`
`In the
`Supreme Court of the United States
`
`MARVIN WASHINGTON DB, AS PARENT OF INFANT AB
`JOSE BELEN SC, AS PARENT OF INFANT JC AND
`CANNABIS CULTURAL ASSOCIATION, INC.,
`
`
`
`Petitioners,
`
`v.
`
`WILLIAM PELHAM BARR, IN HIS OFFICIAL CAPACITY
`AS UNITED STATES ATTORNEY GENERAL UNITED STATES
`DEPARTMENT OF JUSTICE TIMOTHY J. SHEA, IN HIS OFFICIAL
`CAPACITY AS ACTING DIRECTOR OF THE DRUG ENFORCEMENT
`ADMINISTRATION, UNITED STATES DRUG ENFORCEMENT
`ADMINISTRATION, AND THE UNITED STATES OF AMERICA,
`
`
`
`Respondents.
`
`On Petition for a Writ of Certiorari to the
`United States Court of Appeals for the Second Circuit
`
`BRIEF OF THE NATIONAL ORGANIZATION
`FOR THE REFORM OF MARIJUANA LAWS ET AL. AS
`AMICI CURIAE IN SUPPORT OF PETITIONERS
`
`
`
`
`ANDREW P. SCHRIEVER, ESQ.
`CUDDY & FEDER LLP
`445 HAMILTON AVENUE
`14TH FLOOR
`WHITE PLAINS, NY 10601
`(914) 761 1300
`ASCHRIEVER@CUDDYFEDER.COM
`
`DAVID C. HOLLAND, ESQ.
` COUNSEL OF RECORD
`201 EAST 28TH STREET
`SUITE 2R
`NEW YORK, NY 10016
`(212) 842 2480
`DCH@HOLLANDLITIGATION.COM
`
`SEPTEMBER 14, 2020
`
` COUNSEL FOR AMICI CURIAE
`
`SUPREME COURT PRESS ♦ (888) 958 5705 ♦ BOSTON, MASSACHUSETTS
`
`
`
`i
`
`TABLE OF CONTENTS
`
`Page
`
`TABLE OF AUTHORITIES ....................................... ii
`
`INTEREST OF AMICI CURIAE ................................ 1
`
`SUMMARY OF ARGUMENT .................................... 2
`
`ARGUMENT ............................................................... 4
`
`I.
`
`IS IT FUTILE TO UPHOLD THE SUPREMACY OF
`THE SCHEDULE I STATUS OF CANNABIS UNDER
`THE CSA WHEN EACH BRANCH OF FEDERAL
`GOVERNMENT HAS AFFIRMATIVELY ATTEMP
`TED TO PRESERVE AND PROTECT STATE MEDICAL
`CANNABIS PROGRAMS WHICH NULLIFY THE
`SUPREMACY OF THAT DESIGNATION? ............... 4
`
`A. Supremacy of the Federal Controlled
`Substances Act ............................................ 4
`
`B. The Rise of the Nullification Crisis ............ 5
`
`II. IS THIS “BACKDOOR NULLIFICATION” CRISIS
`THE PROPER SCENARIO FOR THIS COURT TO
`INVOKE THE DOCTRINE OF ESTOPPEL AGAINST
`THE FEDERAL GOVERNMENT IN ORDER TO
`PREVENT DUE PROCESS HARMS AND UNFAIR
`NESS TO PATIENTS AND INDUSTRY PARTICI
`PANTS WHO DETRIMENTALLY RELIED ON
`OFFICIAL ACTS AND STATEMENTS INDUCING
`THEM TO ENGAGE IN ACTIVITIES OTHERWISE
`UNLAWFUL UNDER THE FEDERAL LAW? ............ 17
`
`A. Futility of Administrative Challenges and
`Need to Invoke Estoppel Against the
`Federal Government .................................. 17
`
`B. The Precedent for Estoppel ...................... 19
`
`CONCLUSION .......................................................... 25
`
`
`
`ii
`
`TABLE OF AUTHORITIES
`
`Page
`
`TABLE O F AUTH ORITIES
`
`CASES
`
`Americans for Safe Access v. Drug
`Enforcement Administration,
`706 F.3d 438 (D.C. Cir., 2013),
`cert. denied, 571 U.S. 885,
`134 S.Ct. 267, 187 L.Ed.2d 151 (2013) ............. 18
`
`Cox v. Louisiana,
`379 U.S. 559 (1965) ........................................... 20
`
`Energy Labs, Inc. v. Edwards Engineering,
`Inc., 2015 WL 3504974 4 (N.D. Ill. 2015) ......... 13
`
`Gade v. Nat’l Solid Wastes Mgmt. Ass’n,
`505 U.S. 88 (1992) ............................................... 4
`
`Garcia v. Does,
