DOJ's Stance: Industry Lawsuit Should Not Hamper Federal...

In a recent legal development, the Biden administration, through the Department of Justice (DOJ), has urged a federal court to dismiss a lawsuit brought by the cannabis industry, aiming to challenge the enforcement of marijuana prohibition against state-legal activities. The administration’s legal argument is multifaceted, touching on the ongoing process of cannabis rescheduling, the lack of standing for the industry to pursue the challenge, and the constitutional basis for federal intervention in intrastate marijuana activities. This article delves into the complexities of this legal showdown and the implications it holds for the burgeoning cannabis industry.

The Department of Justice has petitioned a federal court to dismiss a lawsuit initiated by the cannabis industry, aiming to impede the enforcement of marijuana prohibition within state-legal activities. Citing a nuanced perspective, the Justice Department asserts that the court should refrain from preempting a potential decision regarding the rescheduling of cannabis currently under consideration.

In a formal submission to the U.S. District Court for the District of Massachusetts, Western Division, attorneys representing Attorney General Merrick Garland articulated that Congress, in its wisdom, established an administrative framework for the rescheduling of controlled substances. The Drug Enforcement Administration (DEA), as part of this structured mechanism, is presently evaluating a recommendation forwarded by the U.S. Department of Health and Human Services (HHS) advocating for the rescheduling of marijuana under the Controlled Substances Act (CSA).

Highlighting the importance of respecting this ongoing administrative process, the Department of Justice underscored that the courts should refrain from disrupting or preempting its trajectory. The submission emphasizes the commitment to allowing the DEA’s careful consideration of the HHS recommendation before any legal interventions transpire.

The Department of Justice (DOJ) has asserted that the cannabis businesses initiating the lawsuit lack the standing to pursue their challenge, emphasizing the absence of direct injury due to federal prosecution under prohibition policies. Notably, the DOJ underscores a decade-long congressional rider preventing the use of federal funds to intervene in state-legal medical cannabis laws.

While acknowledging that the Controlled Substances Act (CSA) initially served legitimate government purposes, the plaintiffs argue its irrationality. They contend that Congress’s allowance for federal territories to enact marijuana legalization laws, coupled with restrictions on the Department of Justice’s spending to impede state medical marijuana laws, has rendered the CSA illogical. In response, the DOJ posits that these legislative choices aim to foster state and local experimentation with marijuana laws while directing federal law enforcement resources towards activities significantly impacting federal interests.

The government asserts that a 2005 Supreme Court ruling, known as Raich, sets a precedent negating the plaintiffs’ argument regarding the Commerce Clause’s application to bans on interstate marijuana commerce. Describing the case as a “transparent entreaty to overrule” Raich, the DOJ contends that federal regulation of intrastate marijuana activities is constitutional, as these activities substantially affect interstate commerce.

Addressing the plaintiffs’ claims of substantive due process violations, the DOJ maintains that no fundamental right exists to distribute, possess, or use marijuana. Consequently, the CSA is subject only to deferential rational basis review, which the DOJ argues it easily withstands. The motion to dismiss underscores the necessity for plaintiffs to demonstrate a substantial risk of future enforcement in a pre-enforcement challenge. Contrary to this requirement, the plaintiffs allege the government’s policy is non-prosecution for conduct complying with state marijuana laws, thus lacking substantial risk.

Even if the court sympathizes with the plaintiffs’ challenge to the Gonzales v. Raich holding, the DOJ invokes stare decisis, urging adherence to the precedent until overturned by the Supreme Court. Additionally, the motion asserts that the plaintiffs fail to provide evidence of a substantial risk of prosecution, and their allegations negate the existence of such a risk. Moreover, the DOJ underscores the Department of Justice’s policy of prosecutorial discretion, focusing federal law enforcement on conduct interfering with vital federal interests while relying on state and local authorities to address marijuana-related activity.

The submission emphasizes that a policy of prosecutorial discretion in federal marijuana cases, akin to the Obama-era Cole memo rescinded under the Trump administration, is deemed a judicious approach. In the broader legal challenge, the plaintiffs contend that sustaining prohibition within state markets is constitutionally unsound. They argue that this perpetuation poses undue public safety risks and impedes licensed marijuana businesses from accessing crucial financial services and tax deductions available to other industries.

In response to the DOJ’s recent filing, the plaintiffs expressed their anticipation of demonstrating standing before the Federal District Court in Springfield, Massachusetts. Their statement outlined the injury inflicted by the federal government’s ban on intrastate marijuana cultivation, manufacturing, and distribution. The lawsuit’s primary objective is to halt the enforcement of this allegedly unconstitutional ban, safeguarding the interests of the plaintiffs and others in similar circumstances. The plaintiffs asserted that the particulars in their complaint distinguish the case from Gonzales v. Raich, a 2005 Supreme Court decision still relied upon by the government.

The government’s submission comes approximately a month after the Justice Department and the plaintiffs, comprising a coalition of marijuana businesses represented by prominent law firms, mutually agreed to seek an extension for the deadline to file initial briefs. Spearheaded by multi-state operator Verano Holdings Corp., Massachusetts-based cannabis businesses Canna Provisions and Wiseacre Farm, and Treevit CEO Gyasi Sellers, the lawsuit challenges the federal ban on marijuana enacted through the Controlled Substances Act (CSA).

