Elevating Businesses to New Highs: Corporate Cannabis Practice

Kyle McEntee:

Today we're joined by Mia Getlin, a 2014 graduate of Pepperdine Caruso School of Law. Mia is a solo practitioner who practices business law in Oregon and Washington State, with a focus on the state-legal cannabis industry. How exactly did the cannabis industry get on your radar?

Mia Getlin:

I started looking at the cannabis industry when my husband decided to start a grow and I was doing just basic business law with a little bit of tax and estate planning at the time. And so I said, well, yeah, I mean, I can form your entity, that's easy. And figured I'd just pop out a really simple operating agreement and got to...I think it's the second provision that says the purpose of the company is, any legal activities, whatever else it says. And I stopped short at that and realized, well, hold on. I've got to adjust this. And then realized I'm going to need to go through every single provision to account for this being a highly regulated business in a brand new legal industry with brand new administrative rules and statutes. And that was a difficult process for a pretty new attorney. And I loved it. And it was just, it was a lot more interesting than the work I had been doing.

Kyle McEntee:

It is illegal federally, but it is legal in Oregon where you live. How is it regulated then in the state?

Mia Getlin:

The industry is governed by the OLCC, the Oregon Liquor and Cannabis Commission. And that's who processes licensing actions, processes, applications for licenses, which for a while now have had to be associated with the change of ownership. And enforcement, compliance issues, they'll send out violation notices.

Kyle McEntee:

So then for your husband who wanted to start a company, he not only needed to start the company, but then needed to get licensed by the state. Now let's say that was going to be a grow in Portland. Does he also need to be licensed in Portland or is it not regulated at the city level?

Mia Getlin:

Well you picked an interesting local jurisdiction with your question. So to get licensed, any license type, you need a land use compatibility statement. It's just saying that the intended use is consistent with zoning. It's land use approval.

Every local jurisdiction -- they all use the same form, but they have their own procedure for it. Most of them, you submit this form, you pay them a fee, and they return it. If you're asking for a variance or if there's anything unusual going on, there might be hearings, it might get more complicated. But in almost every case, you're just submitting the form, paying a fee, and then getting the Lux Form, that’s what we call them.

Portland's a little different. Portland requires a Portland cannabis license. So I actually just submitted two applications yesterday for a client. In addition to the Lux Form, it's another application. You have to provide a bunch of information about the individuals involved with the business. Floor plans. And it's a much higher fee. It's $525 application fee and then a several thousand dollar license fee in addition to the Oregon license, which won't be issued until you have that land use approval.

Kyle McEntee:

Okay, so we started at the state, now we went down to the local level. Let's talk federal.

Mia Getlin:

Well, there's federal law that's applicable because it's illegal. The Controlled Substances Act is applicable. But we look back at the Cole Memo, which was a memo that said, we, the feds, are not going to cause big problems for cannabis businesses as long as they don't violate these big no-no's: Minors being involved, firearms, diversion over state lines, that kind of stuff. That memo was then rescinded, but the state systems still really focus on those priorities because those are still the things that are going to really increase the risk that you start getting attention from the feds.

But where that changes is where you start having, organized crime involved, of course, that's going to bring them in. Or if there are weapons charges related to a cannabis business or a cannabis facility, that's a problem. You start having your product that is labeled as your product showing up in other states, that increases your chances of having some attention.

When questions like that come up. It's a very different conversation than, oh, hey, we've got this issue. Our security system, you know, we had the security vendor out and they reset the system to factory settings and we haven't been storing enough video footage for the last couple months. You know, that's a rule violation. But that is a much different conversation than, “So we had some employees who went rogue, took a bunch of our product and drove over state lines to sell it and got caught and it's labeled with our labels.” Those are very, very different conversations because, yeah, you don't want federal enforcement actions.

Kyle McEntee:

So despite that, my understanding is that you still can't use a credit card at most of these dispensaries if you're selling to the public. Why is that the case if in fact the feds are saying, you know, we're going to be kind of hands off?

Mia Getlin:

Because of the credit card companies’ terms of use. They don't allow it. Just like the very large majority of banks will close your account if you open an account for your cannabis company at a regular bank and they figure it out. Which they can do in a number of ways, you know, where your money's going, where your money's coming from, if you have an unusual amount of cash deposits. And they start looking at that and look at the list of OLCC licensees and there's the business name, they'll shut down your account and it's federal money laundering. You are failing to disclose the federally legal source of funds.

