U.S. Treasury Department in Washington, D.C. Photo: Michael A. Scarcella/ALM

The American Bar Association has joined calls for federal agencies to extend COVID-19 relief to law firms with clients in the state-licensed marijuana industry.

In a letter dated June 5, ABA president Judy Perry Martinez urged federal officials to change Small Business Administration guidelines that currently bar loans to firms "that advise or counsel direct marijuana businesses" on legal issues.

"Most law firms qualify as small businesses, falling within the congressional [Coronavirus Aid, Relief, and Economic Security] Act intent to cover all businesses with less than 500 employees," Martinez wrote to U.S. Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza.

But the SBA guidance on which companies can receive aid "is overly broad and establishes a very low standard for ineligibility, including 'a business that derived any of its gross revenue for the previous year' from such services," Martinez wrote. "Thus, a law firm where a single lawyer provided advice to a single marijuana business client on legal issues for a nominal fee would arguably be ineligible under this language for the SBA [Paycheck Protection Program] loan program."

According to the ABA, 78% of U.S. lawyers practice in jurisdictions where some form of marijuana sales are legal under state law. "Under the current guidance, many of these lawyers and their firms could be disqualified from receiving PPP assistance," Martinez wrote.

The letter reflects the ABA's increased activity in the state-legal marijuana space. The association's Tort Trial and Insurance Practice Section last September sponsored the first-ever ABA-related event dedicated solely to state-licensed cannabis and hemp. And in February, the ABA's House of Delegates adopted resolutions calling for federal legislation to protect lawyers and banks that serve state-legal marijuana operators.

"We are thrilled that the ABA has signed onto this issue," said Christopher Davis, executive director of the International Cannabis Bar Association. The specialty bar sent its own letter to congressional leaders in April, asking that law firms be made eligible for COVID-19-related aid for businesses.

"The ABA has previously come out in favor of cannabis industry banking, and protections for lawyers from criminal prosecution for representing clients that operate in the state-legal cannabis industry," Davis said. "The current position is the logical conclusion of their prior positions—if it's legal to represent, take payment from, and pay taxes on revenue earned from these clients, then the same representation should not render us ineligible for disaster-related economic assistance."

ABA officials declined to comment on the letter.

In April, 34 bipartisan members of the U.S. House of Representatives and 10 Democratic senators pressed congressional leaders to include aid to cannabis-related businesses in any future COVID-19 relief legislation. Such provisions did not make it into a $3 trillion stimulus package passed by the House in May, although the legislation did include protections for banks that serve state-legal marijuana companies.

The Senate has not taken up the House legislation. Senate Majority Leader Mitch McConnell has derided the relief appropriations approved by Democrats, calling cannabis provisions "the cherry on top."