`779 F.3d 84 (2d Cir. 2015) ................................... 21
`
`Ginsburg v. ICC Holdings, LLC,
`2017 WL 5467688
`(N.D. Tex. Nov. 13, 2017) ................................ 14
`
`Gonzales v. Raich,
`545 U.S. 1, 125 S.Ct. 2195,
`162 L.Ed.2d 1 (2005) ................................... 10, 18
`
`Green Earth Wellness Ctr., LLC
`v. Atain Specialty Ins. Co.,
`163 F. Supp. 3d 821 (D. Colo. 2016) ................. 14
`
`Green Sol. Retail, Inc. v. U.S.,
`855 F.3d 1111 (10th Cir. 2017) ......................... 13
`
`Haeberle v. Lowden,
`2012 WL 7149098 (Colo. Dist. Ct. 2012) .......... 15
`
`
`
`iii
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`Heckler v. Community Health Services,
`467 U.S. 51, 104 S.Ct. 2218,
`81 L.Ed.2d 42 (1984) .......................................... 22
`
`Hillman v. Maretta,
`569 U.S. 483 (2013) .............................................. 4
`
`Hillsborough Cnty., Fla. v. Automated Med.
`Labs., 471 U.S. 707 (1985) ................................. 4
`
`In re Malul,
`614 B.R. 699 (Bankr. D. Colo. 2020) ................. 15
`
`In Re Pharmacann LLC,
`123 U.S.P.Q.2d 1122 (T.T.A.B. 2017) ................... 15
`
`In re Way to Grow, Inc.,
`597 B.R. 111 (Bankr. D. Colo. 2018) ................. 15
`
`INS v. Hibi,
`414 U.S. 5, 94 S.Ct. 19,
`38 L.Ed.2d 7 (1973) ..................................... 22, 23
`
`INS v. Miranda,
`459 U.S. 14, 103 S.Ct. 281,
`74 L.Ed.2d 12 (1982) ......................................... 23
`
`James Stewart & Co. v. Sadrakula,
`309 U.S. 94 (1940) .............................................. 4
`
`Kettler v. U.S.,
`139 S.Ct. 2691 (2019) ........................................ 24
`
`Krumm v. Drug Enforcement
`Administration, 739 Fed. Appx. 655
`(D.C. Cir., Sept. 24, 2018) ................................. 18
`
`Landgraf v. USI Film Productions,
`511 U.S. 244 (1994) ............................................ 20
`
`
`
`iv
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`Mann v. Gullickson,
`2016 WL 6473215
`(N.D. Cal. Nov. 2, 2016) ...................................... 13
`
`McCracken v. Progressive Direct Ins. Co.,
`896 F.3d 1166 (10th Cir. 2018) ......................... 14
`
`Montana v. Kennedy,
`366 U.S. 308, 81 S.Ct. 1336,
`6 L.Ed.2d 313 (1961) ........................................ 22
`
`Montilla v. U.S.,
`457 F.2d 978 (Ct. Cl. 1972) ......................... 19, 21
`
`Office of Pers. Mgmt. v. Richmond,
`496 U.S. 414, 110 S. Ct. 2465,
`110 L.Ed.2d 387 (1990) ............................... 22, 23
`
`Raley v. Ohio,
`360 U.S. 423, 79 S.Ct. 1257,
`3 L.Ed.2d 1344 (1959) ................................... 20, 24
`
`Sandusky v. Goetz,
`944 F.3d 1240 (10th Cir. 2019) ........................... 13
`
`Schweiker v. Hansen,
`450 U.S. 785, 101 S.Ct. 1468,
`67 L.Ed.2d 685 (1981) ....................................... 23
`
`Suzanne Sisley, M.D. et. al., v. U.S. Drug
`Enforcement Administration, et. al.,
`No. 20 71433 (9th Cir., August 18, 2020) ......... 18
`
`U.S. v. Blood,
`435 F.3d 612 (6th Cir. 2006) ............................. 20
`
`U.S. v. Canori,
`787 F.3d 181 (2nd Cir. 2013) ........................ 5, 10
`
`
`
`v
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`U.S. v. Cox,
