Biden DOJ Tells Federal Court Not To ‘Disrupt’ Marijuana Rescheduling Decision By Allowing Industry Lawsuit To Proceed

The Justice Department has asked a federal court to dismiss a cannabis industry lawsuit that seeks to block the enforcement of marijuana prohibition against state-legal activity—in part, it says, because the court should not get ahead of a possible cannabis rescheduling decision that’s being considered.

In a document filed with the U.S. District Court for the District of Massachusetts, Western Division, on Tuesday, lawyers for Attorney General Merrick Garland said that Congress “rationally set up an administrative process for rescheduling drugs.”

“Pursuant to that mechanism, the DEA is currently considering” a recommendation from the U.S. Department of Health and Human Services (HHS) “to reschedule marijuana” under the Controlled Substances Act (CSA).

“It is not for the courts to disrupt or get ahead of that administrative process,” DOJ said.

Overall, DOJ also said that marijuana businesses who brought the case lack standing to pursue the challenge because they cannot claim direct injury since they haven’t been federally prosecuted under the policy of prohibition. The filing also notes that a long-standing congressional rider has been in place for a decade, barring the department from using federal funds to interfere in state-legal medical cannabis laws.

“Plaintiffs do not dispute that as enacted, the CSA rationally served legitimate government purposes. Yet they argue that the CSA has been rendered irrational because Congress has chosen to allow federal territories to enact marijuana legalization laws and has prohibited the Department of Justice on spending funds to prevent implementation of state medical marijuana laws…while the Department of Justice has allegedly exercised prosecutorial discretion to decline to prosecute conduct that complies with state marijuana laws under certain circumstances.”

“Yet as explained above, these actions and inactions serve the rational purpose of facilitating state and local experimentation with marijuana laws while focusing federal law enforcement resources on conduct that most significantly affects federal interests,” it says.

The government also asserts that precedent set in a 2005 Supreme Court ruling negates plaintiffs’ argument that the U.S. Constitution’s Commerce Clause renders bans on interstate marijuana commerce unlawful.

The case is a “transparent entreaty to overrule” that precedent, known as Raich, DOJ said.

“Federal regulation of intrastate marijuana activities is constitutional because such activities “substantially affect interstate commerce,’” the department argued. “Plaintiffs get no further by claiming that the CSA violates their right to substantive due process. Courts have consistently, and correctly, held that no fundamental right exists to distribute, possess, or use marijuana. Therefore, the CSA is subject only to deferential rational basis review, which it easily survives.”

“To raise a pre-enforcement challenge to a law, a plaintiff must show a substantial risk of future enforcement. Here, Plaintiffs allege the opposite, that the government’s policy is not to prosecute conduct that complies with state marijuana laws. Neither Plaintiffs’ contention that they are harmed by other federal laws and policies whose constitutionality is not challenged here, nor Plaintiffs’ allegations that some third parties have independently chosen not to transact with them, suffice to provide Plaintiffs with standing to challenge the CSA.”

The motion to dismiss additionally says that plaintiffs “fail to allege facts showing that the risk of prosecution is substantial.”

“In fact, Plaintiffs’ allegations negate the existence of such a substantial risk,” it says. “Yet even if this Court were sympathetic to Plaintiffs’ arguments that [Gonzales v. Raich] holding should no longer be good law, stare decisis commands that this Court adhere to Raich unless and until it is overruled by the Supreme Court

“Moreover, Plaintiffs allege that the Department of Justice has implemented a policy of prosecutorial discretion that guides federal law enforcement to focus enforcement resources ‘on persons or organizations whose conduct interferes’ with important federal interests such as curtailing violence and gang activity, and otherwise to rely largely on ‘enforcement of state law by state and local law enforcement and regulatory bodies’ to ‘address[] marijuana-related activity.’”

The filing adds that a policy of prosecutorial discretion for federal marijuana cases such as under the Obama-era Cole memo that was rescinded under the Trump administration is a “surely rational” approach.

In the overarching lawsuit, plaintiffs claim that perpetuating prohibition in state markets is unconstitutional, creating undue public safety risks while precluding licensed marijuana businesses from accessing critical financial services and tax deductions that are available to other industries.

