Tag Archives: client

MJ Freeway Hardships Linger

By Aaron G. Biros
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MJ Freeway, a seed-to-sale traceability software company with a number of government contracts, has been making headlines this year for all the wrong reasons. A series of security breaches, website crashes and implementation delays have beleaguered the software company throughout 2017.

Just this morning, the Philadelphia Inquirer reported the company’s services crashed Saturday night and Monday afternoon. That article also mentions an anonymous hacker tried to sell sensitive information from the Washington and Nevada hacks in September. Back in April, when Pennsylvania awarded the state’s contract to MJ Freeway for its tracking system, Amy Poinsett, co-founder and chief executive officer of MJ Freeway told reporters “I think I can confidently say we are the most secure cannabis company in this particular industry.” It is safe to say this is now being called into question.

Earlier this week, New Cannabis Venture’s Alan Brochstein reported that MJ Freeway is unable to meet Washington’s October 31st deadline to integrate their software with the state, forcing customers to manually report data.

Roughly a month ago, Nevada suddenly cancelled their contract with MJ Freeway, just two years into their five-year deal. Back in June, the company’s source code was stolen and published online. And back in January of this year, the company’s sales and inventory system was the target of a cyber attack.

According to an email we obtained, all of MJFreeway’s clients in Spain experienced an online outage, but that services were restored within 24 hours. In an email sent to clients in Spain, the company told customers that the problems were the result of a system failure. “Our initial analysis indicates that this was a system failure and unfortunately none of the data was able to be successfully retrieved from the backup archive due to an error but we can assure you that none of your data was extracted or viewed at any moment,” reads the email. “We are extremely distressed regarding the event that occurred with the system and the service interruption that occurred yesterday. We recognize that this is a situation that is very serious and negatively impacts your club.” The email says that MJ Freeway is addressing those problems in a few ways, one of which being ongoing audits of their data backups. “The event has led us to reconstruct our “hosting environment” in Europe to use the latest technology from Amazon Web Services with the best redundancy, flexibility and security, using the highest stability measures in the AWS environment,” reads the email. While the site will be restored fully, according the email, historical data is lost. The company is working with their clients to help them get data back into the system. 

Marijuana Matters

What Happens When the Attorney-Client Relationship Goes South

By David C. Kotler, Esq.
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Today I get to take a break from talking about what some lawyers, where ethically permissible, generally deal with in the cannabis space in terms of drafting leases, distribution agreements, licensing agreements, and/or application assistance. Within the cannabis industry, I personally serve as outside general counsel to entities to which I provide legal guidance and advice under retainer agreements, which comply, with my ethical obligations as a member of the Florida Bar. Over the last two years, I have spoken with individuals in other states and lawyers who practice in other states. As the cannabis industry has evolved, we continue to witness start-ups that need legal help and often take the most cost-effective route. In certain jurisdictions, I have heard of attorneys, particularly attorneys in Colorado, who have expanded into those jurisdictions and taken an equity stake of the start-up for their legal services. Whether or not this is true, and furthermore permissible, remains to be determined or even addressed by me, as this is a topic for another day.

But what happens when the lawyer-client relationship goes south?

It just so happens that in Florida a lawsuit is taking place between a well-known industry participant and its former lawyer. The names of the parties are omitted to protect them; however, perhaps more importantly, not to put myself in anyone’s cross hairs. This dispute was first reported in a reputable industry publication. Having had experience in media-worthy cases in the past, I am assuming that one party or the other reached out to self report the lawsuit for whatever advantage they thought they would garner. Upon review of the docket in preparation for writing this piece, I noted the docket’s length. For those who are unaware, a docket is essentially a listing of the dates and matters that have been filed during the pendency of a lawsuit.

The docket for the case begins between our anonymous parties, on October 26, 2015 with the filing of a complaint. Since October 26, 2015, there have been approximately 59 docket entries. In some cases, that number could encompass all of the docket entries over the life of a full litigation, short of trying a case, and probably gives the reader some idea as to the litigiousness between the parties. In part, this could be due to the personalities of both former counsel and new counsel representing the company in defense, but probably is not indicative of what would happen in every dispute between former counsel and a company. It is certainly a scary proposition considering the fees that may be incurred in defense of the action, aside from the sum that is allegedly owed to the plaintiff. Without getting into the minutia of the complaint, of note was a portion of the retainer agreement that served as the basis of the breach of contract claim, which granted the law firm incentive stock options pursuant to the company’s incentive stock program. It is imaginable that at the time of signing the retainer agreement, the company probably did not think too much about signing such an agreement; however, as time went on, this may have become problematic on a number of levels. Further review shows the parties airing out their dirty laundry in a public forum.

What example has this lawsuit shown us, and what can one take from it?

Well, this lawsuit is illustrative of what can go wrong for start-ups and newer companies in hiring counsel, either on a one-time basis or as outside general counsel. Giving stock options may not always be advisable as a means of deferring payment on the front end. Also realize that counsel who you hire will be privy to some very important and intimate details of how your company operates. In the cannabis industry, one might wish to be especially guarded, as the industry still has considerable exposure federally. The attorney-client privilege, which some readers may have heard about, can cover communications and work done on behalf of the company during the relationship and survive termination; however, that privilege may very well be waived if the services/fees of the attorney are being attacked or defended. Overall, like anything else, it is important to understand who you may be working with on the front end and memorialize any relationship properly and clearly in writing. Go into the professional lawyer-client relationship with reasonable expectations, reasonable demands, and pay reasonable compensation for the work being performed. As a business, don’t try to get something for nothing. And as an attorney, don’t expect the company to be your golden ticket.