FBAOC Newsletter Spring Summer 2017 DRAFT_v4.7_1

Spring/Summer 2017 FBA/OC
Newsletter Date
The Newsletter of the Federal Bar Association/Orange County Chapter

Spring/Summer 2017

The Constitutionality of Inter Partes Review:
Precedent from Article I Bankruptcy Tribunals
and Public Policy Implications

By Gregory K. Clarkson and Sharon Shaoulian*

UPCOMING EVENTS: A very interesting jurisdictional Does an Article I Tribunal
fight is before the Supreme Court in Have the Authority to Adjudi-
 YLD Brown Bag Lunch with a case examining the constitution- cate and Extinguish Patent
the Hon. Douglas F. ality of inter partes review proceed- Rights as Patent Rights Are
McCormick ings by the U.S. Patent and Trade- Public Rights?
Ronald Reagan Federal mark Office (“USPTO”).
Building The Supreme Court’s most
411 West Fourth Street Petitioner Oil States Energy Ser- well-developed line of cases
Santa Ana, CA vices, LLC (“OSEC”) lost its rights concerning the adjudicative
Aug. 9, 2017 in a patent following an inter partes powers of Article I tribunals
review proceeding conducted before arises in the bankruptcy con-
 Intellectual Property Semi- the Patent Trial and Appeal Board text, based upon bankruptcy
nar (“PTAB”), an Article I tribunal of being a “public right” that ex-
Chapman University the USPTO, after Respondent ists only as a direct result of
Sept. 12, 2017 Greene’s Energy Group, LLC ques- federal government action, as
tioned the validity of OSEC’s pa- opposed to a “private right”
 Annual Judges’ Night tent.1 The Supreme Court has that naturally arises between
The Duke Hotel Newport granted certiorari to answer the individuals.3
Beach question of the constitutionality of
4500 MacArthur Blvd. the inter partes review proceeding, Specifically, in 1982, a plurali-
Newport Beach, CA as OSEC contends that the extin- ty of the Supreme Court held
Oct. 19, 2017 guishment of its property right in
its patent by an Article I tribunal IN THIS ISSUE:
Register for events at violates Article III of the Constitu-
www.fbaoc.com tion, as well as the Seventh Amend-
ment.2 Oral arguments are ex-
pected in early 2018. The Constitutionality of Inter Partes Review 1

After examination of similar issues From the Editor 2
in non-patent law areas, we argue
that OSEC’s position contradicts President’s Message 3
the long line of case law established
around the doctrine of “Public The Intersection of Federal and State Law on 7
Rights.” Further, a holding in Cannabis Regulations
OSEC’s favor could cast into serious
doubt any and all agency revoca- Civil Practice Seminar — Perils of Ex Parte 8
tions of rights, resulting in a seri- Communications
ous public policy impact.
Celebrating Judge Real’s 50 Years on the 10
Federal Bench

Ninth Circuit Trims Down Class Certification 13
Requirements in Briseno v. ConAgra Foods

Page 2 FBA/OC

FBA/OC From the Editor

P.O. Box 6130 I am pleased to present the Spring/Summer 2017 issue
Newport Beach, CA 92658 of the Newsletter of the Federal Bar Association, Or-
ange County Chapter. This also marks my inaugural
(949) 608-9905 issue as Editor-in-Chief of the Newsletter, so some
www.fbaoc.com introductions are in order. First, however, I must
[email protected] acknowledge the big shoes left for me to fill by the out-
going Editor. Matthew K. Wegner has worked on the
Board of Directors Newsletter for fourteen years, including the last five
years running the publication as Editor-in-Chief. Un-
To October 2017: der his stewardship, the Newsletter consistently pro-
Jennifer L. Bradford duced substantive, sophisticated articles of great value
Hon. David O. Carter to federal practitioners. His tenure ended on a high
Brian C. Claasen note with the Newsletter receiving the 2016 Outstand-
Hon. Scott C. Clarkson ing Chapter Newsletter Award from the FBA national
Kate Corrigan organization. We are all indebted to Matt for the high-quality publication FBA/OC
Michael W. DeVries has enjoyed over the years, and I hope to continue his legacy.
Hon. Jay C. Gandhi
Lisa S. Glasser My introduction to the federal bar in Orange County began as a law clerk. I had the
Joshua Jessen privilege of clerking for two years in our federal courthouse in Santa Ana — first for
Damon D. Mircheff the Honorable Alicemarie H. Stotler and then for the Honorable Cormac J. Carney.
Hon. Josephine L. Staton I witnessed the important role our FBA chapter plays in fostering bench-and-bar
David M. Stein relations and providing a forum for our federal legal community to come together.
Jennifer Trusso Salinas The Newsletter supports that role, and I hope to maintain the standards of high-
Matthew K. Wegner quality, useful, and engaging content it has come to embody.

To October 2018: This issue debuts a new design for the Newsletter, including a revised layout, typog-
Daniel P. Bane raphy, color scheme, and graphics. The updated design emphasizes clarity and read-
David B. Clark ability and aims for a consistent presentation across platforms — whether in print,
Jason de Bretteville online, or on a mobile device. We have an exciting line-up as well. This issue fea-
Tony M. Diab tures articles on the constitutionality of inter partes review, the unique clash of
Douglas J. Dixon federalism in the area of cannabis regulation, a celebration of the Honorable Ma-
Kiara W. Gebhart nuel Real’s 50 years on the federal bench — written by his 62nd law clerk, a recap
Andrew R. Gray of the highly successful Annual Civil Practice Seminar, and a case update on
Hon. Andrew J. Guilford Briseno v. ConAgra Foods, 844 F.3d 1121 (9th Cir. 2017), an important Ninth Cir-
Bret D. Hembd cuit decision on class action certification.
Kenneth B. Julian
Joey Liu My great thanks to the authors for their hard work. Please contact me if you would
Deborah Mallgrave like to submit an article to the Newsletter for publication or if you have an article
Hon. Douglas F. McCormick idea or topic of interest you would like to see featured.
Christopher H. McGrath
Hon. James V. Selna Brent S. Colasurdo
Arjun Sivakumar Editor-in-Chief
Dennise D. Willett
FBA/OC NEWSLETTER SUBMISSIONS
Director Emeritus:
Hon. Arthur Nakazato Brent S. Colasurdo
Umberg/Zipser LLP
1920 Main Street, Suite 750
Irvine, California 92614
[email protected]
(949) 679-0052

Spring/Summer 2017 Page 3

President’s Message Roman E. Darmer
FBA/OC President
By Roman E. Darmer* FBA/OC Officers
Roman E. Darmer
I am delighted and honored to serve as president of the FBA/OC President
chapter this year. I have been fortunate in my career to have had Amy J. Laurendeau
President-Elect
the opportunity to practice in federal court both as a government Van V. Nguyen
lawyer and a private practitioner in both civil and criminal mat- Treasurer
ters. As members in the Southern Division of the Central District, Dean J. Zipser
Secretary
we are all fortunate to practice before an outstanding bench in a
beautiful courthouse with and against a federal bar comprised of
highly skilled federal practitioners. The mission of the Federal Bar

Association is to strengthen the federal legal system and admin-
istration of justice by serving the interests and needs of federal
practitioners, both public and private, as well as the federal judici-

ary and the public they serve. As the result of the hard work and
dedication of many leaders of this
chapter who have preceded me as

President, the FBA/ “I am delighted and OC continues to be
at the forefront of honored to serve as those efforts.