Why it's okay to have a bank account and it's not money laundering – it’s usually a credit union account, not a bank account, where it's a cannabis banking program. Because then you are disclosing the federally illegal source of funds. And then that credit union is doing their due diligence into you and providing reports to the federal government about your business, about your deposits, and then they're charging you a lot for that. We see $500 monthly banking fees, cash deposit fees, partially because they have to do that due diligence. If you're a little more cynical, it's because they can and their members want to make more money.

Kyle McEntee:

So this is a fairly rapidly evolving area of law and it's changed substantially over the last decade, but especially in the last, I think, seven years since you've been doing this. How are you making sure you're staying on top of all these changes?

Mia Getlin:

That's part of the fun thing about practicing in this area. And it's part of the reason that I try not to take very many non-cannabis clients. The more time I'm spending doing work for licensees, the more I am gonna stay on top of it. The simple answer to your question is, well, you read the rules, read the statutes, read the updates, stay on top of bills, stay on top of administrative rule changes and guidance that's put out by the agency. But that ignores how the OCC is looking at things.

A really easy one is that OLCC licenses by statute are non-transferrable. They actually are transferrable. And how they're transferrable is pursuant to a change of ownership. So if you want to open a farm in Oregon, you submit an application and if you stop there, pay your license, your application fee, submit the application, nothing's going to happen. Eventually the application will be inactivated because they're not issuing new licenses. If you want to start a farm and I have a farm and I'm getting out of the business and I'm willing to sell my license to you or sell my whole business to you along with the license and you submit your application, I submit a change of ownership form and now your application gets processed. You're not actually having my license transferred to you because when you get approved, my license is inactivated and you get a new one with a new license number, you don't take my compliance history, you don't take my license number.

So, it is accurate to say that they're not transferable, but for all practical purposes, they are transferable. And that's something that, you know, even an attorney just dabbling in the industry is going to know that much. Though I have had that come up before when I'm working opposite an attorney on a transaction and they've never dealt with an OLCC license entity transaction before, and they say, well, I was looking at the statute and the license isn't transferable, so how is my client going to get this license? But, you know, but as soon as you kind of wade into it, you figure out those basics.

But there are a lot of smaller things, you know, knowing whether a change of ownership and a change of location can be processed together. And what it means when they can, what it means when they can't. there's a lot of unwritten policy and there's also a lot of written policy that's not particularly easy to come by. It is a mixture of the same thing attorneys do in most specialties, which again is staying on top of statute and rule changes. And it is also a lot of just doing it.

You know, we all call each other. It's a very small community of cannabis law attorneys in the state. And there are a few of us that are known to have an especially good understanding of the rules and especially licensing rules. And so the question isn’t, what's the rule here? The question is, have you seen this before? And is there anything I don't know? Have you been through this process?

Kyle McEntee:

So does this collegiality translate into a community that is able to advocate on its own behalf to change regulations to make them more sensible or more transparent or more operationally functional?

Mia Getlin:

It does. You know, and I was talking about the community of cannabis law attorneys, but to answer your question, I want to kind of expand that out to the, to the community that is the industry. The industry has a very effective advocacy presence. They've really gotten the industry speaking in almost all cases with one voice, which has been extremely effective. When you're trying to get statute changes, you know, you can't have, you're dealing with legislators who are dealing with so many bills, they don't have time, you can't assume that they understand the industry, no matter what industry you're in. And with cannabis, of course, it comes along with so much baggage for everyone.

And so it can be really harmful if you have one person coming in, you know, from the industry, advocating for a bill, another person coming in, opposing the same bill also from the industry, and then someone coming in saying something else, and then they just go, well, we don't even know what the industry wants. When you have legislators who need to be educated by the people coming in, because again, they've got way too much on their plates. They don't have time to go do their own research. I mean, they have staff to do that, but their staff also has way too many bills that they need to get their arms around. It is really helpful to have the industry speaking with one voice, pulling in the same direction, and having a very effective advocacy group, and then having the two groups communicate and coordinate.