This comes about a month after the Justice Department and plaintiffs—a coalition of marijuana businesses represented by an influential law firm—jointly agreed to request a deadline extension for the filing of initial briefs.

The suit against the federal government is being led by multi-state operator Verano Holdings Corp. and the Massachusetts-based cannabis businesses Canna Provisions and Wiseacre Farm, along with Treevit CEO Gyasi Sellers.

On Monday, DOJ sought permission to submit the new 25-page of memorandum that exceeds the general 20-page limit allotted under the rules.

The law firms Boies Schiller Flexner and Lesser, Newman, Aleo & Nasser LLP are representing the plaintiffs. David Boies, chairman of the former firm, has a long list of prior clients that includes the Justice Department, former Vice President Al Gore and the plaintiffs in a case that led to the invalidation of California’s ban on same-sex marriage, among others.

The lawsuit alleges that while Congress originally banned marijuana through the Controlled Substances Act (CSA) in an attempt to eradicate interstate commerce, ostensibly giving the government a basis to enforce prohibition at the state level, lawmakers and the executive branch have since “abandoned” that mission as more states have enacted legalization.

“Despite these changes, the federal criminal prohibition on intrastate marijuana remains in place, an unjustified vestige of a long-abandoned policy,” the complaint, filed last October, states. “This unjustified intrusion of federal power harms Plaintiffs, threatens the communities they serve, and lacks any rational purpose.”

There were repeated mentions of the fact that, while the federal government has taken a largely hands-off approach to cannabis in recent decades, state-licensed marijuana businesses continue to suffer unique financial burdens, including a lack of access to banking services, credit cards and federal tax deductions under an Internal Revenue Service (IRS) code known as 280E.

Without access to credit cards or online payment, state-regulated marijuana businesses must rely heavily on cash, creating serious public safety risks. State-regulated marijuana dispensaries have become targets of robberies,” the original lawsuit says. “These collateral harms increase the costs of state-regulated marijuana businesses and reduce participation in state-regulated marijuana markets. As a result, there is less innovation and less consumer choice.”

The existing ban on cannabis under the CSA results in an “unconstitutional imposition on state sovereignty,” attorneys said. “While Congress has authority to ban marijuana from interstate commerce, it has no general police power over marijuana grown, transported, and distributed in intrastate commerce. Neither the Commerce Clause nor the Necessary and Proper Clause of the Constitution permit this overreach by Congress.”

The lawsuit takes a look at the history of cannabis laws in the country, pointing out that prohibition is a relatively recent policy position that followed more than 100 years of permitted use and cultivation to some extent. It then returned to the federal government’s justification for banning marijuana under the CSA, which was to prevent interstate commerce as was argued in the 2005 U.S. Supreme Court case Gonzales v. Raich concerning medical cannabis access for California patients.

That justification no longer rationally applies, the companies argue. Not only has Congress annually renewed an appropriations rider barring the Justice Department from using federal funds to intervene in state medical cannabis programs, but attorneys general over the course of multiple administrations have spoken to their lack of interest in criminalizing people over marijuana-related activity that’s sanctioned by the states.

“What was once a single-minded federal crusade against the cannabis plant has been replaced with an ambivalent set of inconsistent policies, some aimed at reducing federal interference with state efforts to regulate marijuana,” the suit says.

“In short, the federal government has long ago abandoned the goal of eliminating marijuana from commerce. Nor does Congress have any comprehensive—or even consistent and rational—approach to marijuana regulation,” it continues. “This inconsistent, patchwork approach to marijuana regulation provides no basis for Congress to regulate intrastate marijuana.”

That point echoes what conservative Supreme Court Justice Clarence Thomas said in 2021, criticizing the “contradictory and unstable” state-federal marijuana policy conflicts that have compounded as the federal government continues to take a “half-in, half-out” approach to the issue.