We are off to a busy president of the start this year. On
May 11, the FBA/ FBA/OC chapter OC presented our
annual Civil Prac- tice Seminar fea-
turing Geoff Shep- this year.” ard, author of The
Real Watergate Scandal, and a pan-
el including Judge Guilford and Magistrate Judge Early, discuss-
ing some of the ex parte contacts between the judge who presided

over the Watergate grand jury and the special prosecutor. On May
30, the FBA/OC hosted our annual Pro Bono Opportunities Lunch-
eon at the Pacific Club. This event highlighted several different

ways that federal practitioners can get involved in pro bono work
in Orange County. Among the pro bono programs highlighted were
the Central District Civil Rights Panel, the Ninth Circuit Pro Bono

Appeals Program, Legal Aid Society of Orange County, Veterans
Legal Institute, and Public Law Center. On June 14, we rolled into
summer with our first Bench and Bar Luncheon featuring speaker

Judge Staton, who helped us all avoid future “motion sickness”
with a compelling (and occasionally harrowing) presentation on
potential pitfalls in motion practice in federal court. We followed

that on July 26 with our second Bench and Bar Luncheon, featur-
ing Magistrate Judge Jay Gandhi and Judge George H. King (Ret.)
of JAMS. Judge Gandhi and Judge King addressed some of the

more complicated issues that can arise in mediating your case be-
fore trial as well as some helpful do’s and don’ts. Our summer
Bench and Bar Luncheon events are great opportunities to intro-

duce summer associates at your firm to our local federal judges as
well as the federal bar community.

Looking ahead, FBA/OC will sponsor several events that will be of
interest to federal practitioners in Orange County, regardless of
your practice specialty. Next up, on September 12, FBA/OC will
sponsor its annual Intellectual Property Seminar, at Chapman
University Law School. As in past years, our IP event will feature
local federal judges and leading IP practitioners addressing some
of the leading issues in the area, including a number of important

(Continued on page 4)

Page 4 FBA/OC

President’s Message Federal Bar Association

(Continued from page 3) Orange County Chapter
Young Lawyers Division
IP cases decided by the Supreme Court last term. The
biggest event of our year, Annual Judges’ Night, will take Calling Young Lawyers!
place on October 19, at the Duke Hotel. Judges’ Night is
the perfect opportunity to celebrate and appreciate our FBA/OC Young Lawyers unites young practi-
local federal judges who are so active and engaged in the tioners to build a network of professionals and
efforts of our FBA/OC chapter. A highlight of the event become more involved in FBA.
will be a presentation on the State of the Central District All attorneys under 40 years of age or with 10
by Chief Judge Virginia A. Phillips and the announce- years or less of practice are welcome.
ment of this year’s recipient of the Alicemarie H. Stotler Watch out for our exciting events!
Award.  Brown Bag Lunch with the Hon. Douglas F.

All of these terrific events are the result of the outstand- McCormick
ing efforts of our FBA/OC Board who represent large and August 9, 2017
smaller firms in Orange County, the U.S. Attorney’s Of- Ronald Reagan Federal Building
fice, as well as several of our local federal judges, includ- 411 West Fourth Street, Santa Ana, CA
ing District Judges Carter, Guilford, Selna and Staton; Judge McCormick will answer your questions
Magistrate Judges Gandhi and McCormick; and Bank- about his career and path to the bench, the expe-
ruptcy Judge Clarkson. It has been a pleasure and an rience of litigators in federal court, and advice he
honor to work with such a talented and dedicated group. has for young lawyers.
 FBA YLD/CRF Constitution Day
In addition to our programs, I would like to extend a spe- August 31, 2017 (orientation)
cial invitation to our younger colleagues (or those col- September 18-22, 2017
leagues who are young at heart) to check out our revital- Orange County Middle Schools
ized Young Lawyers Division. Spearheaded by the tire- Foster civic education by presenting interactive
less energy of our fellow board member and current lessons on the First Amendment to 8th grade
treasurer Van Nguyen, the Young Lawyers Division was students. Email [email protected] for registration
formed to address the specific interests and needs of local information.
federal practitioners under the age of 40 or who have  FBA/OC Pro Se Clinic
been practicing 10 years or less. Most recently, the October 3, 2017, 1-4 p.m.
Young Lawyers Group hosted a spring happy hour and First Tuesday of every quarter
networking event at BossCat Kitchen in Newport Beach. Ronald Reagan Federal Building
The Young Lawyers Division is also continuing our chap- 411 West Fourth Street, Santa Ana, CA
ter’s commitment to pro bono work by adopting a regular Come get involved with the Public Law Center
session at the pro se clinic in the federal courthouse in Pro Se Clinic and give back to the community
Santa Ana. with FBA/OC.
 FBA/OC YLD Happy Hour
Thank you for your continued support of the FBA/OC. October 2017, Date TBD.
Whether you are just starting out your career in federal Register for events at www.fbaoc.com
practice or have decades of experience in federal court,
our chapter’s aim is to offer compelling and useful pro-
grams as well as opportunities for you to network and get
to know your colleagues in the federal family of the
Southern Division of the Central District. It is a privilege
to serve this year as President of FBA/OC and I urge you
to contact me if there is any type of program or event
that would be of interest to you or your federal practice
area.

*Roman E. Darmer is a partner in the Irvine office of
Jones Day and is President of the Federal Bar Associa-
tion, Orange County Chapter.

Spring/Summer 2017 Page 5

Inter Partes Review lic right), and because McCormick’s precedent is super-

seded by Congress’s enactment of numerous mechanisms

(Continued from page 1) for the USPTO to administratively review the validity of
issued patents, including the inter partes review process

that there were three exceptions to the general rule re- enacted as part of the AIA.

quiring Article III adjudication before a jury.4 These are: Because a patent is a creation of federal law that is

territorial courts, military tribunals and cases involving “closely integrated into a public regulatory scheme,” pa-

“public” as opposed to “private” rights.5 tent rights may be adjudicated, and if granted in error,

In 1989, the Court further expanded the scope of cases extinguished by an Article I tribunal.11

Article I tribunals may adjudicate, ruling that the “class Is the PTAB’s Authority to Adjudicate Buttressed by the

of ‘public rights’ whose adjudication Congress may assign Patent Owner’s Consent by Filing for a Patent Right?

to administrative agencies or courts of equity sitting In the context of bankruptcy cases, “Article III is not vio-
without juries is more expansive [than previous case law lated when [parties] knowingly and voluntarily consent
suggests].”6 The Court held that, “public right[s]” may to adjudication by a bankruptcy judge.”12 Such consent
extend to cases not involving the Federal Government, if may be “express or implied.”13 This provides further jus-
Congress created a seemingly “private right . . . so closely tification for rejecting OSEC’s position that the PTAB,
integrated into a public regulatory scheme as to be a mat- an Article I tribunal, lacks authority to extinguish its
ter appropriate for agency resolution with limited in- patent rights.
volvement by the Article III judiciary.”7

tcvitaaPfltPsieeoheawncaadrrseladttayesireepndarrinnapgwidaptaattrhalipyasgntdrttlesgeei.gjitosucgonnhaTafvhdcrtuolnehstiyesawscsrteovlannorieifttemscUaenxeoawralrliresSeleyssdy,nknatPshycettqtepTia-ioedpuixtrnsOadslioaescdsacrowudtbtuieeifseyioccdltstadyrtnouhiuaseen.rwadeapteTfastaidaepbithnttodehapehdeentgeftianeiaonirertpbrtotraneemsrtleflnctreh.oteaittrcuinhsvTseepnrgiigeshnredeidosufoiswegPveslpufo“reaTsielifrntpttaA[rntofiritnheBtrnamooyiddyepf--o,,eenpnreatoaldfs]rrq“easelPfuagipatanuwhutril.eatabe”intl8-r-oytingwrhoiigtft.hcpTteh”ahyrtrihspneoeecuofoantafbShudtloluilirjitfsuctpl,cedrldtieachmiatcfbciooemteoatoffeesdifntitotaianieCphhslnogergereoejnaaruonbusdliboryti“nruefsasye[tsbtbnngotfhttrhjiefeioereielaanfnicecdiastclbttdgb.ahlysa,sam.piL,e1nmnotr4itiahkftekkjo,Wtsuvertreteidurhiuewthlofieperfipsurei]tltdstueoenpscwceirfrlnyacy,ymsiitstcttujwieehuhshiotscnnhohdniehtatneoelagepd”snsoteatpreeyfh,atilsasfsiaehnititcnkhlntadepapeoedtmataroacifattboUoi,pbeesvtnynaaunnShan.snntttfPeiesoiladklnTacbirilfptnltOtoouiashslpgnrpi,ieutltmtgtlihayaosf---

scheme, the Leahy-Smith America Invents Act (AIA), Further, the filer for a patent application has alterna-

