DOJ Files Motion to Dismiss Cannabis Operators’ CSA Lawsuit, Calls it ‘Fruitless’

Attorneys representing the U.S. Department of Justice filed a motion to dismiss a lawsuit challenging the Attorney General’s enforcement of the Controlled Substances Act (CSA), which was filed by a group of state-licensed cannabis operators in Massachusetts in late October.

In its motion to dismiss, DOJ attorneys wrote that the plaintiffs, which include cannabis cultivator and retailer Canna Provisions and multistate operator Verano Holdings, “lack standing to challenge” Attorney General Merrick Garland’s enforcement of the CSA.

A memorandum accompanying the motion, filed Jan. 23 in the U.S. District Court, District of Massachusetts, acknowledges that the federal government is reviewing cannabis’ classification in the CSA as a Schedule I substance – meaning it has “no currently accepted medical use” and a high potential for abuse. The Department of Health and Human Services recently made public its recommendation and rationale to reclassify cannabis to Schedule III, noting that cannabis has acceptable medical uses and a moderate to low risk of physical dependence. The DEA is now reviewing that recommendation and has the final authority to determine if cannabis is rescheduled. 

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

The DOJ’s argument outlined three primary reasons, based on past legal precedent and state and federal statutes, why the complaint should be dismissed, indicating that plaintiffs: “lack standing to challenge the CSA’s prohibition of marijuana activities”; “fail to state a claim that the CSA exceeds Congress’ power under the Commerce Clause and Necessary and Proper Clause”; and “fail to state a claim that the CSA violates substantive due process.”

Josh Schiller, partner at Boies Schiller Flexner LLP, one of the law firms representing the cannabis businesses, told CBT back in November that he and his colleagues worked for more than a year on the complaint, speaking to licensed cannabis business owners, researching and “refining legal theories,” but the inspiration for this CSA challenge goes back much further.

“I was a law student when the Supreme Court held, in the Gonzales v. Raich case, that the federal government could prohibit chronically ill patients from growing marijuana in their own homes for personal use,” Schiller said in an email to CBT about the 2005 decision when the Supreme Court rejected a challenge to the CSA’s cannabis prohibitions, which is cited in the complaint. “For years now, my colleagues and I have been thinking about finding a way to revisit that decision. In particular, with the expansion of legalization throughout the states, we saw a lot of suffering caused by the federal prohibition: businesses suffering from unequal and discriminatory treatment, and consumers and patients suffering from lack of access.”

The representing attorneys, who were also from law firm Lesser, Newman, Aleo & Nasser LLP, noted in an announcement about the lawsuit that, “A critical factor in that decision, Gonzales v. Raich, was that the federal government intended to ‘eradicate’ the market for cannabis nationwide. The court concluded that the federal goal of eliminating commerce in cannabis, combined with the assumption in 2005 that intrastate marijuana could not be differentiated from interstate cannabis, justified the Controlled Substances Act’s prohibitions on intrastate cannabis. Neither of those facts, however, are true today.”  

RELATED: Another Path to Challenge Federal Cannabis Prohibition: Massachusetts cannabis operators and lawyers who filed a lawsuit against the U.S. attorney general over the enforcement of the Controlled Substances Act say they can’t wait—or count on—legislative action for relief. 

The lawsuit calls the federal government’s enforcement of the CSA on state-legal cannabis businesses unconstitutional and unfair. These operators are licensed, regulated, and must adhere to strict guidelines for product testing, distribution, marketing, hiring and much more. Because cannabis is illegal at the federal level, it means cannabis operators can’t take normal tax deductions afforded to other companies, which is not sustainable and hinders their ability to compete with the illicit market.

The DOJ argues in its motion that “Plaintiffs lack standing because they fail to allege that the CSA’s prohibition of marijuana activities has caused them any injury,” and references state cannabis industry revenue figures and laws that allow people 21 and over from the U.S. and Canada to purchase products in the state.

“Plaintiffs claim that the federal government lacks constitutional authority in the CSA to ‘prohibit the intrastate cultivation, manufacture, possession, and distribution of marijuana.’ Yet they do not allege that the Department of Justice has enforced the CSA against them to prohibit them from cultivating, manufacturing, possessing, or distributing marijuana. They do not allege, for example, that the Department of Justice has arrested or prosecuted them for violating the CSA or has seized any of their property,” the DOJ wrote in the motion, noting that in the Raich case, the plaintiff alleged that the federal government had seized and destroyed cannabis plants. “When a challenged law has not yet been enforced against a plaintiff, a plaintiff seeking to establish injury based on the potential for future enforcement must show that the alleged ‘injury is imminent’ … Plaintiffs fail to allege facts showing that the risk of prosecution is substantial. In fact … Plaintiffs allege that Department of Justice currently adheres to a policy . . . not to ‘pursue prosecutions of those who are complying with the laws in states that have legalized and are effectively regulating marijuana.’”

In the lawsuit, cannabis businesses noted the ramifications of the CSA and myriad challenges of operating a state-legal business producing and selling cannabis while it remains illegal at the federal level, including the Small Business Administration’s policy to deny loans, the IRC Section 280E tax code, which prohibits cannabis businesses from taking normal tax deductions, among others.

“However, Plaintiffs do not claim that any of these laws or policies are unconstitutional or exceed the authority of the federal government. A claim that a plaintiff is harmed by one provision does not give thaplaintiff license to challenge the constitutionality of another provision, even where the provisions are interconnected,” DOJ lawyers wrote in the motion to dismiss.

The DOJ also asserts that the fact cannabis businesses are often subject to higher banking interest rates (if they can secure consistent banking at all) and higher insurance premiums is because of decisions made by third party providers, not the government nor the court.

“Plaintiffs lack standing to sue [the Attorney General] based on these choices made by third parties,” DOJ attorneys wrote.

The motion also insisted that the “Commerce Clause grants Congress authority to regulate intrastate marijuana use through enactment of the CSA,” which was upheld in Raich, and that challenging this is “fruitless.”

The DOJ also addressed the portion of the lawsuit that highlights the obvious friction and conflict between state and federal policy, which the plaintiffs note is “irrational.”

“… the Supreme Court has long recognized as rational, and indeed, vital to our system of dual federal and state sovereignty: allowing states to serve as laboratories of democracy.

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