`906 F.3d 1170 (10th Cir. 2018),
`cert. denied, 139 S.Ct. 2690,
`204 L.Ed.2d 1090 (2019) .................................... 24
`
`U.S. v. Giffen,
`473 F.3d 30 (2nd Cir. 2006) ................................ 20
`
`U.S. v. McIntosh,
`833 F.3d 1163 (9th Cir. 2016) ....................... 12, 25
`
`U.S. v. Oakland Cannabis
`Buyers’ Cooperative, 532 U.S. 483,
`121 S.Ct. 1711, 149 L.Ed.2d 722 (2001) ........... 17
`
`U.S. v. Ormsby,
`252 F.3d 844 (6th Cir. 2001) ............................... 20
`
`U.S. v. Pennsylvania Industrial Chemical
`Corp. (PICCO), 411 U.S. 655 (1973) ............. 21, 24
`
`U.S. v. Pisarski,
`965 F.3d 738 (9th Cir. 2020) ............................. 13
`
`U.S. v. Washington,
`887 F.Supp.2d 1077 (D.Mont.), adhered to
`on reconsideration, 2012 WL 4602838
`(D. Mont. October 2, 2012) ................................. 23
`
`Washington v. Barr,
`No. 18 859 (2d Cir. 2019) .................................... 2
`
`CONSTITUTIONAL PROVISIONS
`
`U.S. Const. Art. II, § 3 ................................................ 5
`
`U.S. Const., Art. VI, cl. 2 ............................................ 4
`
`
`
`vi
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`STATUTES
`
`21 U.S.C. § 811(a)(1) .................................................... 5
`
`21 U.S.C. § 811(a)(2) .................................................... 5
`
`21 U.S.C. § 812 ......................................................... 5, 6
`
`21 U.S.C. § 841 .................................................... 13, 18
`
`21 U.S.C. § 903 ............................................ 5, 6, 16, 24
`
`CA Health & Safety Code § 11350 ................................ 6
`
`Hart Scott Rodino Antitrust
`Improvements Act of 1976 .................................. 8
`
`JUDICIAL RULES
`
`Sup. Ct. R. 37 .............................................................. 1
`
`REGULATIONS
`
`21 C.F.R. 1301 ........................................................... 24
`
`Fed Register,
`Vol. 156, 53688 (Aug. 12, 2016) ........................ 24
`
`LEGISLATIVE MATERIALS
`
`H.R. 1158 (2020) ....................................................... 11
`
`H.R. 4378 (2019) ....................................................... 11
`
`H.R. 4660 (Rohrabacher) 2015 .................................. 10
`
`MORE Act of 2019–H.R. 3884 ................................... 11
`
`SAFE Act–H.R. 1468 (2019) ..................................... 11
`
`STATES Act–H.R.2093 (2019) ................................. 11
`
`
`
`vii
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`GOVERNMENT PUBLICATIONS
`
`David Ogden,
`Department of Justice, Memorandum for
`Selected United States
`Attorneys–Investigations and Prosecution
`in States Authorizing the Medical Use of
`Marijuana, https //www.justice.gov/sites/
`default/files/opa/legacy/2009/10/19/
`medical marijuana.pdf ........................................ 6
`
`Department of Justice,
`Press Release, https //www.justice.gov/
`opa/pr/justice department issues memo
`marijuana enforcement ....................................... 7
`
`Department of the Treasury,
`Guidance Subject BSA Expectations
`Regarding MarijuanaRelated
`Businesses, FIN 2014 G001, https //