Pub. L. No. 112–29, 125 Stat. 284 (2011). Thus, the tives to availing itself of the benefits of the patent system

PTAB, as an Article I tribunal, just like Article I bank- — it may, for example, choose to maintain its proprietary

ruptcy tribunals, has the power to adjudicate patent information as a trade secret instead of seeking patent

rights, as they are public rights. protection. By electing the benefits of the patent system,

Congress relies upon the USPTO’s expertise not only in a patent filer not only agrees to be bound by the decision
the issuance of patents, but also “to correct the agency's of the USPTO to grant or deny the patent — but also to
own errors in issuing patents in the first place.”9 To re- later have it revoked should it be found that the decision
strict the agency that issues patents from reviewing and to grant the patent was in error.

possibly extinguishing a patent it previously issued in What about Public Policy: Practicality, Efficiency, and

error would be a result that defeats Congress’s purpose. Stability of Agency Determinations?

In its petition, OSEC cites McCormick Harvesting Ma- In approving the constitutionality of the PTAB, as the
chine Co. v. C. Aultman & Co., 169 U.S. 606 (1898), Article I tribunal of the USPTO, to extinguish the public
which holds that the patent office depriving a patent rights granted by its agency, the Supreme Court would
holder of its patent would be an “invasion of the judicial not only comport with existing case law, but would also
branch of the government,” because patents “become the uphold important public policy objectives.
[private] property of the patentee.”10 However, this is
inapplicable to OSEC’s case, because subsequent case law The ability of Article I tribunals to adjudicate disputes,
articulates and clarifies the features of public rights in such as the PTAB adjudicating inter partes review pro-
the context of bankruptcy (which, like a patent, is a pub-

Page 6 FBA/OC

Inter Partes Review 1 Oil States Energy Servs., LLC v. Greene's Energy
Grp., LLC, 2017 U.S. LEXIS 3727 (No. 16-712).
(Continued from page 5)
2 The Seventh Amendment states: “In Suits at common
ceedings, is crucial to judicial and economic efficiency. Arti- law, where the value in controversy shall exceed twenty
cle I tribunal adjudication on highly specialized matters dollars, the right of trial by jury shall be preserved, and
such as bankruptcy or patent law substantially aids the no fact tried by a jury, shall be otherwise re-examined in
nation’s heavily burdened Article III judiciary. Reducing any Court of the United States, than according to the
the burden on Article III courts to adjudicate all cases of rules of the common law.”
patent invalidation, as well as reducing the economic bur-
den upon a litigant desiring to challenge a dubious patent, 3 See Stern v. Marshall, 564 U.S. 462, 489 (2011).
were core objectives of Congress in establishing the inter
partes review proceeding. 4 N. Pipeline Const. Co. v. Marathon Pipe Line Co., 458
U.S. 50, 67 (1982).
Further, a determination in OSEC’s favor would not only
impact the patent system, but would also throw serious 5 Id.
doubt into the ability of any agency, whether via an agency
determination or via an Article I tribunal, to revoke a previ- 6 Granfinanciera v. Nordberg, 492 U.S. 33, 53 (1989).
ously granted property right. Existing trademark rights are
presently subject to cancellation via an adversarial proceed- 7 Id. at 40, 51.
ing before an Article I tribunal, the Trademark Trial and
Appeal Board. The Court of Federal Claims, an Article I 8 35 U.S.C. § 131.
tribunal, has jurisdiction to adjudicate challenges raised to
the propriety of contract rights awarded via a bidding pro- 9 MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d
cess by other government agencies. The Social Security Ad- 1284, 1290 (Fed. Cir. 2015).
ministration’s Office of Disability Adjudication and Review
is an Article I tribunal that has the power to revoke an indi- 10 McCormick Harvesting Mach. v. Aultman & Co., 169
vidual’s previously granted benefits. The power of all of U.S. 606, 609–12 (1898).
these tribunals to perform these duties would be subject to
serious skepticism if OSEC’s argument were to prevail. 11 Wellness Int’l Network, Ltd. v. Sharif, 135 S. Ct.
Requiring the Article III judiciary to assume these roles 1932, 1963 (2015).
instead would further impede judicial efficiency.
12 Id. at 1939.
Our Conclusion
13 Id. at 1948.
Patents are classic public rights for which adjudication, up
to and including extinguishment of that right, may be con- 14 Langenkamp v. Culp, 498 U.S. 42, 45 (1990).
stitutionally assigned to Article I tribunals. Additionally,
by filing for a patent and thus electing the benefits of the
patent system, the filer agrees to be bound by the decision
of the USPTO to later have that patent revoked should it be
found that the decision to grant the patent was in error.
Public policy considerations further support the power of an
Article I tribunal to revoke a public right. The Supreme
Court should properly hold that the PTAB has the power to
revoke a patent during an inter partes review proceeding.

* Gregory K. Clarkson is an associate with Stetina Brunda
Garred & Brucker, PC. Sharon Shaoulian is a Judicial Ex-
tern at the U.S. Bankruptcy Court for the Central District
of California and a second-year law student at the USC
Gould School of Law.

Spring/Summer 2017 Page 7

The Intersection of Federal and State Law on
Cannabis Regulations: Latest Developments in a
Rapidly Shifting Landscape

By Andrea Ruth Bird, Jonathan S. Landis, and Alex Avakian*

The laws and regulations on canna- (discussed below) had their homegrown cannabis de-
bis have long been a source of con- stroyed by the Drug Enforcement Agency (DEA).3 The
tention in the United States. This Supreme Court held that under the Commerce Clause of
article details the development of the U.S. Constitution, it is within the federal govern-
the federal prohibition on cannabis ment’s power to regulate even state-legal homegrown
and the gradual legal and public cannabis, as cannabis has the ability to substantially
policy changes as many states have affect economic activity.4 The ruling also had another
moved to de-criminalize and legal- effect. It essentially said that even if a state has some
ize medical use of cannabis and, sort of medical use exception, the federal government is
more recently, non-medical adult still free to prosecute those abiding by state laws.
usage.
Preemption and California’s Compassionate Use Act
Significantly, on the federal level,
the new administration may signal California was the first state to create an exception to the
a shift in federal enforcement poli- federal prohibition on cannabis by passing the Compas-
cy. The new head of the Depart- sionate Use Act (“CUA”). The purpose of the CUA was “to
ment of Justice, Attorney General ensure that seriously ill Californians have the right to
Jeff Sessions, is a long-standing obtain and use marijuana for medical purposes where
advocate of strict enforcement of the that medical use is deemed appropriate and has been
federal prohibition on cannabis, recommended by a physician who has determined that
including intervention on the state the person’s health would benefit from the use of mariju-
level in contravention of state laws. ana . . . .”5 In addition, the Act sought “to ensure that
Meanwhile, the momentum on the patients who obtained a recommendation and primary
state level continues to build to- caregivers would not be subject to sanctions and criminal
wards acceptance of medical canna- prosecutions.”6
bis usage and in a number of states
more recently — the legalization of non-medical adult us- The California exception directly conflicted with federal
age. law. So, how does California’s law, and all the other
states that have medical use exceptions, coexist with the
This article will outline the unique issues of federalism federal law?
presented by cannabis regulations, the extent to which
differences between federal and state law on cannabis can The interplay between the two laws exists for two main
be reconciled, and the conflicts and challenges that remain reasons: The first and foremost is because of the way our
under the current legal landscape. two-tiered system of government works. Secondly, it is
based on how the federal statute on marijuana is drafted.
Federal Cannabis Law
Under the principles of federalism, states are free to exer-
The period of modern federal regulation1 of cannabis had cise their police powers in matters concerning the health
its start in 1969 when Congress passed the Controlled and safety of their citizenry. This means that it is up to
Substances Act (CSA). Under the CSA, marijuana is clas- the states to decide what constitutes a crime in their ju-
sified as a Schedule I prohibited drug. This categorization risdictions. And under the 10th Amendment, the federal
under the Act means that marijuana has a high potential government cannot compel state law enforcement agen-
for being abused and there is no accepted use whether un- cies to enforce federal law. Such “commandeering” of
der medical supervision or not.2 In 2005, the CSA’s consti-
tutionality was challenged when two Californians who
were abiding by California’s Compassionate Use Act