Everyone's not always in agreement. But if the groups can get the people who aren't in agreement on a particular issue to either agree to just kind of accept it and sit back on that one or address their concerns so they can come over to the same side as everybody, as the majority or some sort of trade. Hey, you know, back us on this and then let's talk about how we can work on this priority of yours that allows a lot more to get passed. And it makes it so that the people who the industry is trying to get to work with them and influence towards changes that are good for the businesses and the industry, where they're going to listen a little more. And the legal community has really been helping a lot with that too.

Kyle McEntee:

I would imagine one of the challenges that you have with your client base is that some of them are coming from the illegal side of the market. And that probably means they are not maybe as sophisticated or familiar with how to operate legally. How do you navigate those challenges?

Mia Getlin:

That's one of the really fun things about specializing in this industry. I have clients on that end of the spectrum. I then have clients that are very sophisticated, large, multi-state operators, public companies, and everything in between. Some of the big ones used to be, did come over from the illicit market. But the ones that are just coming over, it's kind of fun. It's a little scary. I get scared for them sometimes, but it's fun helping them through that process. And some of them are resistant and think that, oh yeah, there's a bunch of rules. Yeah, oh yeah, we'll say we're doing that stuff. The large majority of them really want to be rule compliant and it makes things interesting because I'm walking them through so many things that I usually am not walking clients through.

One of my favorite clients started their business and they were in it about six months, maybe nine months and sent me a picture and said, “what's this?” And it was a picture of a letter they got from the Oregon Department of Revenue saying that they failed to file quarterly payroll taxes. And I said, “oh, you didn't file payroll taxes for last quarter.” He sSaid, “what does that mean?” And I said, “oh, okay, let me back up. So, as a business, you don't just file taxes annually, your payroll taxes, you have to file quarterly and pay.” And he said, “wait, hold on. I don't know what you're talking about.” And I said, “payroll taxes.” “No, what's that?” I said, “okay, let's back up some more. You know when you get a paycheck and on the pay stub” and he said, “I'm going to stop you right there Mia. No, I don't.” And I realized that this client of mine who, you know, is close to my age had never gotten a paycheck in their life because they've always been operating for their entire adult life. They were operating in the illicit market and there aren't pay stubs when you're in the illicit market. And so I had to back way up, you know? And there were a lot of instances like that, you know, with that client and other similar clients. And so then, and then with that client, we ended up having, you know, within a few months of each other, we had OSHA show up for an inspection, and both said this is...

Kyle McEntee:

And OSHA is the…

Mia Getlin:

Oh, OSHA is there to check health and safety, employee health and safety. They're out there to make sure, you know, big things that you don't want to see, you know, employees being horribly mistreated. But then things like, do you have a ladder up too high? Because that's a violation. Do you have, you know, eye cleaning rinsing stations for if someone gets something in their eyes? Are you properly labeling all your chemicals? So we had an OLCC inspector show up and inspect and we had an OSHA inspector show up and inspect within, I think within a few months of each other and both reported back to me and one of my associates at the time that it was the most compliant recreational cannabis facility they had ever been to.

And I was just so proud of our client, you know, because it's one thing if you're coming from... If you're coming over from say, whatever, almost any other business, that's impressive. But you know how to run a business. You know how to make sure your employees are following rules and going through checklists. You're coming out from the listed market. You have to think about most of those businesses have operated intentionally not keeping paper records. And certainly not worrying about to your point, you know, what the OSHA rules are, because if somebody shows up looking at that, they've got much bigger problems, you know. So yeah, so that makes it really fun.

Kyle McEntee:

When a client comes in, you know, they're in various positions, right? So sometimes you're going to help them set up a new business, help them with corporate structuring. Should this be an LLC? Should this be a partnership? Should this be a corporation with shareholders? Some of them are going to be just businesses that already exist, that are trying to get into this market. And then regardless of how they became a business, you're then helping them get their license. But it also sounds like you have this continuing relationship. So it's not just about helping startups operate. It's advising them throughout the setup and then they run into problems they come back to you. What are some of the things that they're coming back to you most often on besides say the OSHA regulations?

Mia Getlin:

All kinds of things and it starts looking much more like a business in any other industry with a lot of that work. You know, I had a meeting with a client this morning that wanted to streamline their collections process. And I'll have clients come to me for corporate restructuring.

