Federal Courts Are Undermining Cannabiz Contracts: Attorney

This article was originally published on WeedWeek, and appears here with permission.

As many legal U.S. marijuana markets experience unprecedented growth, an industry lawyer has sounded the alarm that the federal court system could derail its momentum.

Vince Sliwoski, an attorney with the Harris Bricken law firm, theorized that federal courts are “sliding backward” in regards to honoring contracts involving cannabis companies. He cited several recent decisions to make the case that cannabis litigants might be better served in state courts.

Sliwoski compares several 2020 federal court decisions with those from past years. As recently as last year, both state and federal courts seemed generally open to resolving cannabis contract fights, he says.

“While it was kind of encouraging and they were sort of stepping out and helping people in limited ways,” he said of federal judges, “they seem to have drawn a line in the sand with respect to what kind of relief they can award, even in friendly jurisdictions.”

A landmark federal case involving a cannabis contract dispute is Mann v. Gullickson, tried in California the Northern District of California in 2016. The court ruled a promissory note was enforceable despite the borrower using the funds to operate a cannabis business.

In effect, the court ruled Party A can’t ask a court to force Party B to honor a contract that would require Party B to break federal law. However, significantly, the decision specified that even if a contract involves illegal aspects – such as marijuana – the court is not barred from providing relief if that relief can be obtained without requiring the parties to break federal law.

Sliwoski compared the dynamic to someone paying another person to start a forest fire, only to watch the recipient of the funds keep the money without starting the fire. The court, in that case, would not require the recipient to return …

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