Page 8 FBA/OC

FBA/OC Civil
Practice Seminar

More than 120 members of the Orange
County legal community attended the
annual Civil Practice Seminar on May
11, 2017 at the Ronald Reagan Federal
Building and United States Courthouse.
The program, A Case Study from the
Watergate Prosecutions: The Perils of
Ex Parte Communication,” featured
Geoff Shepard, who served as counsel to
President Richard Nixon during the Wa-
tergate trials; U.S. District Judge An-
drew J. Guilford; and newly appointed
U.S. Magistrate Judge John D. Early.
Judge Early, who was sworn in on Feb-
ruary 22, 2017, is the newest Magistrate
Judge in the Southern Division of the
Central District of California.

The program focused on the ethical con-
siderations attendant to interactions
between judges and counsel. The panel
began with a presentation by Geoff

Spring/Summer 2017 Page 9

Shepard of the background of the Watergate
trials, including the relevant participants.
The panel then went through nine separate
examples of interactions between the judge
presiding over the Watergate trials, U.S.
States District Judge John Sirica, and the
various counsel prosecuting the Watergate
cases. After each anecdote from the Wa-
tergate trials, the panel members discussed
the ethical considerations associated with the
interactions. Judge Guilford shared his expe-
rience of more than 10 years as a federal
judge, and Judge Early shared his experienc-
es from private practice and as a former As-
sistant United States Attorney. The panel
also discussed other considerations that both
judicial officers and counsel should take into
account when interacting socially.

FBA/OC would like to thank Geoff Shepard,
Judge Andrew J. Guilford, and Judge John D.
Early for their participation in this event. For
more information on this program or other
FBA/OC-sponsored events, please visit
www.fbaoc.com or contact [email protected].

Tony Diab, Esq.*

*Tony Diab is an associate at Shook, Hardy &
Bacon L.L.P. and serves on the FBA/OC
Board of Directors.

Page 10 FBA/OC

Celebrating 50 Years on the Federal Bench: Judge
Real’s 62nd Law Clerk Shares Tales of a Central
District Legend

By Mani Dabiri*

What do you say when someone celebrates fifty what he means by that if you haven’t seen some of
years on the bench? the gardening he’s done.

Plenty in Judge Real’s case if you ask me, and Here’s a story for you. A few years ago, I went to

since someone did, here’s my piece. visit him at home, and when I got there, he was all
by himself; no Mrs. Real, no family. He asked me
Who am I? Well, I was the Judge’s to give him a hand with something, so we

62nd law clerk: one of two during the “I found myself at headed back toward the garden, and I saw
2005-06 term, and one of 82 now over- the foot of a very that he was already in the middle of some
all. A lot of those clerks feel the way tall ladder, staring heavy-duty project. Before I knew it, he
about him that I do, so I’m delighted brought over a ladder and power saw, and
to help commemorate this very special up at my 86-year- he said we were going to clear out some
jubilee; it’s a deep and sentimental tree branches and foliage. That sounded
honor for me. old former boss, good to me in the abstract, but then I found
who happened to be myself at the foot of a very tall ladder, star-
The Judge hired me when I was 26 ing up at my 86-year-old former boss, who
years old, and he made a big impres- a federal judge, happened to be a federal judge, perched on
perched on the

sion on me from the beginning. penultimate rung.” the penultimate rung. And above him, the
tree branches loomed large and thick. It

For one thing, he seemed like the would’ve been a tough job for someone half
strongest 82 year old in the world. I remember we his age.
flew to Arizona once to sit by designation, and at

the airport, I found myself scampering ten or fif- Suddenly, I was pretty worried. And I didn’t like
teen feet behind him because he was tearing along my options. I couldn’t ask him to come down from
at a brisk pace with all of his luggage in tow. It there any more than I could’ve told him not to go

was the gait of a man who knew where he was up in the first place. Not to someone like Judge
going. A lot of folks have marveled at his vitality Real, and not in his own house, anyway. But my
over the years, and the Judge will often attribute mind was running and my adrenaline pumping.

it to his gardening, but I’m not sure you’d grasp (Continued on page 11)

Spring/Summer 2017 Page 11

Celebrating 50 Years on the dence was overwhelming, but there was plenty of
Federal Bench room to convict if he wanted to. Although I’ve never
asked the Judge about it, I believe it was a pure, un-
sung display of mercy and judgment by a judge whom
no one would characterize as easy or soft. Mind you,
(Continued from page 10) the law of federal sentencing was in a state of up-

All I could think about — in addition to his falling and heaval at the time. The Supreme Court had just de-
hurting himself — was how in the world I would ac- clared the guidelines to be advisory, not mandatory,
count for that afterward to his family, or the world. but there was a lot of commotion about it, and the
dust hadn’t settled like it has since.

So I held onto that ladder as best I could and braced Sometimes, the Judge disagreed with me, and those
myself to break his fall or do whatever else. were the best lessons. One time, we got a motion for

But you know what? I didn’t need to worry. The Judge attorney’s fees after a disabled-access case had set-
climbed that ladder to the top, stood firmly at its crest, tled. The plaintiff’s lawyer was asking for $103,000,
and starting mowing down branches like nobody’s busi- and the defendant, a restaurant, said it should be
ness. Before I knew it, I was getting covered down $13,000. I split the baby and recommended an award
there with leaves and branches. At some point, he of $65,000. I argued that the lawyer’s hourly rate was
came down to take a break, and I offered to go a round. reasonable and that the award, even if generous,
He didn’t go up again after that, and that was the end would compensate him for the risk he took in bring-
of it. But boy, what a moment that was. ing the case and his success in obtaining defendant’s
compliance with the law. Or so I thought.