Kyle McEntee:

I mean, that's the kind of thing lots of family businesses are trying to do, right? They're, hey, we want to take on a new investor. What does that look like? Or, uh, we see a long-term solution where this is an employee-owned company because we want to make an exit in 10 or 15 years. That's all pretty standard in, you know, the outside general counsel, which is kind of what it sounds like you are.

Mia Getlin:

Exactly, yes. And then, of course, a lot of those things will touch on the rules. Somebody has a great employee that they want to give an interest in the company to, we need to look at whether that's going to rise to the level of a financial interest that requires them to be added to the license.

Somebody wants to amend their operating agreement and be more permissive with transfers. We need to make sure that there's not gonna be a transfer without OLCC approval, if that's required. You know, somebody has a secured debt where the debtor has defaulted and the secured assets include either inventory or a license. We need to talk about the process for, you know, foreclosing on secured assets that are regulated. So, most of it touches on the rules, but yeah, it does really start looking more like helping any other business. A lot of times what it is, is issue spotting. For any law students who think you don't issue spot later, that is actually a huge part of it. It's issue spotting for compliance and licensing issues. And then if there aren't any, you know, just doing the work like you would for any other business.

Kyle McEntee:

So issue spotting, we could also call that seeing around corners. That requires trust, right? Because that requires them to provide you lots of information. And again, I think for those coming over from the illicit market, they might struggle with that trust. So how do you build that with a client who maybe doesn't understand why they need to hand over large sums of money or sensitive credentials as someone who, at least at the start of your working relationship is essentially a stranger?

Mia Getlin:

Well, to be honest, usually by the time we get to that point, I have that trust. And the first test of that is someone who's never worked with an attorney before and doesn't really know people who have, who calls me, asks me to do work for them. And then I tell them, okay, before I'm going to start working, you need to send me $5,000. But I promise you that if we don't use that all up and you want it back, you get back whatever hasn't been earned. Anyone who's, anybody who's been in business for a while isn't going to blink an eye at that. They're, okay, how much do you need? Somebody who's never worked with an attorney before, may say, well, what do you mean? No, just send me a bill. Send me a bill when you've done the work and then I'll pay you. I identified that as a potential issue early on.

And so I insert words when I'm having that consultation with the client and talking about next steps, I kind of insert words that I think will make them feel a little more comfortable. But yeah, you do need to gain that trust. It's not actually more difficult to earn their trust. It's just different from earning the trust of a business person who's much more sophisticated. They're looking for different things in most cases.

And those clients who are coming over from the illicit market, you know, I think you earn their trust in many cases just by being on their side and making sure they feel that and having the answers. In a lot of those, it's pretty clear that they're thinking, they don't want to tell me this because I'm going to judge them. I don't and they can tell that and I think that with those clients, I think that goes a long way to earning trust.

Kyle McEntee:

As a solo practitioner, one of the challenges is going to be a steady stream of money that is actually flowing from your clients into your pocket. And so if you have clients all on retainer and they're willing to pay it. And you have a steady stream of clients coming through word of mouth, it sounds like you're set up pretty well as a solo practitioner in a way that isn't as easy for a lot of people.

Mia Getlin:

So I've only been a solo practitioner for about six months now. When I was considering going out on my own, I identified, of course, the drawbacks, the risks, and correctly identified one as difficulty in keeping a consistent workflow. There are, as a solo, you have a couple weeks, at least for me, I mean, depending what kind of law you're practicing, it might be a longer period, shorter period, but for me, it's usually a couple or a few weeks where I am so busy that I'm saying, oh, I'm going to need to stop taking clients, my turnaround time's going to slow down too much, this is busier than I want to be, and then, those projects wrap up and what often happens is I'm busy, get through a Friday, you know, oh my gosh, I need this weekend. I don't think I have anything I need to do over the weekend. I'm not going to, you know, look at my email. I'm not going to do any work, save it for Monday and then I come in on Monday, get in front of my computer, ready for another busy day and realize I have nothing to do because all those projects that were keeping me so busy wrapped up.