Notably, the DOJ sought permission to submit a new 25-page memorandum, surpassing the standard 20-page limit, on Monday. The legal representation for the plaintiffs is provided by the law firms Boies Schiller Flexner and Lesser, Newman, Aleo & Nasser LLP. David Boies, the chairman of the former firm, has an extensive history of representing diverse clients, including the Justice Department, former Vice President Al Gore, and plaintiffs in a case pivotal to overturning California’s same-sex marriage ban.

The lawsuit contends that while Congress initially banned marijuana under the CSA to eliminate interstate commerce, the subsequent rise in state legalization indicates an abandonment of that mission by lawmakers and the executive branch. Describing the lingering federal criminal prohibition on intrastate marijuana as an unjustified vestige, the complaint argues that it harms the plaintiffs and adversely affects the communities they serve without rational purpose.

A recurring theme in the lawsuit is the financial plight faced by state-licensed marijuana businesses. Despite the federal government’s hands-off approach to cannabis in recent decades, these businesses grapple with unique challenges, including limited access to banking services, credit cards, and federal tax deductions under the IRS code 280E. The lawsuit underscores that this financial disadvantage, coupled with the reliance on cash transactions due to a lack of electronic payment options, heightens public safety risks, making state-regulated marijuana dispensaries vulnerable to robberies. The existing CSA ban is deemed an unconstitutional encroachment on state sovereignty, asserting that Congress lacks the authority to govern marijuana within intrastate commerce under the Commerce Clause or the Necessary and Proper Clause of the Constitution.

The legal challenge delves into the historical trajectory of cannabis laws in the United States, highlighting that the recent policy shift towards prohibition follows over a century of permitted use and cultivation to varying extents. Examining the federal government’s rationale for marijuana prohibition under the Controlled Substances Act (CSA), as argued in the 2005 Supreme Court case Gonzales v. Raich concerning medical cannabis access for California patients, the plaintiffs assert that this justification no longer holds merit.

Companies argue that despite Congress annually renewing an appropriations rider preventing the Justice Department from intervening in state medical cannabis programs, the federal government’s inconsistent policies persist. The lawsuit contends that the initial federal crusade against cannabis has transformed into an ambiguous set of policies, some aimed at reducing federal interference with state marijuana regulation.

Emphasizing the federal government’s abandonment of the goal to eliminate marijuana from commerce, the complaint argues that Congress lacks a comprehensive, consistent, and rational approach to marijuana regulation. This inconsistency, described as a patchwork approach, provides no justifiable basis for Congress to regulate intrastate marijuana.

This sentiment aligns with the viewpoint expressed by conservative Supreme Court Justice Clarence Thomas in 2021, criticizing the contradictory and unstable state-federal marijuana policy conflicts resulting from the federal government’s “half-in, half-out” approach.

Plaintiffs highlight the potential harm caused by the continued enforcement of the CSA, undermining state efforts to establish safe and regulated intrastate marijuana markets. The lawsuit draws attention to the adverse impact on low-income communities, citing the ban on intrastate marijuana commerce as a barrier to delivering cannabis products to public housing facilities in Massachusetts.

The lawsuit underscores the severe consequences of the prohibition for the industry, particularly small businesses that face challenges due to the lack of diversification and economies of scale. Josh Schiller, a partner at the Boies Schiller Flexner law firm representing the plaintiffs, emphasizes the strategic decision to seek a legislative solution and simultaneously pursue a permanent change through the courts. The evolving ideological dynamics in the Supreme Court, characterized by a more “federalist” viewpoint, are seen as potentially bolstering their case.

The lawsuit aims to establish a new precedent allowing states, exclusively, to regulate and foster the growth of marijuana businesses under their regulations. Ascend Wellness Holdings, TerrAscend, Green Thumb Industries, Eminence Capital, and Poseidon Investment Management are acknowledged as foundational supporters of the legal action.

As the Drug Enforcement Administration (DEA) conducts a review into marijuana scheduling following the U.S. Department of Health and Human Services (HHS) recommendation to move it from Schedule I to Schedule III under the CSA, the lawsuit contends that such rescheduling could address certain tax-related issues but wouldn’t legalize the plant or permit intrastate commerce.

The federal criminalization of safe, regulated marijuana commerce in states where it is legal is viewed as unjust, burdening legal operations, encouraging the production and sale of illegal, unregulated marijuana, and imposing discriminatory taxes. The lawsuit, grounded in the belief that cannabis should be subject to reasonable state regulation, challenges the federal government’s authority to prohibit intrastate cannabis commerce, citing outdated precedents and changed circumstances.

Plans to file the lawsuit challenging the constitutionality of enforcing criminalization of intrastate marijuana activity were initially described by cannabis business executives last year. The seriousness and potential success of the legal action, spearheaded by a leading constitutional law firm, underscore its significance in prompting legislative action and cannabis banking reforms. The hope is that this legal challenge serves as a catalyst for congressional attention and action on the broader issue.