Marijuana Properties and Title Insurance

1. Marijuana Properties and Title Insurance Alaska Land Title Association Convention February 10, 2018 John Martin

2. Brief History of Marijuana • Estimates vary, but history of cannabis may be 12,000 years old; • Has been called oldest cultivated crop; • First evidence of medical use as far back as 4,000 B.C. in Asia; • May have been used as anesthetic during surgery, easing toothaches and during childbirth

3. Brief History of Marijuana

4. Brief History of Marijuana • Uses of hemp plant: • Rope • Food • Paper • Textiles • Plastics • Insulation • Biofuel

5. Hemp dress -- Wikipedia

6. Hemp Concrete Block -- Wikipedia

7. Rope -- Wikipedia

8. Hemp food • Low THC content; varieties of hemp seeds eaten like nuts or oil used for salad dressing or cooking; • High in globulins that help immune system; • Low sodium, no cholesterol and good source of zinc

9. Hemp food

10. Brief History of Marijuana • First used as an intoxicant in the United States in the early 1900s. • Made illegal in Utah in 1915; • By 1931, twenty-nine states had made marijuana use illegal.

11. Brief History of Marijuana

12. Brief History of Marijuana • Federal Legislation • Marijuana Tax Stamp Act of 1937 • Imposed excise tax on sale, possession or transfer of hemp products; • Came under regulation of the Drug Enforcement Agency; • Effectively criminalized possession of all but commercial hemp. • First person convicted under the act – Samuel R. Caldwell, arrested one day after the act went into effect. Three years in prison.

13. Brief History of Marijuana • Found to be unconstitutional in Leary v. United States 395 U.S.6 (1969) • The plaintiff in the case -- Timothy Leary, 1960s professor and activist, arrested for possession of marijuana in Texas. To have complied with the Marijuana Tax Stamp, Dr. Leary would have had to declare that he possessed marijuana, which violated his 5th Amendment right against self incrimination.

14. Brief History of Marijuana • Comprehensive Drug Abuse Prevention and Control Act of 1970, also known as the Controlled Substances Act • Replaced the unconstitutional Marijuana Tax Stamp Act; • Classified marijuana as a Schedule I controlled substance; • High potential for abuse • No currently accepted medical use • Lack of safe use under medical supervision

15. Brief History of Marijuana • Same classification as heroin, LSD, ecstasy and meth; • Prohibits use, possession, manufacture or sale; • Penalty for violation is based on the amount of marijuana and may run up to life imprisonment and $50,000,000 fine.

16. Brief History of Marijuana

17. Brief History of Marijuana

18. Brief History of Marijuana

19. Brief History of Marijuana

20. Brief History of Marijuana

21. Brief History of Marijuana • Change in attitude regarding marijuana 1969 – 16% voters supported legalization 2005 – 36% voters supported legalization 2017 – 64% voters support legalization

22. Famous Fans of Marijuana

23. Famous Fans of Marijuana

24. Famous Fans of Marijuana

25. Famous Fans of Marijuana

26. Famous Fans of Marijuana

27. Famous Fans of Marijuana “.…Yes, but I didn’t inhale”

28. Famous Fans of Marijuana

29. Famous Fans of Marijuana “I did inhale. That was the point”

30. States with legal marijuana • Recreational use – Washington D.C. and eight states; • Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon and Washington Medical marijuana – legal in twenty-nine states

31. Legalization in Alaska Ravin v. State, 537 P.2d 494 (1975) Irwin Ravin deliberately got arrested while possessing marijuana to challenge the existing law. “[W]e conclude that citizens of the State of Alaska have a basic right to privacy in their homes under Alaska's constitution. This right to privacy would encompass the possession and ingestion of substances such as marijuana in a purely personal, non-commercial context in the home….”

32. Legalization in Alaska • 2014 Ballot Measure 2, decriminalizing marijuana approved by 53% voters; • Went into effect February 2015; sales began in 2016 • People over twenty-one years old may possess up to one ounce; grow up to six plants per person at home (limited to three flowering) with a maximum of twelve plants in the home no matter how many residents, (six flowering) and possess any additional marijuana produced by those plants.

