Business
Washington’s Residency Requirement Upheld In Court. . . Again
It’s possible that this case will end up being argued before the US Supreme Court. However, the issue could be moot as Washington lawmakers are considering a bill that would remove the residency requirement from Washington law.
The US District Court for the Western District of Washington (the Court) has upheld the residency requirement set by the Washington Liquor and Cannabis Board (LCB) in the case of Brinkmeyer v. LCB. The residency requirement, which requires individuals owning or controlling a licensed business to establish residency six months prior to applying for a license, prohibited Todd Brinkmeyer, who lived in Idaho, from owning or investing in a cannabis license in Washington.
The Court determined that the Dormant Commerce Clause did not apply to Washington’s residency requirement as cannabis remains illegal under federal law. For background on this case check out our three previous blog posts on the lawsuit:
Dormant Commerce Clause
The Dormant Commerce Clause is a legal doctrine that limits states from passing laws that discriminate against or unduly burden interstate commerce. It is based on the Commerce Clause of the U.S. Constitution, which grants Congress the power to regulate commerce among the states. We wrote about how the Dormant Commerce Clause was recently invoked to prohibit New York from fully implementing its Conditional Adult-Use Retail Dispensary licenses. Here’s a brief summary of Dormant Commerce Clause jurisprudence from that post:
The Court began its analysis with Tennessee Wine by distinguishing that case from Brinkmeyer because alcohol is legal under federal law while cannabis is not.The Court also pointed out that many other federal District Courts found that the Dormant Commerce Clause prohibited residency requirements in cannabis, including a decision out of the US Court of Appeals for the First Circuit ruling that Maine’s cannabis residency requirements violated the dormant Commerce Clause. Ne. Patients Grp. v. United Cannabis Patients & Caregivers of Me., 45 F.4th 542 (1st Cir. 2022). In that case, the First Circuit affirmed that Maine’s residency requirement, which is similar to Washington’s, violated the Dormant Commerce Clause of the United States Constitution. However, Maine’s residency requirements applied to only medical cannabis dispensaries.
There are limited protections in place at the federal level that apply to medical cannabis operations but not recreational, specifically, the Rohrabacher-Farr Amendment which prohibits the use of federal funds to go after medical cannabis operators in compliance with state law. The Court found that line of thinking inapplicable to the case at hand because Washington has merged its medical and recreational markets:
The Court ultimately ruled that the Dormant Commerce Clause does not apply to Washington’s cannabis market because that market is illegal under federal law. By finding that the Dormant Commerce Clause did not apply, the Court did not reach the question of whether the residency requirement is narrowly tailored to advance a legitimate local purpose, which means that this question may be analyzed on appeal, if Brinkmeyer decides to take this fight to the US Court of Appeals for the Ninth Circuit.
Congressional Intent
The Court reasoned that Congress expressly and unambiguously prohibited interstate commerce of cannabis by listing it in Schedule I of the Controlled Substances Act. The Dormant Commerce Clause cannot apply when Congress expressly has not exercised its Commerce Clause power to regulate the matter at issue. The Court determined that “[t]here is no dispute that Congress exercised its Commerce Clause power in enacting the CSA and criminalizing cannabis.” The Court went on to state:
The Court rejected the idea that Congress “substantially legalized” cannabis just because the Department of Justice exercised prosecutorial discussion to not prosecute state-legal operators for cannabis crimes.
Privileges and Immunities Clause
The Court also granted summary judgment on Brinkmeyer’s claim that the residency requirement violated the Privileges and Immunities Clause of the US Constitution. The Privileges and Immunities Clause is a provision in the United States Constitution, found in Article IV, Section 2. It prohibits states from discriminating against citizens of other states by denying them the “Privileges and Immunities” that it affords its own citizens.
Brinkmeyer argued that Washington’s residency requirement for selling cannabis violates the right to pursue a livelihood and the right to travel, which are protected by the Privileges and Immunities Clause. However, the Court determined that that the right to engage in illegal commerce is not an established right under the Privileges and Immunities Clause because the right to engage in commerce that remains federally illegal is not fundamental.
Bottom Line
The Court held that:
- The Dormant Commerce Clause did not apply to Washington’s residency requirement as cannabis remains illegal under federal law. The Dormant Commerce Clause cannot apply when Congress has not exercised its Commerce Clause power to regulate the matter at issue.
- Restricting interstate commerce of cannabis was in line with Congress’s intent and that the residency requirements attempt to prevent any interstate commerce in cannabis and prevent cannabis from moving into states where it remains illegal.
- Citizens do not have any constitutional right to engage in illegal activity.
If this case is appealed, it will go to the US Court of Appeals for the Ninth Circuit. If the 9th Circuit upholds the ruling it will likely create a circuit split with the First Circuit’s holding on the residency issue in its Maine case.
It is possible that this case will end up being argued before the US Supreme Court. However, the issue could be moot as Washington lawmakers are considering a bill that would remove the residency requirement from Washington law. We will continue to monitor the situation.
Source: https://thefreshtoast.com/news/washingtons-residency-requirement-upheld-in-court-again/
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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