Lawsuit Highlights the Complexity of Regulating the Intrastate Use of Marijuana

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Jean Smith-Gonnell

Jean has dedicated her entire career to the cannabis sector, helping growers, dispensaries, investors, receivers, and other stakeholders achieve their business goals and prepare for unexpected issues. She has extensive experience with medical marijuana, retail marijuana, hemp, and CBD products, and helps clients…

 

 

One of the most interesting aspects of marijuana law and policy in the U.S. is its tendency to strike at our most foundational democratic principles. In 2005, the U.S. Supreme Court held, in Gonzales v. Raich,[1] that Congress has the power to regulate the purely intrastate cultivation, manufacture, distribution, possession, and use of marijuana under the commerce clause, even if the marijuana never crosses state lines, because marijuana-related activity has a “substantial affect” on interstate commerce. Several challenges have been made to this conclusion since Gonzales was decided, none of which have been successful to date.

In October 2023, a group of plaintiffs filed a complaint against U.S. Attorney General Merrick Garland in the U.S. District Court for the District of Massachusetts challenging the holding of Gonzales.[2] Considering the interim legalization of medical and recreational marijuana in most states across the country, the plaintiffs argue that the presumptions that underpinned Gonzales in 2005 no longer hold true. The plaintiffs argued that the Controlled Substances Act (CSA) is unconstitutional as applied to the purely intrastate use of state-regulated marijuana. The U.S. Department of Justice (DOJ) responded in late January with a motion to dismiss the complaint based on a lack of standing and failure to state a claim.

This lawsuit provides an opportunity to look back on a seminal case in the history of federal marijuana law and reflect on how changes in state law over the intervening 19 years may impact the longevity of the supporting arguments put forward in Gonzales.

Background

In Gonzales, two medical marijuana users in California who grew, possessed and/or consumed cannabis legally under state law were raided and had their marijuana plants seized and destroyed by the Drug Enforcement Administration (DEA). These medical marijuana users sued the U.S. attorney general, claiming that enforcement of the CSA against individuals whose use of marijuana complies with state law and does not enter the interstate market represents an unconstitutional overreach of congressional authority under the commerce clause. While the district court denied the plaintiffs’ motion, the Ninth Circuit reversed, holding that such marijuana use constituted a “separate and distinct class of activities” which did not fall under Congress’ commerce clause authority. The DOJ appealed to the Supreme Court, which granted certiorari.

The Court has recognized three broad categories of activity that Congress may regulate under its commerce clause authority, one of which is activities that “substantially affect” interstate commerce.[3] Relying primarily on Wickard v. Filburn,[4] the Court in Gonzales held that because Congress had a rational basis for concluding that rising demand for home-grown cannabis could affect the supply and demand of the interstate cannabis market, even cannabis grown strictly for personal use has a “substantial affect” on interstate commerce. As such, Congress has the authority to regulate purely intrastate marijuana activity under the commerce clause.

Canna Provisions, Inc., et al. v. Garland

Canna Provisions v. Garland was filed in the U.S. District Court for the District of Massachusetts Western Division in late October 2023 by the owners of several licensed marijuana businesses in Massachusetts. In their attack on the validity of Gonzales, the plaintiffs highlighted three facts that they claim the Court in Gonzales relied on and which are no longer true today. As a result, the plaintiffs claim that Congress no longer has a rational basis for regulating intrastate marijuana activity under the commerce clause. While plaintiffs also claim that application of the CSA against their intrastate use of marijuana violates their substantive due process rights, our focus for the purpose of this article will be limited to the commerce clause claim.

Plaintiff’s Complaint

First, plaintiffs claim that the Court in Gonzales relied on the assumption that allowing the intrastate use of marijuana would increase interstate traffic in marijuana. This was undoubtedly true before the existence of robust state regulatory programs, but the plaintiffs argued that states with highly regulated marijuana programs have actually reduced, rather than increased, interstate commerce in marijuana by transitioning from the illicit to a regulated market which forbids moving marijuana across state lines.[5]

Next, to distinguish the present case from Wickard, the plaintiffs claimed that the Court in Gonzales specifically relied on the fact that marijuana was a “fungible” commodity, similar to wheat.[6] The plaintiffs argued that state seed-to-sale tracking systems require extensive tagging and monitoring of plant material and products throughout the manufacturing process so that each marijuana plant and product can be individually identified. State-regulated marijuana is therefore not “fungible.”

Finally, the plaintiffs claimed that the Court in Gonzales had concluded that, by enacting the CSA, Congress had intended to create a “closed regulatory system” that would completely eliminate the interstate market in cannabis, and that permitting intrastate marijuana would undermine that goal.[7] The plaintiffs conceded that this was true in 2005, but argued that it is no longer so. Pointing to several federal actions (or inactions) during the intervening years since Gonzales was decided,[8] plaintiffs argued that the federal government has evidenced an intent to abandon its prior approach of creating a “closed regulatory system,” deferring instead to state regulation.

