once and for all that the crime-fraud exception does not apply to legal services rendered in compliance with state or local laws on medicinal/ adult-use cannabis and that any confidential communications provided for the purpose of rendering those services are to be confidential provided the lawyer advises the client on conflicts with respect to federal law.

[1] On the governor’s desk to be signed at the time of writing this article

Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.