Maybe you can play in the sandbox if you don’t live in the neighborhood – Have marijuana residency permit requirements gone up in smoke? | McGlinchey Stafford

For a variety of reasons, many states that have legalized marijuana for recreational or medical use have imposed residency requirements in their regulatory regimes, which means that marijuana licensees, employers and, in some cases, even consumers, must be residents of the state. However, a recent decision by a three-judge split panel of the United States Court of Appeals for the First Circuit jeopardized these residency requirements by holding that Maine’s residency requirement for license holders a commercial marijuana license violates the dormant Commerce Clause of the US Constitution. Northeast Patient Group. vs. United Cannabis Patients and Caregivers of Maine1st Cir., n° 21-1719, 08/17/22.

The case involved Maine’s Medical Marijuana Law residency requirement for dispensary officers and trustees. The relevant provision of the law provides that for a dispensary to be licensed under state law to sell medical marijuana in Maine, “all [the] officers or directors of a dispensary must be residents [Maine].”

The law has been challenged as a violation of the Commerce Clause contained in Article I, Section 8, Clause 3 of the United States Constitution. Over the past 100 years, courts in the United States have developed a legal doctrine under the Commerce Clause called the Dormant Commerce Clause (or the Negative Commerce Clause). This doctrine emphasizes the prohibition of state protectionism. In practice, it is used to invalidate and prohibit state legislation that discriminates against or unduly impedes interstate or international commerce.

The North East Patients The deal arose because High Street Capital, a Delaware company wholly owned by non-Maine residents, wanted to acquire Northeast Patients Group, a Maine company owned by three Maine residents that owns and operates three licensed marijuana dispensaries. in Maine. The residency requirement would have prevented High Street Capital from operating the dispensaries had it acquired Northeast Patients Group. Northeast Patients Group and High Street Capital (plaintiffs) sued the Maine Department of Administrative and Financial Services (department) and Kirsten Figueroa, Commissioner of the Maine Department of Administrative and Financial Services, alleging that Maine’s residency requirement violated the commerce clause dormant because the law permitted only in-staters to serve as officers or directors of dispensaries.

Shortly after the defendants responded to the lawsuit, United Cannabis Patients, a nonprofit advocacy group that represents Maine resident-owned medical marijuana businesses, decided to intervene in the suit as as defendant.

The plaintiffs filed a motion for summary judgment and the defendants filed a cross motion for summary judgment. Although the district court ruled in favor of the department on the grounds that the department was immune from suit under the Eleventh Amendment to the United States Constitution, the district court ruled with respect to the Plaintiffs’ claims against Defendant Kirsten Figueroa, Commissioner of the Department, that the Maine residency requirement violated the dormant Commerce Clause.

On appeal, the defendants did not dispute that the Maine residency requirement would violate the dormant Commerce Clause if the business was a legal business under federal law, which marijuana businesses currently are not. Rather, they argued that Maine’s residency requirement is consistent with the dormant Commerce Clause because current federal law (i.e. the Controlled Substances Act or “CSA”) makes participation illegal. to the market to which the residency requirement applies. The Court of Appeal said: “[i]It is to this assertion – and to this assertion alone – that we must respond.

In setting the stage for its analysis of this issue, the Court stated:

. . . it is important to keep in mind that the question before us is not whether the CSA overrides the residency requirement of the Medical Marijuana Act. The question is whether the residency requirement cannot be maintained because it violates the dormant Commerce Clause due to the substantial burden that this requirement (in light of its patently protectionist nature) imposes on interstate commerce.

This distinction is important because preemption by federal law and prohibition by dormant commerce clause are distinct rather than coincident means by which federal law can limit the making of state laws that significantly burden interstate commerce. Thus, the negative implication of trade power may constitute an independent barrier to state regulation of an interstate trade market even when Congress chooses to exercise its affirmative trade power with respect to that same market without also preempting such state regulation. .

In other words, although the CSA makes it illegal to manufacture, distribute or distribute, or possess with intent to manufacture, distribute or distribute, marijuana, the majority of the panel rejected the argument that which Congress, by enacting the CSA, has shown an intent to consent to state residency requirements. Had the majority of the panel found such an intention, it would likely have concluded that the residency requirement is consistent with the dormant commerce clause.

The dissent finds the dormant commerce clause inapplicable to a bargain that Congress has lawfully outlawed:

It follows that, in the market for lawful goods and services in the course of interstate commerce, the dormant commerce clause renders unconstitutional the preferential treatment of a state to its residents, in the absence of “the manifestly clear intention of Congress to authorize otherwise discriminatory regulations”. In effect, the law presumes that the public interest is best served by maintaining an unencumbered “competitive national market” for lawful goods and services. . . However, it makes little sense to uphold this presumption when Congress has explicitly acted to render the market in question illegal, since the premise that the Dormant Trade Clause enshrines. . . does not hold. The commerce clause does not recognize the interest in promoting a competitive market for illegal goods or services or in preventing hypothetical interstate rivalries in the same field.

For now, all residency requirements for marijuana businesses (recreational or medical) in states under the jurisdiction of the United States Court of Appeals for the First Circuit (Maine, Massachusetts, New Hampshire, Porto Rico and Rhode Island) are unconstitutional. The dissent suggests that other federal circuit courts may rule the residency restrictions constitutional. Ultimately, if states continue to solve the problem in various ways and come to opposing conclusions regarding the constitutionality of the residency requirements, the Supreme Court may have to solve this problem by providing a single uniform rule regarding the requirements. of residency for marijuana businesses which will be applicable in all states.

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