And I have to tell you, I was astonished by that. I real- After the Judge reviewed my bench memo, he posed
ly couldn’t believe he did something like that at his just one question: Could I research the court dockets
age, and there was never a moment while he was up for cases involving this plaintiff and lawyer? Sure
there that he seemed unsteady or precarious. The thing, Judge. And so I did, and what I found was
whole thing just blew me away.
quite interesting. In the past three years,
the plaintiff had filed at least 21 of these
But then the Judge is impressive in a lot of “Speaking of bank lawsuits in the California federal courts
ways. I remember a patent case we had
that went to trial. It was a difficult, esoteric robberies . . .” alone. In each case, his complaint made
the same boilerplate claim that he’d fallen
case, and the jurors had a hard time follow- in a toilet at some restaurant. In two of
ing along or even trying to. I found my own
thoughts wandering, and I was supposed to be the ap- these cases, he even alleged that it happened on the
same day in two different restaurants — on opposite
prentice law clerk. The Judge, however, actively pre- ends of the state. His lawyer in every case? You can
sided over the trial and lobbed incisive questions from
the bench. In the fog of a dry witness examination, he take a wild guess.

would get the testimony moving again with a series of The two had quite a racket going. They would file a
short, focused questions. The longer I practice, the lawsuit based on their boilerplate claims; bring in a
more I’m impressed by that case and how the Judge consultant to identify every technical violation of dis-
exerted the same energy and attention that one might abled-access laws, few of which had anything to do
summon in, say, a bank robbery. with the plaintiff’s personal claim; settle the case for

Speaking of bank robberies, I remember one of those next to nothing but the defendant’s promise to bring
went to trial, too. The defendant was a middle-aged itself into compliance; declare victory; and move for
man who’d walked into a bank and passed a note. It attorneys’ fees, which I suspect the two probably
was, like many bank robberies, a nonviolent act of tur- shared to some extent. But this wasn’t the Judge’s
moil and desperation. The guy had lost his job, his wife first rodeo, and needless to say, they didn’t get what
had left him, and his life was falling apart. So he went they asked for.

and robbed a bank. No gun or other alarming facts, just There are a lot of things that you learn in a textbook,
a guy with a note. It was sad and pitiable. He got but when you learn by doing, and you peel back an
caught, and now he was looking at a serious term of onion that way, it tends to stay with you.
imprisonment under the federal sentencing guidelines.

There was no jury this time, and the case was tried to In that case, rather than acceding to the parties’ set-
the court. I do recall the evidence was sufficient to con- tlement, the Judge pursued a more just result, and he
vict the man, but then I wasn’t the trier of fact, though got it.
I’m not sure I would’ve come out differently if I was.
Well, the Judge acquitted him. I’m not saying the evi- (Continued on page 12)

Page 12 FBA/OC

Celebrating 50 Years on the About the FBA/OC
Federal Bench
The Federal Bar Association of
(Continued from page 11) Orange County (FBA/OC) is
committed to meeting the needs
But that’s how he approaches work every day in my estimation. of federal practitioners in Or-
He’s a prototypical trial judge. During my clerkship, he would ange County, California by spon-
often remind us that, as a matter of fact, “we decide these cases.” soring important "Bench and
He knows that it’s his job to decide them, and he understands Bar" events, CLE events and
that, while the court of appeals is there to review them, appellate other social events. These events
review isn’t always an adequate remedy for injustice. He knows all focus on issues relevant to
that, in nearly every case, the most important contest in the lives federal practitioners and provide
of those involved is the one decided in his court. And he knows an important bridge between the
that not everything that happens in a case or courtroom transfers many federal judges in Orange
to an appellate record, anyway. He wants to do justice. County and the attorneys who
practice before them.
Even generations of defendants whom he’s supervised on proba- We encourage you to join the
tion write to him, still — decades after he’s sentenced them or FBA/OC and benefit from this
terminated their probation — to thank him for taking the time to great and ongoing dialogue be-
judge them in a way that improved the balance of their lives. tween the local federal bench
and bar.
That kind of stuff makes an impression on you, too.
www.fbaoc.com
In the end, everyone will have his or her critics — we all do —
and fifty years of judging will earn you a few.

But I’ve learned that Judge Real
cares only to do the best he can every
day in law and in life. May we all do
it so well.

His style may hark back to the brand
of judge he used to appear before in
his day, but his instincts are sound,
his philosophy just, and his heart
tucked securely in the right place. He
is a good man in a preternatural
sense, one of the very best I know,
and I’m proud to call him a friend
and mentor. Happy anniversary,
Judge, and here’s to many more.

*Mani Dabiri is the founder of Think Defense,
a professional law corporation that defends
people and businesses in white-collar cases,
blue-collar cases, and business litigation.
Please visit www.thinkdefense.com for more
information. He served as the 62nd Law
Clerk to Judge Real.

Spring/Summer 2017 Page 13

New Year’s Resolution — Ninth Circuit Trims Down
Class Certification Requirements in Briseno v.
ConAgra Foods, 844 F.3d 1121 (9th Cir. 2017)

By Siena M. Caruso*

The Ninth Circuit fornia granted in part the plaintiffs’ motion to certify
rang in the New eleven statewide classes for persons in those states
Year by joining the who had purchased Wesson-brand cooking oil prod-
Sixth, Seventh, and ucts labeled “100% Natural.” The plaintiffs alleged
Eighth Circuits in ConAgra Foods deceptively and misleadingly market-
holding a putative ed its Wesson cooking oils, contending the bioengi-
class is not required neered ingredients used to make Wesson oils are not
to demonstrate an “natural.”
administratively

feasible way to deter- While noting the split among Ninth Circuit district

mine class member- courts, Judge Morrow held that to require administra-

ship at the class cer- tive feasibility would “effectively prohibit class actions

tification stage. involving low priced consumer goods — the very type

While a boon for of claims that would not be filed individually — there-

plaintiffs, the court’s by upending ‘[t]he policy at the very core of the class

decision in Briseno v. ConAgra Foods, 844 F.3d 1121 action mechanism.’”

(9th Cir. 2017), may result in greater administrative The Ninth Circuit affirmed. Writing for the panel,
burdens on the trial courts and increased pressure on Judge Friedland held that “the language of Rule 23
defendants to settle or reevaluate prior defense strate- neither provides nor implies that demonstrating an
gies.
administratively feasible way to identify

For plaintiffs, the removal of administra- “[T]o require class members is a prerequisite to class certi-
tive feasibility as an obstacle to class certi- administrative fication.” The Ninth Circuit’s determination
fication may encourage more class action feasibility would not to “interpose an additional hurdle into
filings in the Ninth Circuit. An increase in ‘effectively prohibit the class certification process” focused on
class action filings and certifications would class actions statutory interpretation and other circuits’
further burden district courts in the Ninth involving low priced interpretations of Federal Rule of Civil Proce-
Circuit, particularly with a greater number consumer goods — dure 23.
of class action cases going to trial. the very type of
claims that would Rule 23 dictates the elements a party seeking
For defendants, the removal of this implicit class certification must demonstrate for a
barrier to class certification will increase not be filed district court to certify a class. The moving
pressure to settle cases and may result in a individually . . .’” party “bears the burden of showing that each
complete reevaluation of defense strategies. of the four requirements of Rule 23(a) and at

For example, defendants may now choose, least one requirement of Rule 23(b) have

when possible, to remain in state court, where adminis- been met.” Relevant here, subsection (a) requires four

trative feasibility may still be a requirement. elements to be met: numerosity, a common question of

Ultimately, the Ninth Circuit’s weighing in on the is- law or fact, typicality, and that the representatives
sue of administrative feasibility may trigger the U.S. will fairly and adequately protect the interest of the
Supreme Court to step in and resolve the current cir- class members.

cuit split with the Third Circuit. The Ninth Circuit’s analysis of the plain meaning of

In the underlying case, Judge Margaret M. Morrow of (Continued on page 14)
the U.S. District Court for the Central District of Cali-