Attorneys for the plaintiffs said that “without court intervention, the CSA will continue to undermine state efforts to create safe and regulated intrastate markets for marijuana. As long as the CSA continues to prohibit intrastate cultivation, manufacture, possession, and distribution of marijuana, Plaintiffs and the communities they serve will suffer irreparable harm.”

There’s also a mention in the lawsuit of the impact of the current policy of criminalization on low-income communities, noting that the ban on intrastate marijuana commerce means that cannabis products cannot be delivered to public housing facilities in Massachusetts.

“This prohibition is to the detriment of the states, their citizens, and Plaintiffs,” the complaint states. “Not only do Plaintiffs face the potential risk of enforcement, their businesses also face numerous hurdles that result directly from the CSA’s treatment of intrastate marijuana.”

The consequences of this prohibition are devastating for the industry, particularly for small businesses that cannot rely on diversification or economies of scale,” it continues.

Josh Schiller, partner at the Boies Schiller Flexner law firm that is representing the plaintiffs, said during an X Spaces session in October that “our clients have finally decided we can still look around the corner and hope that there is a legislative solution—but let’s decide whether or not we can create a permanent change by going to the courts,” adding that Supreme Court ideological dynamics have shifted toward a “federalist” point of view in a way that could bolster their case.

The court is “looking to enforce the constitutional protections for states to regulate commerce within the state, which is called intrastate commerce,” he said. “There is no right of the federal government under the Constitution to regulate intrastate commerce.”

“But we’ve built a lawsuit that we hope to get back to the Supreme Court as quickly as possible,” Schiller added. “The factual evidence that we offer in our complaint—which will be supported by testimony on a summary judgment motion which we hope to get to, probably not this year, but hopefully early next year—will be the basis for going to the Supreme Court and demonstrating this evidence that negates any legitimacy that the federal government has in continuing to treat cannabis as a federal crime.”

He also briefly previewed plans to pursue future litigation as a “second step” to help marijuana businesses recoup losses they’ve incurred due to the “inequality that they’ve suffered for years” if they’re successful in the current case.

“But this case is meant to create a new precedent that allows the states—and only the states—to let these businesses flourish under their regulations,” he said.

A press release says that Ascend Wellness Holdings, TerrAscend, Green Thumb Industries, Eminence Capital and Poseidon Investment Management are “foundational supporters” of the suit.

The lawsuit comes as the Drug Enforcement Administration (DEA) carries out a review into marijuana scheduling after the U.S. Department of Health and Human Services (HHS) recommended moving it from Schedule I to Schedule III under the CSA. Such rescheduling could resolve certain tax-related issues for the industry under 280E, but it would not legalize the plant or permit intrastate commerce.

“The federal criminalization of safe, regulated marijuana commerce in states where it is legal unfairly burdens legal operations and expands the production and sale of illegal marijuana that is unregulated, can be unsafe, and is likely to find its way to other states,” Boies said in a press release in October. “Federal criminalization also denies small, legal marijuana businesses of access to SBA loans, investors, benefits for their employees, and normal banking regulations (which among other things, forces them to rely on cash transactions with all of the dangers to them, and to the community, that result)—as well as burdening them with discriminatory taxes.”

“Americans believe that cannabis should be legal and available subject to reasonable regulation by the states. 38 states have legalized some form of cannabis,” he said. “The federal government lacks authority to prohibit intrastate cannabis commerce. Outdated precedents from decades ago no longer apply—the Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce; moreover, the facts on which those precedents are based are no longer true.”

Cannabis business executives first described plans to file the lawsuit challenging the constitutionality of enforcing criminalization of intrastate marijuana activity under the CSA last year.

“I think the fact that one of the leading constitutional law firms in the United States is willing and eager to take this case speaks volumes to the seriousness of the action and the potential likelihood of success,” the then-CEO of Ascend Wellness Holdings told Marijuana Moment at the time, saying that he hoped the legal challenge would prompt Congress to pass cannabis banking legislation of other reforms.

“Hopefully, this will be another factor [so] that the Senate says, ‘you know, we’ve gotta get off our ass or we’re gonna lose this issue to the courts,’” he said.

Read the federal government’s filing in the marijuana lawsuit below: 

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