`www.FinCEN.gov/resources/statutes
`regulations/guidance/bsa expectations
`regarding marijuana related businesses .......... 7
`
`James Cole,
`Department of Justice, Memorandum for
`All United States Attorneys–Guidance
`Regarding Marijuana Enforcement,
`https //www.justice.gov/iso/opa/resources/
`3052013829132756857467.pdf ............................ 7
`
`
`
`
`
`
`
`viii
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`OTHER AUTHORITIES
`
`Cresco Labs,
`Press Release, https //www.
`newcannabisventures.com/cresco labs
`cannabis acquisition clears department
`of justice initial waiting period without
`second request/ .................................................... 8
`
`David Downs,
`Historic House Vote to Legalize
`Marijuana Expected This Month, Leafy,
`https //www.leafly.com/news/politics/
`marijuana legalization more act news ............. 11
`
`Jonathan Cooper,
`DOJ Allows MedMen to Buy
`PharmaCannGreat News for Origin
`House
`Sep. 11, 2019 https //seekingalpha.com/
`article/4291015 doj allows medmen to
`buy pharmacann great news for origin
`house .................................................................... 8
`
`Kyle Jagger,
`Marijuana Moment, January 15, 2019
`https //www.marijuanamoment.net/
`trump attorney general nominee pledges
`not to go after legal marijuana
`businesses/ ........................................................... 9
`
`Marijuana Moment,
`Marijuana Legislation Tracking, https //
`www.marijuanamoment.net/bills/ .................... 11
`
`
`
`ix
`
`TABLE OF AUTHORITIES – Continued
`
`Page
`
`Michael Walsh,
`Yahoo News, https //news.yahoo.com/barr
`signals support ending marijuana
`legalization 212041886.html .............................. 9
`
`Niall McCarthy,
`Which States Made the Most Tax
`Revenue from Marijuana in 2018?,
`Forbes, https //www.forbes.com/sites/
`niallmccarthy/2019/03/26/which states
`made the most tax revenue from
`marijuana in 2018 infographic/
`#7547293b7085 .............................................. 2, 25
`
`Robert J. Reinstein,
`The Limits of Executive Power,
`59 Am. U. L. Rev. 259 (2009) .............................. 5
`
`World Population Review,
`https //worldpopulationreview.com/state
`rankings/states with medical marijuana ........... 6
`
`
`
`
`
`
`
`
`
`1
`
`
`
`INTEREST OF AMICI CURIAE 1
`
`National Organization for the Reform of Marijuana
`Laws (NORML) and Empire State NORML
`
`The mission of NORML, a not for profit corpora
`tion, and its New York State affiliate, is to advocate
`for public policy changes so responsible possession
`and use of marijuana by adults is no longer subject to
`criminal penalties. NORML further advocates for a
`regulated commercial cannabis market so that activi
`ties involving the for profit production and retail sale
`of cannabis products are safe, transparent, consumer
`friendly, and subject to state and/or local licensure.
`NORML advocates for additional legal and regulatory
`policy changes so those who use marijuana respon
`sibly no longer face social stigma or workplace dis
`crimination, and so those with past criminal records
`for marijuana related violations can have their records
`automatically expunged.
