The Massachusetts Lawyer
The eyes of the cannabis industry in Massachusetts and beyond will be on the 1st U.S. Circuit Court of Appeals on Dec. 5 as a group of businesses tries to revive a case premised on the belief that it is long past time for the federal government to exit the realm of regulating cannabis as a Schedule I drug under the Controlled Substances Act.
In Canna Provisions, Inc., et al. v. Garland, the plaintiffs, who operate Massachusetts cannabis businesses, are seeking a declaratory judgment that the Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession and distribution of marijuana. They are also asking the court for a permanent injunction prohibiting the federal government from enforcing the CSA in a manner that interferes with their tightly regulated state markets.
We’re saying let the states police these industries.
— Joshua I. Schiller, plaintiffs’ co-counsel
In the court below, U.S. District Court Judge Mark G. Mastroianni said he felt constrained by the U.S. Supreme Court’s decision in the 2005 case Gonzalez v. Raich, which involved the cultivation and possession of marijuana that never entered the stream of commerce and was prescribed by a doctor and consumed in compliance with state law.
The facts were “troubling,” the Supreme Court acknowledged in Raich. However, it added that “case law firmly establishes Congress’ power to regulate purely local activities that are part of an economic ‘class of activities’ that have a substantial effect on interstate commerce.”
Given all that has happened in the last two decades — recreational use of marijuana is legal in almost half of the country (24 states), while medicinal use has been sanctioned in 38 states — the time has come to revisit Raich, the plaintiffs in Canna are now arguing.
“Raich provides that this challenge must be assessed under the Necessary and Proper Clause, but the significant legislative changes since Raich mean that the federal marijuana regime the Supreme Court encountered in 2005 no longer exists,” the plaintiffs argue in their 1st Circuit brief. “Because of these legislative changes, Raich no longer ‘directly controls.’”
In addition to new laws on the state level, the plaintiffs attach great significance to the Rohrabacher-Farr Amendment to the CSA that Congress first passed a decade after Raich and has renewed each year thereafter. The Rohrabacher-Farr Amendment prohibits the Department of Justice from spending funds on prosecutions “if doing so prevents a state from giving practical effect to its medical marijuana laws.”
Mastroianni felt constrained by the broad reading of the Commerce Clause that the U.S. Supreme Court first announced in the 1942 case Wickard v. Filburn and reaffirmed in Raich.
“While the Complaint has alleged persuasive reasons for a reexamination of the way the Controlled Substances Act (‘CSA’) regulates marijuana, the relief sought is inconsistent with binding Supreme Court precedent and, therefore, beyond the authority of this court to grant,” Mastroianni wrote.
At oral argument, the plaintiffs will be represented by New York attorney David Boies, who is no stranger to the Supreme Court. Many believe Canna is headed to the high court as well, though the 1st Circuit will have some say in how quickly it gets there.
Distressed industry
In their complaint, the plaintiffs in Raich outline the economic hardships they have had to endure due to the specter of the CSA looming over the cannabis industry. For example, state-regulated marijuana businesses cannot obtain federal grants and loans conditioned on the grantee not violating federal criminal law. Processors of payroll and credit card transactions also refuse to work with state-regulated cannabis businesses out of fear of being subject to federal prosecution or regulatory scrutiny under the Bank Secrecy Act and similar laws.
Another cloud that the industry is currently operating under is Section 280E of the IRS code, which disallows all deductions or credits for any amount paid or incurred in carrying on any trade or business that consists of illegally trafficking in a Schedule I or II controlled substance within the meaning of the Controlled Substances Act.
It’s almost impossible to be profitable in this business right now. There needs to be relief, and I think everything is needed — all hands on deck, including legislation and including this complaint.
A judicial ruling that Congress no longer had the authority under its Commerce Clause powers to regulate cannabis as a Schedule I or II controlled substance would go a long way to lifting those clouds, said Boston attorney Jesse H. Alderman, co-chair of Foley Hoag’s cannabis practice.
Read the full article at https://masslawyersweekly.com/2024/12/03/cannabis-industry-watching-1st-circuit-case-with-interest/