33. Conflict between State and Federal law Who wins?

34. Conflict between State and Federal Law Article VI, Section II This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.

35. Conflict between State and Federal Law

36. Non-enforcement of Federal Marijuana laws • President Obama elected as 44thPresident of the United States

37. Non-enforcement of Federal Marijuana laws

38. Non-enforcement of Federal Marijuana laws • Cole memo directed U.S. Attorneys in the states with legalized marijuana to not focus federal resources on individuals whose actions “are in clear and unambiguous compliance with existing state laws” regarding marijuana. • Important factor: Whether the jurisdiction had implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of marijuana.

39. Non-enforcement of Federal Marijuana laws • Cole memo did not prohibit federal prosecutions of the CSA for marijuana violations, but set priorities for prosecutions: • prevent diversion of marijuana outside the regulated system and to other states, • prohibiting access to marijuana by minors, • and replacing an illicit marijuana trade that funds criminal enterprises with a tightly regulated market in which revenues are tracked and accounted for.

40. Non-enforcement of Federal Marijuana laws • United States v. McIntosh, 833 F,3d 1163 (2016) fn 5: • To be clear, § 542 does not provide immunity from prosecution for federal marijuana offenses. The CSA prohibits the manufacture, distribution, and possession of marijuana. Anyone in any state who possesses, distributes, or manufactures marijuana for medical or recreational purposes (or attempts or conspires to do so) is committing a federal crime. The federal government can prosecute such offenses for up to five years after they occur. See 18 U.S.C. § 3282. Congress currently restricts the government from spending certain funds to prosecute certain individuals. But Congress could restore funding tomorrow, a year from now, or four years from now, and the government could then prosecute individuals who committed offenses while the government lacked funding.

41. Non-enforcement of Federal Marijuana laws Moreover, a new president will be elected soon, and a new administration could shift enforcement priorities to place greater emphasis on prosecuting marijuana offenses. Nor does any state law “legalize” possession, distribution, or manufacture of marijuana. Under the Supremacy Clause of the Constitution, state laws cannot permit what federal law prohibits. U.S. Const. art VI, cl. 2. Thus, while the CSA remains in effect, states cannot actually authorize the manufacture, distribution, or possession of marijuana. Such activity remains prohibited by federal law.

42. Change in Administration

43. Attorney General Jefferson B. Sessions January 4, 2018 memo

44. Effect of the Sessions memo Enforcement of marijuana laws is at the discretion of the U.S. Attorney in each District U.S. Attorney for District of Alaska – Bryan Schroder Nominated by President Trump Took office November 9, 2017

45. U.S. Attorney Schroder’s statement • The U.S. attorney for Alaska says his office will continue using "long-established principles" in deciding which cases to charge, following a change in policy on marijuana enforcement by the U.S. Department of Justice. • One of the principles is following federal law enforcement priorities. • Highest priorities of the U.S. attorney's office in Alaska have been combating violent crime, including as it stems from drug trafficking. He says his office will continue to focus on such cases.

46. Risk to Title insurers Policy risk – somewhat minimized, but not eliminated by exceptions for violations of Federal controlled substances laws; Escrow risk – possible for facilitating transaction with money or property that had been involved or earned in marijuana trade; Reputational risk – Bad publicity.

47. Title Insurance on Marijuana properties For short time during the Cole memo era, some very limited and case by case; At this time, no known insuring of marijuana related property.

48. Title Insurance on Marijuana properties As a result of the conflict between Federal and State laws, title companies will not knowingly participate in a transaction that would be seen as facilitating criminal activity. If you have actual knowledge that the property is currently used or will be used for production, sale or distribution of marijuana, should decline the order.

49. Title Insurance on Marijuana properties What is “actual knowledge”? You know or reasonably believe that the property that the property was, is or will be used for the production, sale or distribution of marijuana

50. Title Insurance on Marijuana Properties Level of investigation required Not cops or enforcement organizations Ordinary transactions proceed as usual Imagine yourself on a witness stand being examined by U.S. Attorney