`
`New York City Cannabis Industry Association
`(NYCCIA) and Hudson Valley Cannabis Industry
`Association (HVCIA)
`
`The NYCCIA and HVCIA are affiliated regional
`not for profit organizations which foster dialogue,
`develop policy, and rules for the self governance of the
`anticipated cannabis market in New York City and the
`Hudson Valley.
`
`1 Pursuant to Supreme Court Rule 37, all parties consent to the
`filing of this amici curiae brief. No part of this brief was authored
`by counsel for any party, and no person or entity other than amici
`curiae and its counsel made a monetary contribution towards
`the submission of this brief.
`
`
`
`2
`
`New York Cannabis Bar (“Cannabar”)
`
`Cannabar was an unincorporated think tank
`focused on challenging the classification of cannabis
`under the federal Controlled Substances Act. It was
`the genesis of the challenge in Washington v. Barr.
`
`
`
`SUMMARY OF ARGUMENT
`
`A supremacy and nullification crisis has loomed
`for the past 24 years with regard to the 34 States
`that implemented some form of cannabis legalization
`program despite its prohibited Schedule I designation
`under the federal Controlled Substances Act (here
`inafter, “CSA”). This crisis has been fomented by all
`branches of government. Each have made statements
`and taken actions to protect and further the state
`cannabis programs despite federal illegality. States
`have passed cannabis regulations that defy federal
`supremacy. Since 2014, Congress began passing
`spending appropriations amendments handcuffing the
`Executive branch and federal law enforcement from
`using federal funds to investigate and prosecute
`state compliant cannabis patients and providers. As a
`positive result of this nullification crisis, hundreds of
`thousands of jobs have been created in state cannabis
`industries, with billions in revenue generated.2
`
`The Second Circuit Court of Appeals did not
`believe in 2013 that United States Department of
`
`2 https //www.forbes.com/sites/niallmccarthy/2019/03/26/which
`states made the most tax revenue from marijuana in 2018
`infographic/#7547293b7085
`
`
`
`3
`
`Justice prosecutorial guidance memoranda created a
`de facto rescheduling of cannabis or a constitutional
`crisis. However, in 2019, Attorney General Barr, during
`his confirmation hearings, directly identified his
`concerns about it. For him, the guidance memoranda,
`the spending appropriations amendments which were
`signed into law by the Executive, and the federal
`judicial rulings upholding them created a “backdoor
`nullification” of federal law. Barr testified that while
`personally opposed to legalizing cannabis, he believed
`it unfair and vowed not to retroactively prosecute
`patients and industry participants who in good faith
`relied upon federal officials’ statements and actions
`that they would not interfere with state legal cannabis
`programs despite the conflict with federal law.
`
`This nullification crisis rejected by the Second
`Circuit yet, articulated by Attorney General Barr, must
`be resolved. Rather than letting future political whims
`undo the efforts of the three coordinate branches of
`federal government to protect and promote state
`cannabis programs, this Court should, as a matter of
`fairness and Due Process, invoke estoppel against
`the federal government to prevent injustice through
`retroactive prosecution of those who detrimentally
`relied on such statements and violated federal law.
`Invocation of estoppel would end this constitutional
`crisis and cede the power to regulate cannabis to the
`states as the federal government has effectively
`attempted to do through nullification for more than
`two decades.
`
`
`
`4
`
`
`
`ARGUMENT
`
`I.
`
`IS IT FUTILE TO UPHOLD THE SUPREMACY OF THE
`SCHEDULE I STATUS OF CANNABIS UNDER THE CSA
`WHEN EACH BRANCH OF FEDERAL GOVERNMENT
`HAS AFFIRMATIVELY ATTEMPTED TO PRESERVE AND
`PROTECT STATE MEDICAL CANNABIS PROGRAMS
`WHICH NULLIFY THE SUPREMACY OF THAT
`DESIGNATION?
