The U.S. Court of Appeals for the First Circuit in Northeast Patient Group et al. v Kirsten Figuero et al., affirmed a lower courts decision that the Dormant Commerce Clause applies to the cannabis industry; as such, Maine's Residency Requirement for its Medical Cannabis Program violates the Commerce Clause of the U.S Constitution.
What is the Dormant Commerce Clause? The Dormant Commerce Clause a legal doctrine that prohibits states from passing legislation that "discriminates against or excessively burdens interstate commerce."
Under Maine's Medical Cannabis Program, Caregivers must meet certain requirements in order to obtain a caregiver registration, including being a "resident" of the State of Maine. One of the requirements to obtain a Dispensary License under Maine's Medical Cannabis Program is that all "officers and directors" must be "residents" of the State of Maine. "Officers or Directors" are defined as "a director, manager, shareholder, board member, partner or other person holding a management position or ownership interest in the organization."
The State argued that there is no such interstate marketplace for cannabis due to the Controlled Substance Act (i.e. Cannabis listed as a Schedule 1 Drug under the CSA); as a result, the residency requirement "comports with the Dormant Commerce Clause." The First Circuit, in a 2-1 decision, disagreed. Interstate Commerce generally means the "transacting or transportation of products, services, or money across state borders." As the Court correctly pointed out, Maine permits out of state patients (known as "Visiting Qualifying Patients") to come to Maine and purchase cannabis from Registered Caregivers and Dispensaries. This act, by definition, is considered Interstate Commerce, as qualified residents from another state are invited into Maine to purchase Medical Cannabis. The Court also acknowledged that while Cannabis remains federally illegal, Congress has passed the Rohrabacher-Farr Amendment since 2015, which bars the U.S. Justice Department from using funds to interfere in state legal medical cannabis programs. The Court states:
"The Rohrabacher-Farr Amendment does not in fact repeal the CSA as to medical marijuana. It is thus hard to discern from the Rohrabacher-Farr Amendment a congressional intent to bless a state regulation of the market that might further participation in it, such as a protectionist state law like the one at issue here might. Yet, at the same time, the Rohrabacher-Farr Amendment does plainly reflect an effort by Congress to free the market in medical marijuana from being subject to the full degree of federal criminal enforcement to which that market otherwise would be subject. And yet, the Rohrabacher-Farr Amendment does so without in any way indicating that Congress wishes for that interstate commercial market to be the unusual one that states may substantially burden through protectionist measures."
Why is this case important? A Federal Appellate Court has recognized that the Dormant Commerce Clause applies to the cannabis industry. Unless the State of Maine continues with its appellate efforts, Maine will be required to eliminate the Residency Requirement under its Medical Cannabis Program. Prior to this ruling, Maine had multistate operators investing in its Medical Cannabis Program; however, many of them have transitioned their investment into Maine's Adult Use Cannabis Program. In addition, this case may also open up the door for other challenges to "protectionist measures" such as states giving priority to certain businesses over others in the licensing process.
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John M. Burke manages the firm's Maine cannabis law practice. Mr. Burke advises and represents the firm's clients throughout Maine in both the Medical and Adult Use cannabis programs in a wide range of Maine cannabis law matters. In addition to Mr. Burke's Maine cannabis law practice, Mr. Burke advises and assists the firm's clients in a variety of industries on various intellectual property matters throughout the United States. Learn more about John Burke by clicking here.
Caseiro Burke is a boutique law firm that specializes in intellectual property law and cannabis compliance and licensing in the State of Maine. We offer clients creative, cost-effective and reliable legal solutions in all intellectual property and Maine cannabis law matters.