A panel of judges for the U.S. First Circuit of Appeals did not appear convinced that the federal prohibition of cannabis precludes the Dormant Commerce Clause of the Constitution from applying to ownership residency restrictions within a state-wide cannabis market, during oral arguments on April 7 in Boston, Mass.
In a case with far-reaching national implications, the First Circuit is considering whether or not Maine’s requirement that all medical cannabis companies be owned by state residents improperly hinders interstate commerce.
“There’s some great irony in saying your market is illegal when your state, Maine along with 33 other sates has chosen to enter the market and regulate the market in a way that discriminates against non-residents of Maine,” said Circuit Judge Sandra Lynch to Maine’s legal representative. “That’s a kind of basic flaw in the approach here. You’re asking us to read Congress’s intent that there should be no market, while Maine is exploiting the market.”
Maine’s Chief Deputy Attorney General Chris Taub, argued that interstate commerce regulations cannot apply to any cannabis market as long as that market remains federally illegal.
“It would make no sense for Congress to declare that there is to be no marijuana market, but say that ‘by the way states, if you’re going to make a marijuana market, you have to preserve interstate commerce,’” he said.
This is the second time that Maine’s residency requirement was challenged in court. Previously, Northeast Patient Group (NPG), which operates dispensaries in Maine as Wellness Connection, sued the state to block its residency requirement for adult use cannabis. That case was settled without a decision after the state agreed to disregard that requirement. This time, NPG is challenging that requirement in the medical cannabis market.
The federal court decision at stake in the First Circuit would have 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.
Acreage Holdings, a multi-state operator based in New York City, has expressed interest in purchasing NPG, but current state restrictions bar ownership of medical cannabis facilities by non-residents. NPG operates as Wellness Connection in Maine and owns three of the state’s seven medical dispensaries.
“This case presents an issue that neither the Supreme Court nor any court of appeals has ever considered. To what extent does the Dormant Commerce Clause apply to a market that Congress has made illegal,” said Chief Circuit Judge David Barron. “Even though there is a prohibited market, there is a market in the common sense of the term. People are buying and selling marijuana.”
Acreage and NPG were successful in federal court, when the judge ruled in their favor, despite advocacy group United Cannabis Patients and Caregivers of Maine inserting themselves into the legal fight. United Cannabis argued in favor of the residency requirement on behalf of the state’s vibrant medical cannabis caregiver market. United Cannabis and the state filed dual appeals to the ruling in the First Circuit in Oct. 2021.
James Monteleone, an attorney with Bernstein Shur representing the United Cannabis Patients and Caregivers of Maine, argued that if the federal government wanted commerce regulation to apply to cannabis, it would legalize cannabis.
“If Congress, with full knowledge of what’s happening in different states, had a desire to change its word on a subject, it has the knowledge and ability to do that,” he said.
Lynch countered that ongoing legislative attempts to legalize cannabis would suggest that Congress is attempting to “change its word on a subject.”
“You seem to be in a world that is static and requires Congress to act in the face of changing circumstances and Congress has given indication that it is aware of the changing circumstance,” she said.
On the other side of the legal battle, Circuit Judge Gustavo Gelpi questioned if NPG was requesting that the court supersede the authority of Congress in the absence of clear guidance on cannabis commerce.
“The default under our constitution is that Congress has exclusive authority unless Congress says otherwise,” said Warner. “In the absence of clear language from Congress, we’re asking the court to simply address the default rule under the Constitution.”
Typically, the First Circuit can take a few weeks or as long as a few months after oral arguments to issue a decision in the respective case.