Cannabis Litigation: Third-Party Subpoenas and the Illegality Defense

This post discusses the use of the federal “illegality defense” in connection with third-party subpoenas in litigation.

Let’s start with a review of the illegality defense. 

Cannabis litigators, investors, and companies who decide to filing lawsuit arising out of a business transaction likely are familiar with the “illegality defense.” An initial question is choosing a forum for a cannabis dispute. The forum may be federal court, state court, or an arbitration if there is an agreement to arbitrate disputes.

Filing in federal court is not an option (or at least not the best option) in most instances because marijuana is a controlled substance under federal law. This means a contract concerning marijuana may be found void for public policy reasons, i.e., unenforceable, by a federal court on the ground that the subject of the contract (marijuana) is illegal. My colleague Vince Sliwoski neatly summarized the illegality defense in Federal Courts are Going Backward on Cannabis, as follows:

The touchstone ruling here is found in Mann v. Gullickson, 2016 WL 6473215 (N.D. Cal. Nov. 2, 2016). In that case, the court observed that “[n]o principle of law is better settled than that a party to an illegal contract cannot come into a court

Read More Here…

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