`
`A. Supremacy of the Federal Controlled Substances
`Act
`
`The Supremacy Clause of the United States Con
`stitution promotes national uniformity by precluding
`state law from interfering with the enforcement of
`federal law. U.S. Const., art. VI, cl. 2. It gives Con
`gress the power to preempt state law if it is found to
`be in conflict with federal law. Hillman v. Maretta, 569
`U.S. 483 (2013). “Where enforcement of . . . state law
`would handicap efforts to carry out the plans of
`the United States, the state enactment must . . . give
`way.” James Stewart & Co. v. Sadrakula, 309 U.S.
`94, 103 104 (1940). To avoid a constitutional crisis,
`where “compliance with both federal and state regu
`lations is a physical impossibility,” the “state law is
`nullified to the extent that it actually conflicts with fed
`eral law.” Hillsborough Cnty., Fla. v. Automated Med.
`Labs., 471 U.S. 707, 713 (1985) See, Gade v. Nat’l
`Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98 (1992).
`
`The CSA is a series a federal statutes that organ
`izes controlled substances into five schedules based on
`(1) their potential for abuse, (2) their accepted medical
`
`
`
`5
`
`uses, and (3) their accepted safety for use under medical
`supervision and potential for psychological or physical
`dependence. See 21 U.S.C. § 812. Cannabis was placed
`in Schedule I, “ . . . the most restrictive of the five
`schedules, the violation of which may result in criminal
`penalties.” U.S. v. Canori, 787 F.3d 181, 183 (2nd Cir.
`2013).
`
`The classification of any drug under the CSA is
`not permanent. Congress may amend it at any time,
`and the Attorney General is empowered to reschedule
`it (21 U.S.C. § 811(a)(1)) or de schedule it entirely upon
`finding that it lacks the requirements for inclusion. 21
`U.S.C. § 811(a)(2). Congress did not intend to com
`pletely occupy the field of controlled substance regu
`lation to the exclusion of any state law. State laws
`may operate provided that the Attorney General does
`not find a “positive conflict” between it and the CSA
`such “that the two cannot consistently stand together”
`requiring complete preemption of the state law. 21
`U.S.C. § 903.
`
`B. The Rise of the Nullification Crisis
`
`1. Acts of the Executive Branch
`
`While the Executive Branch, headed by the Presi
`dent, is charged with the duty to “faithfully execute the
`laws of the United States” U.S. Constitution, Article
`II, § 3, it has not done so with regard to state can
`nabis programs. “Dispensing power” occurs when the
`Executive, rather than “faithfully executing” the law,
`instead attempts to bypass or suspend legal prohib
`itions imposed by it.” See, Robert J. Reinstein, The
`Limits of Executive Power, 59 Am. U. L. Rev. 259, 278
`279 (2009). Such dispensing of power has been the
`
`
`
`6
`
`catalyst to the nullification crisis caused by state can
`nabis programs.
`
`The crisis started in 1996 when the Executive
`branch failed to preempt California’s Proposition 215,
`the “Compassionate Use Act”, which established the
`country’s first medical cannabis program. California
`Health and Safety Code § 11350, et. seq. State sanction
`of cannabis as a form of medical intervention subverts
`the Schedule I finding that is has, “no currently
`accepted medical use in the United States.” 21 U.S.C.
`§ 812. Thirty three states have established medical
`cannabis programs since 19963. However, Congress
`and the Executive branch have chosen to stand pat
`to allow the continued nullification of the Schedule I
`designation of cannabis rather than preempt those
`programs.