And that's fine, you know, I don't mind that. When that happens, I can catch up on admin work, you know, kind of go through projects that stalled out and check in with those clients to see if they are either ready to get started or, you know, if they've abandoned the project, do they want their retainer funds back or might they want to keep those for another project? You know, stuff like that.

But yeah, getting paid as a solo too, it's a little scarier. If you're at a big firm and you have a client that runs up a balance or even a medium or small firm and then they don't pay, well, you've got other attorneys in the office that are getting paid. As a solo, if I let a client get behind on paying and they have a fair bit of work for a couple months, that could be a really significant chunk of my annual income. Luckily, I have a really good relationship with my clients. I'm pretty selective about the clients that I take and that I keep. And so, you know, knock on wood, I've been pretty lucky with that since I've been on my own. But I am careful. I don't like asking for money. I don't think really anybody does. And you know, I kind of have in the back of my head that if I have a retainer run out, and I'm going to keep doing work, then any of that additional work I'm doing, I might not get paid for.

Kyle McEntee:

And so you have to be comfortable with that, like taking the calculated risk.

Mia Getlin:

Right. And that the Oregon cannabis industry has been in a pretty bad slump for a while. And so I've had some clients who I've worked for a while who have ended up in situations where they need legal services and they'll pay when they can. And you know, and I've done work for those clients knowing that they'll pay if and when they can. And that's fine. I just want to be able to choose that. I have limited time. I have three kids. I have other things going on in my life. I have limited time to do free work. And if I'm doing free work for someone. I want it to be by choice, either an actual pro bono project or a client who I've decided I'm going to do the work for them and if they don't pay me. You know, they don't pay me, but they've been a good client for a while. And, and, you know, I want to help them out. Um, what, what I really don't like is when, you know, I do work for someone who should be paying, who can pay, and then I start having to chase them down. You know, if you need, if you need a favor from me, let's talk about that. Uh, uh, don't just don't, don't steal my time.

Kyle McEntee:

Have you had to fire any clients at this point?

Mia Getlin:

Yes, not since I've been solo, but over the years, definitely. And I think what I've gotten better at is listening to my gut. And sometimes my gut's wrong. I mean, I one time referred out a client because I thought that they were going to be a problem client and a friend of mine ended up with them and they have been a wonderful client for that friend for years. But rarely, far more often I've taken clients that I got a bad feeling about or I thought they were going to be difficult – and not the kind of difficult I like dealing with clients – and then it turned out I was right and had to fire them or didn't fire them but didn't really enjoy representing them and wished I hadn't.

That's pretty rare. It's usually either I like the client or they're problematic enough that I've had to cut them. And that's a really important skill for attorneys. Anytime an attorney is in a position where they're deciding whether they're going to take a client or not, you need to be able to identify problem clients. And if you're identifying them after you've taken them on, you need to be comfortable firing them.

Of course, there's ethical limitations to that in certain circumstances. As a transactional attorney, I don't butt up against those very often.

Kyle McEntee:

Yeah, transactional attorneys are often thought of as bringing people together, as opposed to being in these adversarial positions. And it sounds like that's kind of what drives you and motivates you.

Mia Getlin:

Right. And I sometimes have to get a little aggressive in negotiations or we'll have to terminate a transaction or do something else that the other party really isn't going to like. And that is absolutely part of being a transactional attorney. But I'm not looking for opportunities to be aggressive. I think it would be a disservice to my clients in most instances if I was, because you're right. I am typically looking to find solutions. I'm trying to get a deal done, trying to get a deal signed and closed, or I'm trying to form an entity and get all of the, all of the owners to, on the same page about how the entity's going to be governed and what the voting rights and distribution rights are going to be. Advocating for your client in those situations where we're not doing, talking about litigation, we're not talking about disputes, advocating for your client most often means, you know, not ruffling feathers, and most often means just getting the parties to come together.

While I am not typically handling disputes, I am, you know, with some frequency dealing with clients who are very stressed out and very upset. They might be selling a business for a huge loss when that loss is their entire life savings. They might, you know, they might have all kinds of things going on. I need to kind of be supportive and also understanding that they're upset and, you know, maybe lashing out a little bit. That is not cause to fire a client at all. You know that means I need to kind of help the client. I need to be the reasonable mind for the client and I need to help get the client to a better place with their business so that they can not be having such a hard time with it.