(July 10, 2024) - Alex Malyshev and Sarah Ganley of Carter Ledyard & Milburn LLP analyze a federal judge's decision dismissing a case brought by a coalition of cannabis companies challenging the federal prohibition on cannabis, and note the complexities in pursuing federal cannabis reform.
In a closely watched decision released earlier this month, Judge Mark G. Mastroianni of the Federal Court for the District of Massachusetts dismissed a case brought by a coalition of cannabis companies challenging the federal prohibition on cannabis. The case, Canna Provisions, Inc. et al. v. Garland, No. 3:23-cv-30113, had serious fire power behind it in the form of David Boies, a founding partner of the world-renowned law firm Boies Schiller Flexner, as lead counsel.
The plaintiffs in this case sought to broadly challenge the constitutionality of the federal prohibition on cannabis under the Controlled Substances Act (CSA) — which prohibits the cultivation, manufacturing, sale, and possession of cannabis under federal law — and block enforcement of the CSA as against legal, in-state cannabis activities. The case was filed before the DEA began the process of rescheduling cannabis from Schedule I to Schedule III of the CSA earlier this year.
While conceding that Congress has the power to ban interstate commerce of cannabis under the Commerce Clause — which gives Congress broad authority to regulate interstate commerce — the Canna Provisions plaintiffs argued that the CSA represents congressional overreach under the Commerce Clause because it criminalizes legal intrastate conduct (i.e., acts occurring entirely within states that have legalized cannabis).
The plaintiffs argued that this created a risk of prosecution under federal law for those operating legally under state law and, as a result, reduced state-legal cannabis businesses' options for obtaining business services as compared to non-cannabis businesses.
In this article, we address Judge Mastroianni's ruling dismissing the case and some of the resulting implications and complexities faced by the cannabis industry in pursuing federal cannabis reform.
Background of the case
The plaintiffs in Canna Provisions, led by multi-state operator Verano Holdings Corp., are participants in the state-legal cannabis markets. They argued that continued federal prohibition of cannabis under the CSA unlawfully interferes with states' rights to regulate cannabis within their borders and impedes legitimate businesses from operating freely in compliance with state laws, in violation of the U.S. Constitution's Commerce Clause, the Necessary and Proper Clauses, and Due Process.
To bolster those claims, the plaintiffs pointed to the growing body of evidence supporting cannabis's medicinal benefits, as well as shifting societal attitudes towards legalization and decriminalization of cannabis in many states.
The complaint's core contention, however, is that, over the last two decades, the Federal Government has abandoned the CSA's goal of eliminating cannabis from interstate commerce. That goal was the basis for the Supreme Court's 2005 decision in Gonzales v. Raich, 545 U.S. 1 (2005). The Gonzales decision rejected a previous challenge to the CSA, holding that the federal prohibition on cannabis under the CSA preempted (or superseded) state laws seeking to legalize and regulate cannabis.
In upholding Congress' authority under the Commerce Clause to prohibit the local cultivation and use of marijuana pursuant to the CSA, the majority in Gonzales found that Congress had an interest in preventing state-authorized cannabis from reaching interstate markets.
More specifically, the plaintiffs alleged that the three following factual assumptions underlying the Court's finding in Gonzales that Congress had an interest in preventing state-authorized cannabis from reaching interstate markets are no longer true today: (1) a congressional finding that "distribution and possession of controlled substances contribute to swelling the interstate traffic in such substances"; (2) that cannabis was a fungible commodity, akin to wheat; and (3) that Congress's goal in passing the CSA was to create a "closed regulatory system" that would "eliminat[e] commercial transactions in the interstate market [for marijuana] in their entirety."
Plaintiffs contended that because these assumptions have changed so dramatically in the 19 years since Gonzales, the majority's analysis upholding the CSA is no longer relevant and warrants revisiting.
Legal analysis and court's decision
Judge Mastroianni's decision dismissing the complaint rejected the plaintiffs' argument that the circumstances undergirding the decision in Gonzalez had changed so much that the decision was no longer applicable precedent. Indeed, the decision concluded that the finding in Gonzalez that Congress has an interest in preventing state-authorized cannabis from reaching interstate markets is still binding upon the district court, and that Congress still has the power to regulate cannabis activities under the CSA pursuant to its authority under the Commerce Clause — even if those activities are wholly intrastate and legal under state law.
The decision also rejected plaintiffs' argument that the specter of CSA enforcement violates their substantive due process rights, finding no fundamental right to grow or consume cannabis.
A decision along these lines was not unexpected and is consistent with the broad readings of the Commerce Clause going back at least to the Great Depression era case of Wickard v. Filburn, 317 U.S. 111 (1942) (where the Supreme Court held that even wheat produced by farmers purely for personal consumption could, in the aggregate, implicate the Commerce Clause). Unsurprisingly Wickard was at the core of the Gonzalez decision.
In the lead-up to the district court's decision, many industry participants were hopeful that litigation could provide a viable alternate strategy to pursue federal cannabis reform in the absence of congressional action. The decision should not be surprising as the district courts are not the place where Supreme Court precedent is usually overturned.
As Judge Mastroianni's decision notes, plaintiffs can pursue their claims and seek the attention of the Supreme Court, which has likely been the ultimate goal of this case from the very beginning (and, indeed, plaintiffs have already indicated their intent to appeal).
If the case does reach the Supreme Court, which is far from guaranteed, it is possible that cannabis will have been rescheduled to Schedule III by the DEA, which could affect the Court's appetite to overturn Gonzalez (or even take up the case). Still, although the decision does not mark the end of the case, it delivered a blow to industry efforts, led by some of the largest cannabis companies, to pursue federal cannabis reform via litigation.
Conclusion
The dismissal of the Canna Provisions case underscores the complex interplay between federal law, state autonomy, and individual rights in the context of cannabis reform and legalization. As the legal and regulatory landscape surrounding cannabis continues to evolve, stakeholders will need to consider a variety of strategic approaches to advancing cannabis reform, in addition to litigation, including engaging with federal agencies and advocating for legislative changes.
Originally published by Westlaw Today and Thomson Reuters.
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