Harvest Health & Recreation’s GC makes new law every day in the cannabis industry

Nicole Stanton is a pioneer. As the general counsel of Tempe, Arizona-based Harvest Health & Recreation Inc., she’s in the vanguard of lawyers who work at companies that supply cannabis to a growing market. Harvest is one of the bigger players in the field, generating more than $33 million in revenue in the last quarter. The company has a presence in multiple states and supplies marijuana in various forms for both the medical and recreational markets.

Being a GC at Harvest poses challenges. For one thing, cannabis is still illegal at the federal level. But dozens of states have either decriminalized its use, permitted medical use, or made the plant and its derivatives completely legal. Keeping track of this crazy patchwork of law is one of the many tasks Stanton performs. Another is retaining outside counsel. She does hire outside firms, but some simply won’t work with cannabis suppliers, while other prominent firms will, but with conditions. They don’t want their identities to be revealed, or they impose limits on the tasks they’ll perform for their client. Stanton takes all of this in stride, displaying infectious good cheer and optimism about having what is quite possibly the most interesting, yet strange, in-house legal jobs in the country. MAG talked to her about how she and her team operate in that peculiar environment.

How did you get your job? Were you looking specifically to work for a cannabis company?

I wasn’t looking specifically for a job in the cannabis industry, although I’m glad to be a part of it now. I was looking to make a change from private law practice, where I’d been for almost 20 years and I managed the Phoenix office of a national law firm for about five years. And once my time there was up, I didn’t want to go back to practicing law in a private firm. I really liked the leadership aspects of my management role. So almost immediately, I began to look for something that would utilize those skills of leadership.

The opportunity surfaced through a longtime friend of mine. He actually recruited me to the law firm that I had left. He knew someone who had a connection to Harvest and knew that they needed a general counsel. He asked me if I was interested and passed along my resume when I said I would be.

Are you the only lawyer?

No. I work with seven other lawyers. It’s a good-sized legal department, and I’m fortunate that our CEO Steve White is a lawyer himself. He recruited all but two of the legal team, so I have an excellent group of people. I wouldn’t change any of them even though I didn’t hire them myself.

How is the team organized?

Most are in headquarters here in Tempe, the other works out of his Florida home. We are broken down into functions. We have two-almost three M&A lawyers, although the third one does a lot of our financing work. We have a general corporate and contracts person, a chief compliance attorney and one who handles real estate because there’s a big real estate component to what we do. We have a labor and employment lawyer that we hired in-house from Target.

Do you think that in-house lawyers need different abilities and skill sets from those in private practice?

I do. It’s a mindset more than anything. When you’re at a large law firm like where I was, there’s an increasing premium in specializing in one thing. And here at Harvest you do have to wear many different hats, work in different areas. Those on my team can do some specialization, but at the end of the day they’re at different disciplines.

Do in-house lawyers have to have an affinity for the industry they’re working for?

I think that it’s not necessary to have a passion for what the company does. But I definitely think it helps. Our industry has such unique qualities, that unless you have an appreciation for that, it would be difficult to deal with the stressors associated with that. It makes it much more satisfying.

I’m guessing that none of your colleagues disapprove of the use of cannabis?

I think most of the legal team here has a live and let live attitude about cannabis use.

I imagine there’s a huge regulatory aspect to the job….

There are different rules in every state we operate in. Often there are similar concepts from state to state. But there’s no national framework. And even from state to state, we’re regulated by different agencies. So in New Jersey, the regulators in charge of cannabis came from the gaming industry, so they have a mindset that may be different from those in Pennsylvania, where we’re regulated by the Department of Health.

Have the Feds interacted with you? Do they enter into it at all?

Not really on a regulatory front. That’s more of a government affairs matter. The industry is trying to work with them about banking, access to capital, things like that. Where we have intersected is that all of the large acquisitions by cannabis companies in 2019, ourselves included, we had three acquisitions, that were so significant that they triggered Hart-Scott-Rodino act antitrust review by the DOJ. And we’ve cleared the hurdle for all three of those. But many large acquisitions in 2019 were hung up by the justice Department for antitrust review.

You’re basically creating law as you live your life every day…

I equate working here to building the airplane as it’s flying already. That’s what we do every day because many of the things we encounter have never been done before.

Since you’re in an industry that is illegal federally, do you use outside firms? Is there a different network that you have to rely on?

We do not have a hard time finding outside counsel. There are a couple of buckets of firms. Some have been in it from Day 1 and haven’t been hesitant to help cannabis companies with their legal business. And then you have a group which are firms that stuck their toe in. My former firm would work on certain issues like m&A. And then there are some firms that are hesitant, but that number is dwindling.

Do these firms work publicly with you?

When I first got here a colleague sent me a list of the top 50 law firms. And it said they won’t touch cannabis. And I said that’s interesting because several on the list are doing work for us. So it’s a matter of how much they want to publicize their work for us. Often there will be different types of fee arrangements but we’ve been able to successfully navigate some of the most white-shoe firms in the country.

Can you name them?

[Laughs] I’d rather not. If they’re not comfortable publicizing it, I’m not going to out them.

How do you choose outside firms? Do you have a panel?

When I got here, there weren’t a lot of rules about choosing a firm. Over the past couple of months, I’ve been going through a convergence process where I’ve taken the number of firms and cut it by about 75 percent. And I’m trying to find firms that can help us in more than one state. First and foremost is to find firms that understand our industry, because it does have a lot of nuances to it. Then beyond that, I’m looking for people who are outstanding in what they do, be it litigation, whatever.

Two things are important to me I try to stick with firms that have been loyal to the industry, who have taken that risk. I do think they understand the nuances, and I appreciate that. I appreciate those who haven’t come late to the party. Beyond that I really have made it a personal goal to have diverse counsel representing the company.

How big is your panel?

It’ll be about 20 different firms. Don’t hold me to that number. I’m whittling it down right now

What issue keeps you awake?

Access to capital, because we’re not a traditional industry. Our company is in a better position than most. We get a lot of investment from Canada. We’re traded on the Canadian stock exchange. Hopefully in the next 12-24 months our Congress opens up to our industry and does something different.

A bigger issue is talent. I don’t think of the members of my team as fungible cogs. I do think the issue of retention is one of my top concerns. The people on my team have a strong understanding of our company, of our industry and are skilled at what they do. Losing a team member would be very challenging.

So, do you get a discount?

No. I’m in Arizona, which for now is a medical state. I don’t have a medical card, so am I not able to purchase our product here. If I were to go to California, I’d be able to purchase.

—Anthony Paonita