The hammer finally dropped on Maine’s residency rule for medical operator ownership, after a federal appellate court found it in violation of the U.S. Constitution, striking it down. And although this does not guarantee an immediate step toward interstate weed commerce, this ruling would likely be cited if a future court did legalize adult use on a national level.
Currently, Maine requires all managers and owners of a medical cannabis company to be residents of the state. The ruling affirms a lower court decision that the residency rule violated the Constitution’s dormant commerce clause, which bars any law that would hinder interstate commerce.
The ruling does not directly impact transport of cannabis, because it remains illegal on a federal level, and the court was not specifically ruling on cross-border trafficking. On the other hand, the precedent in this ruling could easily re-emerge in subsequent cannabis-related decisions regarding cross-border transport of cannabis. For today, however, cannabis cannot be legally transported over state lines, while the dollars that finance cannabis operations can cross the border.
This was the argument made before the court by Maine-based medical operator and their would-be out of state parent company.
Northeast Patient Group legally owns and operates three medical dispensaries, under Maine’s resident requirement. The company would like to sell to Acreage Holdings, which would put the multi-state operator in violation of Maine’s residency rule – or at least that was case before Wednesday’s ruling.
[Read the First Circuit’s ruling.]
“We are not persuaded that the dormant Commerce Clause can have no effect in a market in which Congress has made participation criminal, including even one in which, as is the case here, Congress has barred enforcement of the federal criminal prohibition in certain respects,” wrote Chief Circuit Judge David Barron in a 37-page, 2-1 decision released August 17.
The most significant way Congress has barred enforcement of federal cannabis law was through the Rohrabacher-Farr Amendment, introduced in 2001 as part of the Department of Justice’s annual funding budget. It stipulated that no federal funds could go toward enforcing cannabis prohibition laws in states that had legalized medical or adult use cannabis. Congress has renewed that amendment every year since.
The hold out in the ruling was appellate Judge Gustavo Gelpi, who refused to agree that the commerce clause could apply to an industry that is illegal on the federal level.
“If Congress were to legalize marijuana, which it has not done via the passage of the Rohrabacher-Farr Amendment, I would join the majority in finding this legislation unconstitutional under the dormant Commerce Clause,” he wrote in a 6-page dissent.
A similar rule was in place for adult use until the state agreed to stop enforcing it amid a previous federal lawsuit over the requirement. The state settled that case by agreeing to back down on enforcement.
The court also challenged the rule within the context that Maine dispensaries and caregivers are allowed to accept out of state patients. The opinion argued that this is a form of interstate commerce.
“While the Medical Marijuana Act does attempt to restrict out-of-staters from selling medical marijuana, it affirmatively encourages out-of-staters to participate in the medical marijuana market as customers,” wrote Chief Circuit Judge David Barron in a 37-page, 2-1 opinion.
The State of Maine and a group of cannabis access activists that were all parties to the case argued that the Controlled Substances Act, which was intended to eradicate any cannabis markets in the country, makes cannabis a schedule 1 substance, which in turn eliminates any legal interstate market. The court rejected that reasoning.
“Congress’s enactment of the Rohrabacher-Farr Amendment in the wake of the CSA’s passage further undermines the notion that no such interstate market exists. That amendment hardly reflects a congressional understanding that the CSA succeeded in eradicating the interstate market in medical marijuana.”
This ruling has implications across the country, and has already been cited in other cases, such as when a federal judge in Missouri struck down that state’s residency requirement for cannabis licenses on Oct. 7, while a case in Detroit, Michigan awaits a 2022 trial. Missouri state officials indicated they will not appeal the ruling and will abide by the Circuit Court’s ruling. Another federal case over Illinois residency requirements was filed last month.
On the other hand, given that the opinion was split 2-1, it is more likely that the issue of residency as well as the application of the dormant commerce clause on cannabis while federal prohibition still exists could be taken up by additional circuit courts. In either case, this ruling is now precedent for future challenges to the prohibition of interstate cannabis commerce.
The case could be further appealed to the U.S. Supreme Court, but there is no guarantee that the court would take up the appeal, especially considering that earlier this year, they declined to rule on a case involving whether or not workers’ compensation should cover the cost of medical cannabis.