By pacbiztimes Friday, August 30th, 2019

The legal industry has become a staple in California cannabis production, retail and compliance as businesses seek to weather tough regulations.

On the Central Coast, which has emerged as a major player in the cannabis industry, a patchwork of complicated laws, permits and compliance standards has created a demand for skilled attorneys.

“From a legal perspective, it’s really interesting because the laws are constantly changing, and it’s fun to be able to shape policies,” said Amy Steinfeld, an attorney at Santa Barbara firm Brownstein Hyatt Farber Schreck.

The firm recently formed the Cannabis and Industrial Hemp Group, with Steinfeld as co-chair, to focus its services within those sectors. Based in Colorado with a Santa Barbara office, Brownstein has been at the forefront of cannabis and hemp law for several years, including national lobbying efforts for banking and hemp policy.

“I utilize expertise from our Colorado colleagues in Denver because they were years ahead of us as far as legalizing recreational use — so applying a lot of those lessons-learned in California,” she added.

Steinfeld said the firm often deals with corporate support, such as legal formations and mergers and acquisitions, as well as state and local regulations. Intellectual property rights are another hot topic as hemp and cannabis startups, like cannabis DNA testing company Delta Leaf Lab, have sprung up in the Tri-Counties.

In Santa Barbara and San Luis Obispo counties, issues surrounding land use, water law and real estate services remain the backbone of legal services for cultivation and retail businesses, she said.

“It’s a really dynamic area of law,” Steinfeld said, where regional lawmakers, attorneys and government and business leaders are “learning together” as the cannabis industry evolves.

Pushback from neighborhood groups and “Not In My Back Yard,” or NIMBY, attitudes have challenged the industry since its inception, said Josh Lynn, an attorney and founding partner at Lynn & O’Brien in Santa Barbara.

Fluctuating political will has also been a player since cannabis ag transitioned from state-controlled medical grows to recreational grows regulated under local jurisdictions in 2018. Lynn said he has dozens of clients who, in one way or another, are dealing with “a patchwork of laws,” many which result in criminal and civil cases.

The process has often been messy, he said, with unclear boundaries that have led to raids on illegal grows and confusion around who is operating legally and who is not.

With a long history in criminal defense, Lynn transitioned into cannabis law after working in the Santa Barbara County district attorney’s office. A large number of his clients come from grower and retail sectors, he said, and many have received either a notice of violation or a criminal citation, or both.

Oftentimes, business owners or farmers don’t know they are violating county ordinances, he said.

Because the crop was slowly legalized for recreational grows, Lynn said a struggle for county district attorneys and defense lawyers is determining which farms are compliant, based on original laws, and which are not.

“It’s daily becoming more, not less, institutional,” Lynn said of the industry, “which has a lot to do with professional help as well as capital.”

While the process is improving, it still has a ways to go, he said.

California, by far, has the most regulated market in the nation, Steinfeld said, especially when compared with Washington, Oregon and Colorado’s less monitored approaches.

Cannabis is the only crop that is subjected to review under the California Environmental Quality Act. Extensive scrutiny paired with a lack of uniform rules for all jurisdictions adds to the intricacy of the business on the Central Coast.

“To get into cannabis space, you need to acknowledge this is a very volatile industry,” Steinfeld said. “It’s really important to hire an attorney before you get into the space to help navigate what you can and can’t do.”

Businesses have begun seeking out legal help early on to avoid potential conflicts down the road. Another piece to the puzzle is compliance support.

That’s where people like Stacey Wootin, founder of Cal Coast Compliance and treasurer of the Lompoc Valley Cannabis Association, come in. Although she’s still in law school and working on becoming a licensed attorney, Wootin provides state and local compliance and license consulting on the Central Coast.

Attorneys often refer clients to her or contract with her to help with the compliance process, she said. She thinks of it as “business compliance,” everything you would do during the process of starting and running a business.

“There’s always something extra in the cannabis business you have to do . . . all these different little things that the people holding licenses, farmers and store owners, didn’t realize two years ago (would mean) you need a whole team behind you,” she said.

In addition to state and local compliance support, Wootin’s consulting services include finding places for the cash-heavy business to bank. She said she vets third-party financial organizations for her clients, choosing services that are associated with banks insured by the Federal Deposit Insurance Corp.

When California formalizes its industrial hemp plan in 2020, there will likely be significant positive impacts to both the Tri-Counties’ ag industry and economy, Steinfeld said. That’s because the industrial crop has been federally approved, which means it won’t be subjected to the same regulations and local laws cannabis is.

“Hemp is coming to Santa Barbara County,” Steinfeld said, adding that there is also a lot of interest in the crop in Ventura County.

• Contact Annabelle Blair at ablair@pacbiztimes.com.