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: Some views on marijuana and the pandemic from Reed Smith's cannabis practice chair • Another win for the IRS in a 10th Circuit tax case • Goodwin Procter's new cannabis practice partner • A lawsuit to re-open Massachusetts' recreational marijuana sales

Thanks for reading. I always appreciate your feedback, thoughts and tips. Send them all my way at [email protected] or call me at 916.448.2935. Follow me on Twitter @capitalaccounts.

Q&A: Reed Smith's Claudia Springer on the Coronavirus and the Cannabis Industry

The COVID-19 pandemic has brought into sharp focus all the problems faced by cannabis companies even before the outbreak hit: limited access to funding, employment issues and federal shunning. I recently spoke with Claudia Springer, head of Reed Smith's cannabis practice, about these challenges and how she's advising clients in these trying times. Here are excerpts from our conversation, edited for length and clarity.

Higher Law: What is an average day like for you now as an attorney in the cannabis space?

Springer: I'm actually in two places. I head up our firm's cannabis practice but I'm also a bankruptcy and restructuring lawyer. So I'm actually pretty busy these days.

What are you hearing from clients?

It's interesting. Before all of this began there was a lot of concern about contraction in the industry generally, mostly resulting from too many players and too little funding or cash. I think what happened in this industry is that it grew so fast and everybody wanted to get in on it.

I compare it to the dot-com era in the early 2000s when we saw the proliferation of companies and then we had a severe contraction. The issue though in this space that these companies have to deal with is that, especially in the United States, because they're still violating federal law, they're not able to borrow money the way other companies can. They're not able to take advantage of bankruptcy laws. They're not able to get loans under the new CARES Act. And oftentimes if they are able to borrow money it comes at a much higher price. Not only that but their tax deductions are very limited.

It didn't surprise me being the bankruptcy lawyer that there would be this kind of day of reckoning, So time will tell what the overall impact is going to be on this industry as a result of COVID-19. But what we have seen is an increase in insolvencies with some of the Canadian companies because there they can file under the statute that is analogous to our bankruptcy code.

And here what we've seen is some companies that are struggling are either going into some kind of receivership, which is a state law remedy, or they are doing workouts with their lenders and investors to try to get more capital. So it was an industry that was already having some issues before this pandemic hit. And the impact of this pandemic is still a big question mark I would say. What is your counsel to clients in this industry right now?

The counsel is to make the best of a very bad situation. To the extent you're able to stay open and protect your workers in the process then you have to decide whether you should do it. It's a matter at this point of survival for a lot of these businesses.

By the same token, you have employees who may not want to work during this period or might not want to have anything to do with the public. And you have to understand their needs also.

It's not only a legal question, I think it boils down to your own judgement in many respects. You can explain the law to the clients. But then it comes down to the business owner's decision as to whether or not they need to or want to stay open under those circumstances.

Tenth Circuit Rules for IRS, Again, in Dispensary Audit Challenge

Once again, a federal appellate court has blessed an Internal Revenue Service audit of a state-legal marijuana dispensary.

On Monday, the U.S. Court of Appeals for the Tenth District affirmed a district court ruling allowing federal tax investigators to obtain plant reports, sales reports and Colorado state license information related to Denver medical marijuana dispensary Standing Akimbo. The dispensary's owners had tried to quash the summonses on the grounds that the federal government lacked a legitimate purpose for seeking the information.

A three-judge panel of Circuit Judges Carlos Lucero, Gregory Phillips and Nancy Moritz was not persuaded by Standing Akimbo's arguments.

"The Taxpayers did not meet their burden to show that the IRS acted in bad faith in issuing the summonses or that it is abusing the court's process in asking for their enforcement," Phillips wrote for the court. "The Taxpayers' appended declarations neither create a genuine issue of material fact nor support their defenses, so the district court correctly enforced the summonses without discovery or a hearing."

The opinion was another defeat for Colorado firm Thorburn Walker, which has challenged a number of IRS audits targeting state-legal dispensaries, arguing that the federal government is using tax investigations to go after marijuana businesses instead of traditional law enforcement agencies.

The Tenth Circuit has already affirmed the IRS's broad authority to audit state-licensed dispensaries in cases such as Alpenglow Botanicals v. United States of America, The Green Solution Retail v. United States of America.and High Desert Relief v. United States of America.

Who Got the Work

>> Jennifer Briggs Fisher, the former cannabis team lead at Duane Morris, has joined Goodwin Procter's San Francisco office as a partner in the firm's litigation and cannabis practices. Goodwin Procter has "a national cannabis practice and a big California-based litigation team, both looking to serve innovators and investors," Fisher told my colleague Patrick Smith at Law.com. " I work with a lot of cannabis businesses that are really thriving in the market," Fisher joined Duane Morris 14 years ago as an associate and worked on issues including regulatory compliance, business strategy, banking and intellectual property matters for cannabis clients.

>> CBD producer Vertical Wellness has retained Mercury Public Affairs to lobby on hemp issues, according to a recently filed disclosure. The filing lists former two-term U.S. Senator David Vitter of Louisiana as the sole lobbyist for the California-based CBD company.

In the Weeds…

>> The pandemic is pausing the push for legalization. Initiative and legislative efforts have stalled across the United States as COVID-19 stalls signature-gathering efforts and lawmaking. "Coronavirus is taking up all the oxygen in the room," said Andrew Freedman, senior vice president at the public affairs firm Forbes Tate Partners. "People are just going to go home when all the essential business is passed." [Politico]

>> "I knew I was going to end up in the cannabis industry way before it was cool or sexy." Forbes interviewed Cultiva Law attorney Fabiola Jimenez about her decision to pursue cannabis law, her professional obstacles and her favorite thing to cook. "For me to succeed as a female, Latina, cannabis lawyer, is that I need to work twice as hard if not three times more to demonstrate to people in the cannabis industry that I can handle whatever you throw at me." [Forbes]

>> The DEA relaxed rules for the cannabis-derived prescription drug Epidiolex. GW Pharmaceuticals announced this week that the U.S. Drug Enforcement Administration descheduled the drug prescribed to treat some eplipetic symptoms. The move will likely encourage more insurers to cover the drug and more doctors to prescribe it. [Leafly]

>> Dispensaries are suing to reopen recreational sales in Massachusetts. Five businesses and a medical marijuana patient sued Gov. Charlie Baker in state court, saying his decision to close recreational outlets during the pandemic is illegal under both the state and U.S. constitutions. Attorneys with Prince Lobel Tye and Vicente Sederberg represent the plaintiffs. [Boston Business Journal]

>> To weed or not to weed: Budtenders in the time of COVID-19. For some Washington dispensary workers, being an employee at a business deemed essential by the governor means making a tough choice: Go to work and risk exposure to a virus when you have no health insurance or walk away from the job with no hope of qualifying for unemployment benefits. [DailyUW]

Calendar Things

April 10 - Duane Morris hosts the webinar "Cannabis 302: The Impact of COVID-19 on the California Cannabis Market." Partner Tracy Gallegos and associate Justin Santarosa will lead the discussion.

April 10 - BDS Analytics presents the webinar "Impact of the COVID-19 Virus on the Cannabis Market."