The push for interstate commerce is accelerating, and it’s coming through the courts
In the 1978 National Lampoon comedy Animal House, Dean Wormer privately announces his intention to place fraternity Delta Tau Chi on probation. When he learns they are already on probation, he famously upgrades their status to “double secret probation.”
That’s where I am on the issue of interstate cannabis commerce.
I recently doubled down on my bet that it will happen—not through legislation, but through the courts. To that point, Jason Reposa, CEO of the infused cannabis beverage brand Good Feels, tagged and alerted me to a post about an Oregon distributor suing that state to allow for interstate trade. The plaintiff, Jefferson Packing House, sued Oregon; be sure to read Alex Halperin of Weed Week who did a great job of reporting this, because his coverage is a crystal ball showing where the industry is going (here’s a link to the complaint).
In short, Jefferson Packing House argues that states cannot impugn interstate commerce of cannabis—that, their attorneys say, requires federal action. Furthermore, they argue that such action is the domain of the legislative branch, not the Department of Justice. The lawsuit is relatively succinct and only about an eight-page read.
When the federal government quietly sanctioned state marijuana programs, they did so by issuing a series of guidance memos, authored by Deputy United States Attorney David Ogden in 2009 and continuing in 2011, 2013, and 2014 with three memos by Deputy United States Attorney James Cole. The Cole memos are well-cited, and Cole #2 set out eight federal enforcement priorities. In simple language, the feds said marijuana remains illegal, but they have limited enforcement resources and therefore will not focus on those states whose regulations cover those federal issues.
When a dream team of plaintiffs, led by former pro football player Marvin Washington, sued the federal government, they put forth a compelling argument which appeared to some observers to be a winner. To counteract that argument just before an important hearing, though, then-US Attorney General Jeff Sessions rescinded guidance memos on which the argument relied.
Interestingly, when asked about marijuana, the subsequent US AG, Bill Barr, responded that he found the disconnect between state and federal laws “intolerable,” but acknowledged he had other priorities and felt the Cole memo guidelines seemed to be working fine (even if the memo had been rescinded by his predecessor).
Meanwhile, in Oregon
To understand the Oregon suit, one must understand the eight federal enforcement priorities. As the DoJ summarizes: The Department is also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way. In furtherance of those objectives, as several states enacted laws relating to the use of marijuana for medical purposes, the Department in recent years has focused its efforts on certain enforcement priorities that are particularly important to the federal government:
Preventing the distribution of marijuana to minors;
Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;
Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
Preventing marijuana possession or use on federal property.
The memorandum, the feds add, “serves as guidance to Department attorneys and law enforcement to focus their enforcement resources and efforts, including prosecution, on persons or organizations whose conduct interferes with any one or more of these priorities, regardless of state law.”
Of everything on that list, the big issue that states took to heart was the priority of “Preventing the diversion of marijuana from states where it is legal under state law in some form to other states.” The states interpreted this to mean that nothing crosses borders, and they crafted regulations accordingly.
But as Vanderbilt Law School professor Robert Mikos argues, the feds never specifically stated there could be no interstate commerce. His insightful 2021 white paper, Interstate Commerce in Cannabis, published in Boston University Law Review, points out that the states may have misinterpreted this enforcement priority. His alternative reading includes adding the words “where it isn’t legal” to the end of the sentence.
Cannabis commerce between two states, where each state has a legal market with regulations that support the eight enforcement priorities, might not turn heads at the DOJ. That appears to be the direction where Jefferson Packing is headed. I highlighted some of their best arguments below:
The self-evident purpose of the ban on export is to keep Oregon marijuana and marijuana products within the state of Oregon, discriminating against Oregon marijuana growers, processors, and wholesalers, like JPH, by denying them the opportunity to market and sell their products in other states. The export ban harms not only Oregon growers, processors, and wholesalers, but also non-residents, who are denied access to the high-quality marijuana products created in Oregon unless they physically travel to Oregon to purchase those products.
The export ban should be struck down because it violates the dormant Commerce Clause of the United States Constitution by discriminating against and unduly burdening interstate commerce.
The export ban discriminates against interstate commerce by nakedly prohibiting such commerce, without any legitimate, nonprotectionist purpose, and is therefore prohibited by the dormant Commerce Clause of the U.S. Constitution (“DCC”).
There is no constitutionally adequate reason for Oregon, or any other State, to bar the import or export of marijuana.
Protecting the local cannabis industry is a purely protectionist motive and is therefore plainly unconstitutional under the DCC.
Attempting to appease the perceived enforcement priorities of the federal government to induce the DOJ to continue its policy of nonenforcement of state-legal marijuana activities (which violate federal law equally as much as interstate commerce in marijuana) implicates fatal separation of powers concerns, as only Congress can authorize the States to regulate interstate commerce, not the DOJ, an agency of the executive branch.
As Halperin reported in Weed Week, “In an accompanying letter to Oregon Gov. Kate Brown and other state officials, the plaintiff’s lawyers cite a recent Maine case where a federal appeals court ruled the U.S. Constitution’s dormant Commerce Clause (DCC) blocked the state from imposing residency requirements on MED license holders. ‘This decision indicates a growing consensus within the courts to view marijuana commerce the same as any other commerce,’ the letter states.”
Halperin quoted the letter: “Under the DCC, for example, an Oregon law prohibiting the export of hazelnuts (or grapes, semiconductors, Bigfoot decals, etc.) would be invalidated. … We believe it is likely that a federal court will … invalidate state laws” [prohibiting cannabis exports, despite federal illegality].”
In a recent Forbes article, Mikos, the Vanderbilt law prof, argued companies could pry open interstate markets by suing states, and predicted the lawsuits could begin in 12 to 18 months.
This one came in a matter of weeks.
Anyone interested in some West Coast weed?
Comments? Hit me up. davidr@cannaventureLabs.com or firstname.lastname@example.org. Text me at 617-281-0710.
David Rabinovitz is a cannabis business consultant in Massachusetts and involved in various cannabis ventures. He is a former Director and Treasurer of MassCann (the Massachusetts Cannabis Reform Coalition), a past Trainer for the Massachusetts Cannabis Control Commission Social Equity training program, and the original host of The Green Rush cannabis business talk show on ProCannabis Media. David speaks at various industry events on creating winning financial presentations that investors love. David’s industry insights and analysis are featured in several media outlets. Connect with David on LinkedIn at https://www.linkedin.com/in/davidrabinovitz/ or reach out to him at email@example.com or DavidR@CannaVentureLabs.com