In discussing the harms that they suffer from Congress’ unconstitutional intrusion into intrastate cannabis activity, the plaintiffs claimed that the cross-section of the CSA with other federal law[9] either directly or indirectly inhibits them from activity otherwise allowable for any other type of business. In addition, the plaintiffs claim that federal law disincentivizes private third parties from providing certain products and/or services to their businesses, including banking services, capital lending, credit card processing, and insurance.

DOJ’s Motion to Dismiss

The DOJ disputed the plaintiffs claim that the intrastate cultivation, manufacture, possession, distribution, and use of marijuana no longer substantially affects interstate commerce, but also argued that the plaintiffs lack standing to challenge the CSA as unconstitutional.

1. Plaintiff’s Lack of Standing

Too show standing to challenge a statute as unconstitutional, the plaintiff must first show that: 1) they suffered an “injury in fact”; 2) the injury is “fairly traceable” to the defendant; and 3) it is “likely that the injury will be redressed by a favorable decision.”[10]

Regarding an injury in fact, the DOJ said that the plaintiffs did not allege that the DOJ has enforced or attempted to enforce the CSA against them (for example, by arresting or prosecuting them directly for violations of the CSA), and so they have not yet suffered any injury. DOJ stated that:

“When a challenged law has not yet been enforced against a plaintiff, a plaintiff seeking to establish injury based on the potential for future enforcement must show that the alleged ‘injury is imminent,’ meaning that ‘it is certainly impending’ or ‘there is a substantial risk that harm will occur’. . . a plaintiff’s ‘conjectural fear’ of enforcement is insufficient.[11]

The DOJ argued that the plaintiffs failed to allege facts showing that the risk of their prosecution under the CSA is either substantial or imminent. On the contrary, the DOJ argued that the plaintiffs admitted that the risk of prosecution is not substantial by showing that the DOJ has a current policy of non-enforcement against state-legal marijuana activity.

In addition, the DOJ points out that while the plaintiffs claim to have suffered harm resulting from other federal laws interacting with the CSA, they did not challenge the constitutionality or scope of congressional authority under any of those statutes. Citing California v. Texas,[12] The DOJ argued that a claim by a plaintiff who is harmed by one federal statute does not give that plaintiff the ability to challenge the constitutionality of another statute, even if the two are connected.[13]

As for the injury being fairly traceable to the defendant, the DOJ argued that the plaintiff’s inability to access those ancillary services that are available to most businesses is a result of decisions by those product and service providers, not by the DOJ. On the contrary, the DOJ highlighted that the plaintiffs said in some instances these product and service providers do choose to work with marijuana businesses.[14] Accordingly, the DOJ argued that the injuries to the plaintiffs inflicted by other federal laws, as well as the decisions made by private third-party organizations, do not grant them standing to challenge the CSA as unconstitutional.

2. The Intrastate Cultivation, Manufacture, Possession, Distribution and Use of Marijuana Substantially Affects Interstate Commerce

The DOJ’s second and, for our purposes, more instructive argument in support of the conclusion in Gonzales is that the intrastate cultivation, manufacture, possession, distribution, and use of marijuana continues to substantially affect interstate commerce to this day, and that the plaintiffs therefore failed to state a claim that the CSA exceeds congressional authority under the commerce clause and/or the necessary and proper clause.

The DOJ discussed the history and evolution of the commerce clause, beginning with the country’s founding and tracking all the way to United States v. Lopez, where the Court reiterated the specific categories of activity that Congress may regulate under its commerce clause authority.[15] The DOJ then discussed Gonzales, and stated that:

“The Court concluded that regulation of local production and consumption of an agricultural commodity such as marijuana ‘is squarely within Congress’ commerce power because production of the commodity meant for home consumption, be it wheat or marijuana, has a substantial effect on supply and demand in the national market for that commodity.[16]‘”

DOJ referenced a plethora of cases reiterating that Gonzales is binding authority and argued that the district court, at a minimum, is bound to follow Gonzales, as only the Supreme Court can overrule its own precedent.[17] However, assuming that the district court is unpersuaded by these precedential and standing arguments, the DOJ attacked each of the three arguments put forward by the plaintiffs in support of their position that Congress no long has a rational basis for concluding that the intrastate use of state-regulated marijuana has a substantial affect on the interstate cannabis market.

