Welcome back to Higher Law, our weekly briefing on all things cannabis. I'm Cheryl Miller, reporting for Law.com from Sacramento.

This week we're looking at:

• Buchalter's not-so-new cannabis practice
• Marijuana election results around the country
• Baker Botts got the work for Grupo Flor in a California lease dispute
• A new in-house leader at Green Thumb Industries

Thanks as always for reading. Drop me a line to let me know what you're working on at [email protected]. Or call me at 916.448.2935. Follow me on Twitter @capitalaccounts.

Q&A: Buchalter's 'Organically' Grown Cannabis Practice

The law firm Buchalter is no cannabis law rookie. In 2013, the Los Angeles-based firm represented a court-appointed receiver overseeing the assets of a Southern California dispensary.

Over the last six years, an increasing number of cannabis-related clients kept coming to the firm for counsel. So last month Buchalter made it official: the firm christened a 23-attorney cannabis and hemp industry law group spanning its practices.

I recently spoke with practice co-chair Oren Bitan about the roots of the firm's practice, how it decides which clients to serve and what keeps lawyers in the space hopping these days. Here's some of our conversation, edited for length and clarity.

Higher Law: This isn't really a new practice, is it?

 Bitan: Our initial matter in 2013, we represented a court-appointed receiver who was appointed over a dispensary in Southern California. And we looked around the landscape to see if there was any other business lawyer who actually knew the cannabis industry and there were none. Everyone was a criminal defense lawyer trying to help their clients on the business side but really without a full understanding of fundraising or corporate formalities or secured lending, things that traditional corporate lawyers do.

So we undertook an effort for that matter to learn the industry. And we kept getting calls, initially from large financial institutions that found themselves with loans in which the borrower or a tenant the borrower was leasing to was an unlicensed dispensary or a cultivation facility. So we would install a receiver, remove the unlicensed occupant, foreclose and help the lender.

And then those calls started shifting to Canadian private equity firms. They wanted to deploy capital in California, typically in real estate. And we created what we call the green rider for loan documents, which were industry specific codes of conduct for borrowers that had some provisions to protect the landlord or a lender in the event of any non-compliance.

Then we started getting calls from local landlords who wanted to lease to licensed cannabis tenants. And we created the green rider for lease documents. And it just kept snowballing to now we have over 100 clients in the industry.

So why the formal announcement of a practice?

The other news was we were helping facilitate the first-ever receiver sale of a cannabis license. To our knowledge it hasn't been done at all so we thought that was a good reason to listen to our clients and announce the group. This was an authorized auction process for a cannabis license that the regulators at the state and local levels approved.

And I think it's a milestone moment in the industry because it provides a mechanism for secured lenders to be made whole when a borrower defaults.

What was the discussion like in the beginning with firm leaders about whether to dive into this practice?

It was a methodical approach. The managing partner is very entrepreneurial but wanted us to be cautious entering the space. So we slowly got into it in sort of the evolution that I laid out. It was organic growth, if you will. But we have a very rigorous client screening process so that was one of the mechanisms that we implemented to ensure that we're only working with fully compliant, top-tier clients in the space.

What are some of the biggest issues for you across the practice right now?

The biggest issue right now is the unlicensed portion of the industry. I think by last count, I read in an article, about 80 percent of the industry is now unlicensed. And so you have clients like ours that are doing everything right, that are paying their taxes, that are getting their licenses, that are only working with a licensed supply chain, and their business is being undercut by people who are cutting corners, who don't have licenses, that are getting questionable product into the marketplace.

I think something that's been lost in the recent vape epidemic, if you will, is that I think all or most of the cannabis vape products that have been problematic were unlicensed. And it's an important distinction to make.

Marijuana Election Results: Catch Up Quickly

For the most part, those Americans who went to the polls on Tuesday did not embrace state-licensed marijuana. A scan of election results shows a lot of local towns and cities said no to allowing new operations in their boundaries.

Whether the results are a sign of local residents' wariness of legalized expansion or just a product of typically low-turnout off-year elections is unclear. Here's a look at some of the ballot measures and what voters had to say about them.

>> "It was not a good night for marijuana businesses in Michigan on Tuesday with voters in three out of four metro Detroit communities voting against proposals to allow legal weed into their towns," the Detroit Free Press reported. Measures to allow new or additional marijuana businesses in Keego Harbor, Walled Lake and Allen Park were all rejected. Voters in Lincoln Park said yes, however, to allowing all licensed cannabis business operations in their community.

Outside the Detroit region, voters in Marenisco Township and South Haven approved bans on marijuana operations while residents in Hudson and Mount Pleasant voted down proposals to allow businesses. Crystal Township and Northfield Township said no to bans on state licensees.

"When we were drafting the ballot initiative, we went with the local opt-out language because it was very clear to us that the voters were very supportive of ending prohibition of marijuana, but not all voters were ready to embrace marijuana commerce in their communities," Robin Schneider, executive director of the Michigan Cannabis Industry Association, told the Free Press.

