A few weeks back, the Cannabis Law Institute invited me to discuss contract drafting for cannabis deals. A focal point for the panel was whether courts are willing to enforce cannabis contracts. The last time I had really looked at that issue was early 2019, when I wrote: Cannabis Dispute? Courts are Open. As the title indicates, my research (and our law firm’s experience) showed that both state and federal courts were generally open to resolving cannabis contract disputes at the time. And I assumed the trend had held. Unfortunately, it has not!
In the 2019 piece, I summarized:
[Contract enforceability] was always the biggest consideration in choosing a forum for cannabis disputes. A few months ago, we ran a survey of federal courts and cannabis litigation, observing that none of the districts at issue were invalidating state-sanctioned businesses’ cannabis contracts on the dreaded “illegal purpose” basis. This trend is holding strong in recent federal court disputes on issues from RICO to patent infringement, despite the prohibited status of “marijuana” under federal law. As to state courts, the decisions declining to hear cannabis beefs are pretty far in the rearview. (Ironically, it has been safer overall to enforce cannabis contracts in federal courts that state courts to date.) When drafting agreements for cannabis clients, we still advise as to the diminishing possibility of non-enforcement, but most cannabis companies seem comfortable choosing court over arbitration if other goals are satisfied.
In 2020, state courts still seem to be a good bet for cannabis businesses in cannabis-legal states. Although I have not run a formal survey, I also have not come across local courts tossing disputes solely because the contract related to cannabis activities (and our cannabis business litigators have worked on many of these cases). But federal courts are sliding backward. A trio of cases in Washington,