Page 14 FBA/OC

New Year’s Resolution terms. As for now, it appears that plaintiffs will ring
in 2018 with more Ninth Circuit district court class
(Continued from page 13) action filings and class certifications.
* Siena M. Caruso is an associate at Shook, Hardy & Ba-
the statute confirmed that the prerequisites identified in con L.L.P.
Rule 23(a) do not include or mention “administrative feasi-
bility.” Rather, the court noted Rule 23(b)(3) already re- 1 See e.g., Sevidal v. Target Corp., 189 Cal. App.
quires a court to consider “the likely difficulties in manag- 4th 905, 918-19 (2010) (requiring class represent-
ing a class action.” Thus, to “[i]mpos[e] a separate adminis- atives to define an ascertainable class).
trative feasibility requirement would render that managea- 2 In re ConAgra Foods, Inc., 90 F. Supp. 3d
bility criterion largely superfluous, a result that contra- 919, 969 (C.D. Cal. 2015).
venes the familiar precept that a rule should be interpreted
to ‘give[] effect to every clause.’” 3 This requirement is sometimes referred to as
“ascertainability.”
The court recognized the Third Circuit’s administrative 4 In re ConAgra Foods, 90 F. Supp. 3d at 970–
feasibility prerequisite to class certification, but declined 71 (citation omitted).
to follow suit because the court determined the Third Cir- 5 Briseno v. ConAgra Foods, 844 F.3d 1121,
cuit’s three justifications are “already address[ed]” under 1124–25 (9th Cir. 2017). Judge Friedland was
Rule 23 and so “an independent administrative feasibility joined by Judge Fletcher and Judge Christen.
requirement is unnecessary.” 6 Hanon v. Dataproducts Corp., 976 F.2d 497,
508 (9th Cir. 1992).
First, the court reasoned that the manageability criterion
of Rule 23(b)(D)(3)’s superiority requirement provides a 7 Briseno, 844 F.3d at 1126 (citation omitted).
mechanism to mitigate administrative burdens, whereas
an administrative feasibility requirement “would invite 8 Id. at 1126–-32 (citing Byrd v. Aaron’s Inc., 784
courts to consider the administrative burdens of class liti- F.3d 154 (3d Cir. 2015); Carerra v. Bayer Corp.,
gation ‘in a vacuum.’” 727 F.3d 300 (3d Cir. 2013)).
9 Id. at 1128 (citation omitted).
Second, the interests of class members are safeguarded 10 Id. at 1133. 
because neither Rule 23 nor due process requires actual,
individual notice to class members. Moreover, theoretical
absent class members in low-value consumer class actions
are not economically incentivized to pursue individual liti-
gation. Similarly, bona fide class members will be protected
from dilution by fraudulent members through the auditing
practices of class administrators and the reality of low par-
ticipation rates in consumer class actions.

Third, defendants’ due process rights to challenge the proof
used to demonstrate class membership are already protect-
ed under Rule 23 because defendants may mount challeng-
es to the plaintiffs’ showings of membership eligibility at
every stage of the litigation (initially against the class rep-
resentatives, at claim administration, and if and when ab-
sent class members file claims for damages).

Ultimately, the court rejected the Third Circuit’s reasoning
and joined the Sixth, Seventh, and Eighth Circuits in hold-
ing “the language of Rule 23 neither provides nor implies
that demonstrating an administratively feasible way to
identify class members is a prerequisite to class certifica-
tion.”

Eyes will be on the Supreme Court to see whether it takes
up this issue and addresses the circuit split in the coming

Spring/Summer 2017 Page 15

Intersection of Federal and State eral officials are limited in prosecuting state actors for rea-
Cannabis Law sons discussed below. However, criminal prosecution and
even civil forfeiture by federal enforcement agencies is still
(Continued from page 7) possible whether the individuals are complying with state
laws or not.
state law enforcement has been held unconstitutional by
the Supreme Court.7 Limitations on Federal Government’s Ability to Prosecute
Those Abiding by State Law:
The question of preemption in the cannabis context was
raised in Garden Grove v. Superior Court. There, police In 2011, under the Obama administration, Deputy Attorney
officers in Garden Grove had seized cannabis from a General James Cole wrote a memorandum addressed to all
patient who was authorized to use and possess cannabis federal prosecutors. The Cole Memorandum, although not
under California’s CUA.8 The Superior Court ordered binding, was a guide for how federal prosecutors should pri-
the police department to return the patient’s cannabis. oritize prosecuting cannabis offenders. The Memorandum
The department refused, stating that they would be vio- highlighted that prosecutorial efforts should be targeted
lating federal law. The Superior Court ruled that the towards the most significant threats to the CSA and limited
department was under no duty to enforce federal law.9 investigations of actors compliant with state medical mariju-
The Court of Appeal affirmed, holding that by returning ana laws. These enforcement priorities called for:13
the patients cannabis, they would be following the laws
of the state, which is the department’s traditional du- 1. Preventing the distribution of marijuana to minors;
ty.10 2. Preventing revenue from the sale of marijuana from
going to criminal enterprises, gangs, and cartels;
There are three classes of preemption: express, conflict, 3. Preventing the diversion of marijuana from states
and field.11 Express preemption occurs when the federal where it is legal to other states; and
law expressly states that this is the law all states need 4. Preventing state-authorized marijuana activity from
to follow. This is not the case with the way the CSA is being used as a pretext for the trafficking of other illegal
drafted. It is also not field preemption, which happens drugs or other illegal activity.
when the law is so sweeping that it is obvious that the
congressional intent was to create a law that states With these enforcement principles, actors who are complying
could not contradict. In fact, the CSA is exactly the op- with the CUA and other similar medical exceptions have not
posite. Section 903 of the CSA states the following: been the target of enforcement by federal prosecutors. How-
ever, that is subject to change under the current administra-
No provision of this subchapter shall be construed tion. Attorney General Jeff Sessions expressed his views in a
as indicating an intent on the part of the Congress May 2017 letter to Congress, in which he stated that any
to occupy the field in which that provision operates, limitation on the Department of Justice’s ability to combat
including criminal penalties, to the exclusion of any drugs is a threat to American lives.14 In Attorney General
State law on the same subject matter which would Sessions’s view, this includes prosecuting actors who are
otherwise be within the authority of the State . . . .12 abiding by the laws of their states with regards to cannabis.

Included in this section is a proviso that discusses the Another limitation, to which Attorney General Sessions re-
last of the preemption classes, conflict preemption. Un- ferred, is known as the Rohrabacher-Blumenauer amend-
less the federal law and the state exception cannot coex- ment.15 Essentially, this section of the appropriations bill
ist together, the state law is not preempted. Theoretical- prohibits the Justice Department from using federal funding
ly, the two laws here can exist together. The federal law to interfere with, or otherwise prosecute actors who are com-
under the Commerce Clause means that cannabis can- pliant with state medical cannabis programs. The amend-
not be profited from and it cannot be transported across ments were adopted in 2003 and have been renewed every
state lines. If a state law is not allowing an actor to year, most recently in 2017.
profit off the sale of marijuana and to transport it across
state lines, then it is possible to comply with both feder- The Rohrabacher-Blumenauer amendment was challenged
al and state law. by the Department of Justice in United States v. McIntosh.
However, those who use cannabis for medical purposes In McIntosh, five defendants were indicted for having can-
and/or recreational purposes where it is legal on the nabis stores and a cultivation facility in Los Angeles. The
state level are still violating federal law. Currently, fed-
(Continued on page 16)

Page 16 FBA/OC

Intersection of Federal and State ary function of giving care to patients. In a Tax Court
Cannabis Law case, the court concluded that the caregiving function
of a California collective was a separate business in its

(Continued from page 15) entirety and the collective was allowed to take deduc-
tions in regard to that side of the business.21 Navi-

Ninth Circuit held that the appropriations rider was clear in gating the tricky waters of this industry is no easy
its plain meaning. The DOJ cannot allocate federal funds to feat. Businesses are advised to seek the aid of both tax
pursue prosecution of actors who are compliant with state professionals as well those familiar with accounting in
cannabis laws.16 However, McIntosh only applies to the fol- this industry.

lowing permitted medical use states in the Ninth Circuit: How States with Permitted Recreational Uses (Adult
California, Washington, Oregon, Arizona, Alaska, Hawaii, Use) Are Abiding with Federal Law
Nevada, and Montana. Currently, 21 other states and the

