Government
Here We Go! The Latest Lawsuits to End Federal Prohibition
High profile lawsuits to end cannabis prohibition are nothing new. We’ve covered efforts going back several years, though none of these has succeeded. A recently announced attempt, though, may be the best chance yet– especially given the changing environment with cannabis legalization in so many states; and especially given Constitutional jurisprudence relevant to those changes.
So what is happening? Well, various influential marijuana companies and stakeholders are joining to sue the federal government over alleged unconstitutional policies which affect their operations. This is according to the CEO of one of the companies joining the suit. This effort is especially interesting because of who represent this coalition of multi-state operators (MSOs). Allegedly taking on the case is the renowned constitutional law firm Boies Schiller Flexner LLP. And David Boies — who many regard as the greatest living Constitutional law litigator — is said to be leading the charge.
Boise Schiller has represented clients in constitutional issues ranging from government agencies, politicians, and groups of plaintiffs in high-stakes constitutional rights cases. By taking on the case, the firm would be validating that the coalition’s claims have some merit.
In reality, the coalition plans on filing two separate federal district court, according to Abner Kutin, founder and CEO of Ascend Wellness Holdings. Kurtin mentioned that these lawsuits will likely be filed “in the next couple of months,” and that potential supporters of the “industry-wide effort” include Curaleaf and TerrAscend, as well as the American Trade Association of Cannabis and Hemp (ATACH).
The first lawsuit to end cannabis prohibition centers around the federal prohibition on interstate commerce in a cannabis context, as well as challenge the constitutionality of the Controlled Substances Act (CSA) with a specific interpretation of the US Constitution’s Commerce Clause. One point the coalition will argue is that the federal government’s interstate commerce authority, particularly regarding fungibility, should not apply to cannabis companies in state-legal markets, which are highly regulated. On the other hand, the federal government will argue that market fungibility is the base of its interstate commerce authority. In other words, a good produced in one state can affect pricing of the good in other states, which gives the federal government jurisdiction to regulate it.
In 2005 the Supreme Court ruled along these lines in Gonzales v. Raich, a Supreme Court cannabis ruling that expands the federal government’ authority. In that case, the plaintiffs were medical cannabis patients who invoked the 10th Amendment to protect their right to access marijuana that was legally grown and used in California. The Supreme Court majority thought differently, however, ruling that cultivating cannabis plants for medical use could impact marijuana pricing on the national illicit market. Kurtin argues that this is no longer the case, as state markets are now sophisticated and unique as to render national cannabis markets unaffected by cannabis cultivation in a particular state.
The coalition will also likely make the same argument as that raised by Supreme Court Justice Clarence Thomas, who criticized the federal inconsistency of cannabis enforcement last year. This inconsistency, argues Thomas, is an example of why courts should end federal cannabis prohibition. Also worth noting is that Thomas ruled in favor of the cannabis patients in Gonzales.
The second lawsuit shines a light on the US tax code, specifically Section 280E. This is another fraught area, which clients of ours have also challenged in high-profile federal litigation. The Section states:
“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business . . . of trafficking in controlled substances . . . which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”
This essentially means that cannabis companies cannot claim tax deductions because they are trafficking a controlled substance under the CSA. A resolution in favor of the plaintiffs could be retroactive as well, allowing cannabis companies to recover tax deductions that they could have applied in years past. The recovery of these deductions could actually help to fund the litigation, in theory.
The lawsuits come at an opportune time, as many federal bills to legalize cannabis use at the federal level are stuck in either the House of Representatives or the Senate (see our recent summaries here and here). In addition, Kurtin mentioned that the lawsuits will be argued from a perspective of states’ rights, which will likely garner support from both political parties and appeal to the Supreme Court’s conservative majority.
Ultimately, the lawsuits to end cannabis prohibition represent another angle—which avoids the various hurdles of legislative approval—for federal prohibitions on cannabis to be overturned. Even if the litigation fails, it should exert even more pressure on Congress to Act. But the potential agreement of a highly regarded constitutional law firm to represent a coalition of major players in the cannabis world signals the potential merits of their claims. We will track the these cases in the coming months closely.
Source: https://harrisbricken.com/cannalawblog/here-we-go-the-latest-lawsuit-to-end-federal-prohibition/
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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