By contending that state-regulated cannabis markets have reduced rather than increased the interstate market for cannabis, the DOJ argued that the plaintiffs acknowledged that intrastate cannabis activities “substantially affect” the interstate cannabis market.[18] The DOJ argued that a substantial affect is a substantial affect, regardless of whether the affect is positive or negative with respect to Congress’ goal under the particular statute.[19]

The DOJ also argued that while the plaintiffs in Gonzales were individuals who used marijuana for personal medical use, the plaintiffs in this case are licensed marijuana establishments that engage in the commercial cultivation, manufacture and sale of marijuana, posing a much larger risk of affecting interstate commerce than marijuana grown and consumed for personal use. The DOJ also pointed out that the plaintiffs and other marijuana businesses in Massachusetts advertise and cater their products to out-of-state visitors.[20]

Next, the DOJ rejected the plaintiffs’ argument of the importance of marijuana as a fungible commodity to the decision in Gonzales. The DOJ said that the First Circuit already examined the question and has ruled that the holding in Gonzales is not limited fungible commodities.[21]

Finally, the DOJ turned to the plaintiff’s argument that the federal government has abandoned its intention to create a closed regulatory system for marijuana in the U.S. Again, the plaintiffs pointed to several specific activities at the federal level that occurred since the decision in Gonzales that indicate that the federal government has abandoned this approach. The DOJ, however, suggested that these decisions evidence an entirely different federal intent: the intent to allow the states to continue to serve as “laboratories of democracy.[22]” The DOJ argued that this principal has long been recognized as rational.

Why It Matters

The legal battle in Canna Provisions, Inc., et al. v. Garland represents a pivotal moment in the evolving discourse on federal marijuana regulation and the application of the commerce clause to intrastate cannabis markets. This case not only revisits the landmark Gonzales decision but also probes the adaptability of federal law to the dramatic shifts in state-level marijuana legalization and regulation over the past two decades. The plaintiffs’ challenge underscores a broader societal and legal reevaluation of marijuana’s place within the national market and its regulation by Congress. The DOJ’s defense, grounded in precedent and a broad interpretation of congressional power, highlights the enduring complexity of federalism and the tension between state innovation and federal oversight. As this legal challenge unfolds, it serves as a critical reflection point for legal professionals, business leaders, and policymakers on the interplay between state sovereignty, federal authority, and the dynamic landscape of marijuana regulation. As we continue to witness the evolution of marijuana law and policy, the outcome of this challenge will undoubtedly have significant implications for the regulatory framework governing intrastate and interstate cannabis markets, setting a precedent for future legal and legislative actions in this arena.


Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law.


[1] Gonzales v. Raich, 545 U.S. 1 (2005)

[2] Canna Provisions, Inc., et. al. v. Garland, No. 23-cv-30113 (D. Mass. 2023).

[3] United States v. Lopez, 514 U.S. 549, 559 (1995)

[4] Wickard v. Filburn, 317 U.S. 111 (1942) (holding that Congress has the authority to regulate wheat that is grown and consumed for personal use and does not enter the intrastate market because such personal use would have a substantial affect on the interstate wheat market).

[5] Plaintiff’s complaint at 31-32 (“From 2012 to 2022, the amount of marijuana seized by U.S. Customs and Border Protection declined by almost 95%; from 2021 to 2022 alone, the volume of marijuana seized by the agency declined by around 50%.” (citation omitted)).

[6] Id. at 9 (“This fungibility in turn meant that ‘it is not feasible to distinguish, in terms of controls, between controlled substances manufactured and distributed interstate and controlled substances manufactured and distributed intrastate.’” citing Raich, U.S. 545 at 12 n.20 (quoting 21 U.S.C. § 801(5))).

[7] Id. at 10.

[8] Id. at 32-33 (Including the annual renewal of the medical enforcement appropriations rider; the legalization of medical marijuana in Washington D.C. and legalization in the U.S. Territories; the DOJ’s 2013 Cole Memorandum and AG Merrick Garland’s adherence to this rescinded policy).

[9] Id. at 5-8 (Specifically, U.S.C. § 280E, as well as Small Business Administration, Housing and Urban Development, and federal firearms laws).

[10] DOJ motion to dismiss at 6 (citing Dantzler, Inc. v. Empresas Berrios Inventory & Operations, Inc., 958 F.3d 38, 47 (1st Cir. 2020)).

[11] Id. at 7. (Citing Reddy v. Foster, 845 F.3d 493, 500, 503 (1st Cir. 2017)).

[12] 141 S. Ct. 2104 (2021).

[13] DOJ motion to dismiss at 8-9.

[14] Id. at 9.

[15] Lopez, 514 U.S. at 558-59.

[16] DOJ Motion to Dismiss at 12 (citing Gonzales, 545 U.S. at 19).

[17] Id. at 13-14.

[18] Id. at 16.

[19] Id. (“Where intrastate economic activity substantially affects interstate commerce, the precise nature of the economic interaction between the intrastate activity and interstate commerce does not affect Congress’ authority to regulate the intrastate activity. As Raich explained, where intrastate commerce and interstate commerce in a commodity is economically interconnected, it is ‘of no constitutional import’ whether regulation of intrastate activity is meant to eradicate or support the interstate market.”)

[20] Id. at 14-16.

[21] Id. at 16-17 (citing U.S. v. Poulin, 631 F.3d 17 (1st Cir. 2011)).

[22] Id. at 17-19.

Source: https://www.regulatoryoversight.com/2024/02/lawsuit-highlights-the-complexity-of-regulating-the-intrastate-use-of-marijuana/

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