District of Columbia have permitted medical use of cannabis. Currently, seven states have permitted the adult use
The Ninth Circuit ruling, though likely persuasive to other of cannabis22: Alaska, Oregon, Colorado, Washington,
circuits, is currently not binding on any of these other states Nevada, Massachusetts, and Maine. The District of
or D.C. Columbia has also legalized adult use. However, the

Cannabidiol (CBD) Status: District is comprised predominantly of federal land,
and it is against the law to possess or use on federal

One current controversy is over the status of cannabidiol land. In 2018, California will become the eighth state

(CBD). There has been long-running uncertainty to legalize adult use as voters approved

as to whether CBD products containing below a “Despite the Proposition 64, the Adult Use of Marijuana
threshold amount of THC are subject to federal opportunity in the Act (AUMA). While the use of cannabis is
prosecution.17 This may have arisen out of confu- nearly $7 billion already a very interesting legal issue, under
sion between products made from industrial hemp cannabis industry, this administration, adult use is going to be
low in CBD (some of which have been chemically the majority of the a hotly contested topic.
processed to increase CBD levels and have been banking industry is
somewhat misleadingly marketed as CBD oil) and not comfortable with The Cole Memorandum may still apply for
actual CBD oil derived from cannabis leaves and the level of risk and adult non-medical users of cannabis. How-
flowers. CBD products gained popularity in recent uncertainty in the ever, the same cannot be said for the
years following media coverage of its benefits for regulatory field.” Rohrabacher-Blumenauer amendment,
medical conditions such as childhood epilepsy.18 which as discussed, is the only binding limi-

On December 14, 2016, the DEA released an up- tation on federal enforcement of cannabis

date to the Federal Register clarifying that extracts includ- law. This is because the amendment only

ing CBD were still subject to Federal Schedule I status.19 applies to individuals complying with state medical

Unlike THC, CBD is not listed separately under Schedule I, cannabis laws. It does not discuss non-medical adult

but it nonetheless remains federally prohibited pursuant to users.

the latest guidance by the DEA. The Cole Memorandum was released after Colorado

Operating as Not-For-Profit Entity: Cannabis Collectives and Washington permitted adult use of cannabis. The
Memorandum essentially indicated that the federal

A Cannabis Collective operates very differently than a tradi- government would not interfere with state-law-
tional non-profit 501(c)(3) entity. The collective is subject to compliant cannabis activity so long as the enforcement
stringent taxes and, per Section 280E of the Internal Reve- priorities were being followed. As long as cannabis
nue Code, is unable to make certain deductions like neces- was not being advertised and sold to minors and it
sary and ordinary business expenses, but can deduct costs of was not being shipped across state lines, it was not a
goods sold (COGS).20 This is because deducting COGS is how target for federal enforcement. The Cole Memoran-
you arrive at gross income rather than considering it as a dum merely serves as a guide and is not binding on
deduction. The collective cannot make a profit from the sale this administration or prosecutors under the new ad-
of the flower, instead income is in the form of donations from ministration. In short, non-medical adult users of ma-

patients. The collective must then report the gross donations

that it receives and that is the figure on which the IRS will (Continued on page 18)

assess taxes. However, a collective may also serve a second-

Spring/Summer 2017 Page 17

Page 18 FBA/OC

Intersection of Federal and State Banking:
Cannabis Law

(Continued from page 16) Getting a checking account has also proved to be ex-
tremely difficult for cannabis businesses. As such, can-

rijuana are in direct violation of federal law and can be nabis businesses have remained predominantly cash-
prosecuted at any time. only. Banks fear having their assets seized by the Fed-
eral Deposit Insurance Corporation (FDIC) given can-

Other Challenges to the Industry nabis’s illicit status under federal law. A similar mem-
orandum issued by James Cole, Deputy Attorney Gen-

Insurance: eral, under the Obama Administration also aimed to
limit prosecution against the banking industry servic-

While getting a cannabis business insured is not the ing cannabis-related business. The memorandum em-
greatest challenge, as plenty of companies do offer cover- phasized the enforcement priorities and concluded that
age in this industry, it is important to treat this as any financial institutions should be cognizant that the cli-
other business and get insurance. In fact, for those leas- ents that they are servicing are fully compliant with all
ing properties for their cannabis business, general liabil- state laws.23

ity insurance is essential. If the business sells “For now, cannabis Confirming compliance with state and local
edibles, vaporizers, etc., product liability in- patients and users as laws is a challenge in itself. There is paper-
surance may be necessary to avoid the heavy work regarding the cannabis entity itself,
cost of accidents. Cultivators and producers well as business paperwork regarding state and local licens-
are generally advised to also maintain general owners have to ing, and the matter of tracing the source of
liability and products liability insurance as cash deposits. Despite the opportunity in the
well. If the business has employees, workers’ navigate a nearly $7 billion cannabis industry, the ma-
compensation insurance would also be advised. complicated and jority of the banking industry is not comfort-
unclear legal and able with the level of risk and uncertainty in
In sum, operating a business in the cannabis regulatory situation.” the regulatory field.
industry comes with the same type of risks as,

for instance, a fast food operation. Obtaining However, certain third-party companies are
insurance is a necessary means of minimizing willing to take on this challenge for the banks. Compa-
the financial risks that comes with owning and operating nies such as Hypur Inc. have designed software that is
a business. able to sort through all of the required paperwork a

Intellectual Property: cannabis business needs to operate within state law.
They may also provide a point of sale (POS) system

One of the most significant challenges in this industry is that is able to track every cash transactions and report
creating a proprietary good that others cannot re-create it to the bank. The bank then can identify how much
for their benefit. Cannabis business owners cannot trade- cash is being brought in and exactly where that cash
mark or patent anything that is directly connected to can- came from. These options are important as the lack of
nabis, such as seeds or certain strains of cannabis, or available banking options creates obvious challenges
manufactured goods or extracts made from cannabis. The for cannabis businesses, especially regarding security
alternative approach has been to trademark the name or of assets and the ability to obtain loans and funding.

the logo of the company, which has its own set of chal- Food and Drug Administration Stance Regarding Can-
lenges. A business owner will create hats or t-shirts with nabis:
the company’s name and logo or even package an edible

with the same. While in this situation applying and get- Currently, the FDA’s stance on cannabis being used for
ting approved for a trademark might be easier, holding medicinal purposes is simple. The FDA has not recog-
onto the trademark is not. The business must actually nized such use. However, the FDA has approved two
sell the product (like the hat or t-shirt) in significant synthetically derived compounds, whose origins are
amounts to be able to hold onto the trademark. Further, from cannabis, for medicinal purposes. Marinol and
this subtle workaround does nothing for what is poten- Syndros are FDA-approved drugs that have the active
tially the company’s most valuable intellectual property
in its proprietary processes and manufactured goods. (Continued on page 19)