>> In Colorado, voters in Loveland said they do not want any type of cannabis operation in their city. Voters said the same thing when asked in 2013. The town of Mead also said no. Measures to legalize and tax recreational marijuana sales in the northwest Colorado city of Craig passed. Residents of Louisville also endorsed licensed cultivation facilities.

>> In Ohio, cities were split on whether to decriminalize marijuana possession. Bremen, Nelesonville and Northwood said yes to lowering the penalties for misdemeanor marijuana offenses. Voters Adena, Amherst and Wren said no.

Who Got the Work

>> Baker Botts partner Jonathan Shapiro is representing Grupo Flor in a trial centered on a lease dispute that my colleague Jenna Greene writes "offers a fascinating window into the wild west of the cannabis industry." It's a wild tale of eviction and forgery allegations. The main players are cannabis company Grupo Flor; a Monterey County business park owner represented by San Jose, California-based Gates, Eisenhart & Dawson; and Group Flor co-founder Mike Bitar, who is represented by James Cook of Horan Lloyd in Carmel, California. Trial is underway in Monterey County Superior Court. You can read more about the allegations here.

>> Green Thumb Industries has hired Beth Burk as interim chief legal and compliance officer. The company said in a statement that "Burk has more than 25 years of experience as a legal and compliance strategist including 15 years with Aon, a Fortune 200 professional services firm, where she most recently served as Global Chief Compliance Officer." Bloomberg Law has more here.

>> Foley Hoag advised Columbia Care Inc. in the multi-state operator's recently announced agreement to acquire Colorado cannabis company The Green Solution. The deal, valued at approximately $140 million, is expected to give Columbia Care a major foothold in Colorado where The Green Solution operates 21 dispensaries and is expected to open two more storefronts by the end of the year.

>> "The owners of a Michigan marijuana dispensary aren't entitled to an injunction that would prevent the Internal Revenue Service from discussing allegedly privileged information with their former attorney, the Sixth Circuit ruled Nov. 6," Bloomberg Law reports. Joseph Falcone of Southfield, Michigan, argued for the appellants. Deborah Snyder argued for the Justice Department. Read the ruling.

In the Weeds…

>> Is compliance tech the answer for the cannabis industry? For tech developers, the relative newness of the cannabis industry may spur interest in products that can help new—and even some long standing—businesses navigate the maze of state regulations. But are these tools worth the price tag yet? [Law.com]

>> A compliance quandary for U.S. broker-dealers. "A patchwork of state and federal laws governing the use and sale of marijuana is creating compliance challenges for U.S. firms that manage accounts for investors and trade securities for them. Uncertainty about how to navigate the evolving legal landscape has prompted some brokerages to bar existing clients from trading securities of marijuana businesses, or even turn away prospective clients who have investments in the industry, brokers say." [WSJ]

>> The feds are investigating Massachusetts "host" contracts. U.S. Attorney Andrew Lelling has convened a grand jury to scrutinize agreements between local municipalities and the marijuana companies that want to locate there. Critics say the pacts, intended to give cities and towns some measure of control over local marijuana operations, have been abused by some municipal leaders seeking pricey fees and "donations." At least six municipalities have reported receiving subpoenas from Lelling's office. [The Boston Globe]

>> The stock slump persists. "A sharp drop in their stock-market valuations will have an outsize impact on cannabis companies. Deal making is already slowing, while debt is becoming scarce and more expensive." And more: "The slump in the value of their equity is a big problem for cannabis companies. Large banks won't lend to them while the drug remains federally illegal in the U.S., so pot businesses rely heavily on issuing new shares to fund their deals and expansion plans." [WSJ]

>> Track-and-trace troubles arise in California. The Bureau of Cannabis Control has suspended almost 400 licenses for businesses that have yet to register with the state's marijuana tracking system. The businesses have been warned several times about the need to register to comply with state law, a bureau spokesman said. Licenses will be restored as businesses sign up for the tracking system. [KPBS and Marijuana Business Daily]

The Calendar: Upcoming Things

Nov. 7 - National Cannabis Industry Association's director of public policy, Andrew Kline, and director of government relations Michael Correia will host an "Ask Us Anything" session on Reddit at 4 p.m. EST.

Nov. 13 - Fox Rothschild hosts the Cannabis Law Forum event in San Francisco. Cannabis law practice co-chairs Bill Bogot and Joshua Horn will moderate. Panelists include CannaCraft general counsel Stacy Hostetter and Fox Rothschild partner Melissa Sanders.

Nov. 13-14 - The 2019 Cannabis Industrial Marketplace Florida Summit & Expo takes place in Miami. Scheduled speakers include Dinsmore of counsel John Mackewich and Clement Hayes, general counsel of Block45 Legal.

Nov. 19 - ALM hosts the webinar "Cannabis in the Workplace: Workers' Comp and Employee Use." Scheduled speakers include Sedgewick senior medical officer Dr. Teresa Bartlett and Alex Malyshev, co-chair of Carter Ledyard's Cannabis, Hemp & CBD Industry Group.