The first oral arguments in a high-profile legal case that could ultimately invalidate the federal prohibition of marijuana under the U.S. Controlled Substances Act were held Wednesday.
The hearing was focused on a motion filed by the Department of Justice in January to dismiss a lawsuit first first filed in U.S. District Court in the Western District of Massachusetts last October by a coalition of cannabis companies that directly challenges the Controlled Substances Act and its role in intrastate commerce.
Deputy Attorney General Jeremy Newman and David Boies, the litigator for the plaintiffs, traded legal arguments and took questions from federal Judge Mark Mastroianni, who seemed sympathetic at times to policy arguments made by both sides. However, Mastroianni didn’t indicate Wednesday when he may issue a ruling on the motion.
Newman and Boies fought over whether or not the plaintiffs in the case – which include multistate operator Verano Holdings Corp. as well as Massachusetts-based marijuana companies Canna Provisions, Wiseacre Farm, and Gyasi Sellers – had standing to challenge the constitutionality of the CSA and the basic merits of the case. In addition, the question was raised whether current state-legal U.S. cannabis markets have any direct impact on interstate commerce.
Newman asserted that the companies suing aren’t faced with any “credible threat of enforcement” from the DOJ, given the federal government’s largely hands-off approach toward the federally illegal state marijuana markets that have sprung up across the nation over the past few decades. That alone, Newman argued, means the case should be thrown out.
“You need to be harmed by the specific laws that you’re challenging,” Newman said.
A matter of precedent?
Boies shot back that the legal standard in question for such cases is not whether there’s been any specific harm endured by his clients, and the simple fact that the U.S. cannabis trade remains federally illegal is equal to a credible threat of prosecution.
“There are inconsistent statements coming out of the government, sometimes saying, ‘We’re not going to prosecute,’ sometimes threatening prosecution. Even the reclassification notice that the court referred to, at the end of the initial summary, reminds everybody that it’s still illegal,” Boies said.
Newman also asserted that the merits of the lawsuit itself don’t warrant further consideration by the court and that the plaintiffs undermined their own argument by pointing out the federal government’s lack of enforcement against state-level cannabis markets. He also pointed out that the 2005 Supreme Court ruling in Gonzales v. Raich – which found that federal marijuana restrictions per the CSA were constitutional – was the controlling legal precedent and that only the Supreme Court is allowed to alter such legal findings.
“The Supreme Court said well-settled law controls our answer, the CSA is a valid exercise of federal power,” Newman said. “Frankly, I’d submit that’s the end of the ballgame … Lower courts are obligated to follow Supreme Court precedent, even where relevant facts have changed.”
Mastroianni indicated he may feel bound to follow Supreme Court precedent as a district court judge.
“As a district court, I have to look at it that way. Even if I’m accepting everything you’re saying is true, that it’s for the Supreme Court to change,” he said to Boies at one point.
Boies countered by presenting the central argument from last year’s lawsuit: The national cannabis policy and industry landscape has changed so dramatically since the 2005 Gonzales ruling by the Supreme Court that Mastroianni is entitled to find that the ruling no longer applies.
In particular, at that point, the federal government had a stated mission of eradicating the entire marijuana trade. That is no longer federal policy, he argued, which makes the Gonzales ruling moot.
“It’s not just that the premises are no longer clearly demonstrable. The question is whether those premises have changed so much that the ruling doesn’t apply anymore,” Boies argued.
Intrastate vs. interstate
The central point at hand, Boies argued, is that the federal government doesn’t have the right to criminalize intrastate commerce, which is the practical effect of marijuana’s status as a Schedule I narcotic under the CSA.
“They have to prove that this restriction is necessary,” he asserted, and added that there’s “no basis for concluding” that the legal Massachusetts cannabis market has a substantial impact on even the illegal interstate marijuana trade.
“The net effect, which is what you have to look at … is to reduce interstate commerce in marijuana. You’ve got to keep coming back to that issue,” Boies said.
Mastroianni had a hard time swallowing that argument.
“It seems like that’s talking a big game. That’s a big statement, that you’re able to keep it so within the perimeters of your state, that there’s no effect on or from interstate commerce,” he said.
Boies insisted, however, “that’s an allegation we’ll be able to prove.”
Newman scoffed at that assertion, and said, “Even if you take plaintiffs’ allegations as true, of course it’s rational to conclude that this big business, which is connected to an interstate market, is going to affect interstate commerce in a number of ways.”
Rescheduling
The two sides did align on one aspect before the court, however. Newman and Boies agreed that the current rescheduling process by the Drug Enforcement Administration likely won’t have much effect on the cannabis landscape.
Newman maintained that rescheduling wouldn’t change much at all from DOJ’s perspective on the CSA and the federal illegality of the U.S. marijuana industry – apart from making the threat of federal enforcement “less credible.” Boies said that “there’s no suggestion that they’re going to permit our clients, who are here, to continue the operations legally” even if cannabis is fully moved to Schedule III, which thus necessitates his clients’ legal action.
The ongoing federal illegality of the entire U.S. cannabis industry also keeps in place ongoing financial harms from the refusal of many banks and other financial institutions to work with much of the marijuana industry, Boies said, despite some pushback from Mastroianni.
“There are banking services” for cannabis companies, Mastroianni at one point said in reply to Boies.
“Not all of them are able to find it, and none of them are able to find it all of the time, and none of them are able to find it as comprehensively as they need it,” Boies shot back.
A ruling on the motion to dismiss could take anywhere from weeks to months, legal observers said of the case. The full lawsuit could take years to conclude, as it will likely be appealed no matter which side wins at the district level.
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