Spring/Summer 2017 Page 19

Intersection of Federal and State product. KEEP THIS PRODUCT AWAY FROM
Cannabis Law CHILDREN.
Nowhere in the Massachusetts regulation does it man-
(Continued from page 18) date that the packages contain any sort of nutritional
information. Likely, because of the lack of industry regu-
ingredient Dronabinol, which is a synthetic tetrahy- lation and inconsistency and the inability to use FDA
drocannabinol (THC), the psychoactive component of regulations and guidelines due to the federal prohibition
cannabis.24 These two drugs have been approved for on cannabis, any sort of nutritional information may not
treating anorexia associated with weight loss in AIDS be very trustworthy either.
patients.25 The drug Cesamet has also been approved
by the FDA. This drug contains the active ingredient Conclusion:
nabilone, which is also a synthetic derivative of
THC.26 However, it is safe to assume that so long as Despite the progress of medical and adult use cannabis
cannabis remains a federally prohibited Schedule I legalization on the state level, the conflict between federal
drug, the FDA will not recognize cannabis itself as law and state law remains in regard to the status of can-
having a medicinal purpose. nabis. While many cannabis advocates and interested
parties in the industry foresee that cannabis will eventu-
The other aspect of lack of guidance from the FDA is ally be removed from Schedule I status and/or ultimately
that it leaves the manufactured edibles side of the legalized federally, there is no reason to believe this will
business in flux. It leaves states to regulate their own happen in the short term. For now, cannabis patients and
THC allowances, with no concrete guidance as to what users as well as business owners have to navigate a com-
is considered a recommended dose of THC in an edible plicated and unclear legal and regulatory situation. The
and what may be a maximum dose. best practices are to maintain full compliance with all
local and state laws, avoid engaging in any activity that
Although there has been no guidance from the FDA, would be a target for enforcement under the provisions of
there does appear to be some uniformity among the Cole Memorandum, and stay well-informed of any
states. Washington, Colorado, and California have changes that may occur in the federal government’s en-
limited the amount of THC to 10mg per serving. How- forcement priorities. This will only increase in importance
ever, there are no regulation or monitoring systems to
ensure that each batch is correctly dosed. While there as more states allow medical and adult use of cannabis
is a push for greater regulation and uniformity, much and as the industry continues to grow economically.
of the industry remains inconsistent and inaccurate *Andrea Ruth Bird is the founding attorney of Bird Law
without FDA guidance. Group, PC in Costa Mesa. Jonathan S. Landis is an asso-
ciate at Bird Law Group. Alex Avakian is a summer asso-
This also means that calories or any kind of nutrition- ciate at Bird Law Group.
al information is often left off of Edible Cannabis
Products. For example, under Massachusetts regula- 1 During the Colonial period, cultivation of hemp, a variety of the
tion, Marijuana-Infused Products (MIP’s) must have Cannabis Sativa plant, was required by legislation and often
the following information on all packaging:27 used as a commodity for trade. Marijuana - The First Twelve
Thousand Years, Shaffer Library of Drug Policy, June 29, 2017.
1. Directions for using the product. http://druglibrary.org/schaffer/hemp/history/first12000/4.htm.
2. Information about the product’s THC dosage. After the Civil War, hashish, a drug derived from cannabis, be-
3. A label displaying the ingredients in the product. came popular among recreational users in both France and the
4. A label advising patients that the product contains United States. However, during the period of 1910-1930, there
nuts or other allergens. was a fear of the spread of cannabis as a recreational drug. Some
5. A disclaimer which states the following: Americans associated cannabis with concerns over immigration
due to a perception that early Mexican immigrants were fre-
This product has not been analyzed or approved quent users. David F. Musto, M.D, The History of Marihuana
by the FDA. There is limited information on the Tax Act of 1937 Arch. Gen. Psychiat. Volume 26, February
side effects of using this product, and there may 1972D http://druglibrary.org/schaffer/hemp/history/
be associated health risks. Do not drive or oper- mustomj1.html. Prejudice against Spanish-speaking newcomers
ate machinery when under the influence of this led to a fear of cannabis. During the Great Depression, there was
mass hysteria against cannabis due to questionable research
showing that it was associated with violence, crime and racial
inferiority. Id. This resulted in 29 states outlawing cannabis use,
which prompted the federal government to take action as well.

Page 20 FBA/OC

Intersection of Federal and State 29941.pdf?utm_campaign=subscription%20mailing%
Cannabis Law 20list&utm_source=federalregister.gov&utm_medium=email.

(Continued from page 19) 20 I.R.C. § 280(e).

Id. 21 Californians Helping to Alleviate Med. Problems, Inc. v.
Comm’r, 128 T.C. 173, 185 (2007).
In 1937, Congress passed the Marijuana Tax Act, which was one
of the earliest regulatory measures solely on cannabis. In order 22 Known commonly as recreational use, though this term is con-
to legally engage in the transfer of cannabis, one had to register sidered somewhat pejorative in the cannabis industry.
under the Act and pay the occupational tax. In 1969, the Su-
preme Court held the Act to be unconstitutional in that it violat- 23 James M. Cole, Deputy Attorney General, Memorandum for all
ed the Fifth Amendment’s right to be free from self- United States Attorneys, Guidance Regarding Marijuana Related
incrimination. Anyone who was not registered under the Act by Financial Crimes, U.S. Department of Justice (Feb. 14, 2014).
paying the occupational tax was essentially admitting that he or
she committed a crime. Leary v. United States, 395 U.S. 6, 37 24 U.S. Food and Drug Administration, FDA, and Marijuana:
(1969). Following the Supreme Court decision, the Act was re- Questions and Answers News and Events, February 2, 2017.
pealed and replaced with the federal law we know today. https://www.fda.gov/newsevents/publichealthfocus/
ucm421168.htm#notapproved.
2 21 U.S.C. § 812(c) (2015).
25 Id.
3 Gonzalez v. Raich, 545 U.S. 1, 7 (2005).
26 Id.
4 Id. at 39.
27 105 Mass. Code Regs. 725.105 (2013).
5 Cal. Health & Safety Code § 11362.5(b)(1)(A).

6 Cal. Health & Safety Code § 11362.5(b)(1)(B).

7 Printz v. United States, 521 U.S. 898, 935 (1997).

8 City of Garden Grove v. Superior Court, 157 Cal. App. 4th 355,
362 (2007).

9 Id. at 389.

10 Id. at 391.

11 Stephen A. Gardbaum, The Nature of Preemption, Cornell L.
Rev., 79, p. 767 (1993).

12 21 U.S.C. § 903.

13 James M. Cole, Deputy Attorney General, Memorandum for all
United States Attorneys, Guidance Regarding Marijuana En-
forcement, U.S. Department of Justice (Aug. 29, 2013).

14 Letter from Jefferson B. Sessions, Attorney General, U.S. De-
partment of Justice, to Senator Mitch McConnell, Senator
Charles Schumer, Congressmen Paul Ryan, and Congresswoman
Nancy Pelosi (May 1, 2017).

15 Formerly known as the Rohrabacher-Farr amendment.

16 United States v. McIntosh, 833 F.3d 1163, 1177 (9th Cir.
2016).

17 Hudak, John and Stenglein, Christine, Brookings Institute,
DEA Guidance is Clear: Cannabidiol Is and Has Always Been
Illegal, February 6, 2017. https://www.brookings.edu/blog/
fixgov/2017/02/06/cannabidiol-illegal-and-always-has-been/.

18 Young, Saundra, CNN, August 7, 2013, Marijuana stops child’s
severe seizures. http://www.cnn.com/2013/08/07/health/charlotte-
child-medical-marijuana/index.html

19 https://www.gpo.gov/fdsys/pkg/FR-2016-12-14/pdf/2016-

Spring/Summer 2017 Page 21

Page 22 FBA/OC

UPCOMING EVENTS:

Young Lawyers Division Brown Bag Lunch
with the Hon. Douglas F. McCormick
August 9, 2017
Ronald Reagan Federal Building
411 West Fourth Street
Santa Ana, CA

Intellectual Property Seminar
September 12, 2017
Chapman University

FBA YLD/CRF Constitution Day
August 31, 2017 (orientation)
September 18-22, 2017
Orange County Middle Schools

Annual Judges’ Night
October 19, 2017
The Duke Hotel Newport Beach
4500 MacArthur Boulevard
Newport Beach, CA 92660

For further details and to register for events
please visit www.fbaoc.com

Spring/Summer 2017 Page 23

P.O. Box 6130
Newport Beach, California 92658

949-608-9905

[email protected]

www.fbaoc.com