`
`Since 1996, no Attorney General, the nation’s Chief
`law enforcement officer, has invoked 21 U.S.C. § 903
`finding a “positive conflict” between the CSA and
`state cannabis programs. In 2009, the Justice Depart
`ment’s “Ogden Memorandum” gave guidance to federal
`prosecutors in districts within medical cannabis states
`advising them to conserve resources and refrain from
`pursuing medical patients who were compliant with
`state cannabis laws.4 That guidance was enhanced
`by in 2013 by the “Cole Memorandum” which advised
`federal prosecutors not to investigate or prosecute
`
`3 https //worldpopulationreview.com/state rankings/states
`with medical marijuana
`
`4 Memorandum for Selected United States Attorneys–Investi
`gations and Prosecution in States Authorizing the Medical Use
`of Marijuana, https //www.justice.gov/sites/default/files/opa/legacy/
`2009/10/19/medical marijuana.pdf
`
`
`
`7
`
`compliant medical cannabis operators.5 While the
`guidance memoranda did not dispense power to the
`states, they did exemplify the commitment of the
`Executive branch to allow state cannabis programs
`to persist without interference. Due to the proliferation,
`the industry’s commercial needs required guidance
`for federally regulated banks to facilitate cannabis
`related transactions. In 2014, the “FinCEN Memoran
`dum” advised banks that, subject to guidance criteria
`and transparency, they could do so without fear of
`violating money laundering or other federal criminal
`statutes.6
`
`On January 4, 2018, Attorney General Sessions
`repealed the Cole Memo stating
`
`“ . . . today’s memo on federal marijuana
`enforcement simply directs all U.S. Attorneys
`to use previously established prosecutorial
`principles that provide them all the necessary
`tools to disrupt criminal organizations, tackle
`the growing drug crisis, and thwart violent
`crime across our country.”7
`
`Despite Session’s recission, in 2019, the Justice
`Department’s Anti Trust Division approved the merger
`of multi state operators making them some of the
`
`5 Memorandum for All United States Attorneys–Guidance
`Regarding Marijuana Enforcement, https //www.justice.gov/iso/
`opa/resources/3052013829132756857467.pdf
`
`6 Guidance Subject BSA Expectations Regarding Marijuana
`Related Businesses, FIN 2014 G001 https //www.FinCEN.gov/
`resources/statutes regulations/guidance/bsa expectations
`regarding marijuana related businesses
`
`7 https //www.justice.gov/opa/pr/justice department issues
`memo marijuana enforcement
`
`
`
`8
`
`largest cannabis related businesses in the United
`States despite nullifying the supremacy of the CSA.8
`
`Sessions sent shock waves through the state
`cannabis industries. Participants feared that their
`detrimental reliance upon the actions and pronounce
`ments of federal officials prompting their entrance
`into state programs despite federal illegality may have
`imperiled their liberty investments. Those concerns
`registered with Congressional members whose constit
`uents were impacted. It became a focal point of then
`Attorney General Nominee, William Barr’s confirm
`ation hearings.
`
`Senator Cory Booker inquired about the nominee’s
`thoughts on his predecessor’s rescission. Mr. Barr
`responded “ . . . it was important not to upset the
`interests and expectations of the businesses and
`
`8 DOJ Allows MedMen to Buy PharmaCannGreat News for
`Origin House, Sep. 11, 2019 https //seekingalpha.com/article/
`4291015 doj allows medmen to buy pharmacann great news
`for origin house
`
`“CHICAGO October 30, 2019 (BUSINESS WIRE)–
`Cresco Labs . . . one of the largest vertically integrated
`multistate cannabis operators in the United States,
`today announced the expiration of the waiting period
`under the Hart Scott Rodino Antitrust Improvements
`Act of 1976 . . . in respect to Cresco Labs’ pending
`acquisition of Tryke Companies (“Tryke”) (the
`“Transaction”). The waiting period, during which the
`Transaction could not be completed, expired without
`the issuance of a so called “second request” by the
`United States Department of Justice Antitrust Division
`(the “DOJ”).”
`
`https //www.newcannabisventures.com/cresco labs cannabis
`acquisition clears department of justice initial waiting period
`without second request/
`
`
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`9
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`investors who have entered the legal marijuana
`industry.” He furthered “I said I’m not going to go after
`companies that have relied on the Cole memoran
`dum.”9 Mr. Barr was articulating Due Process and
`fairness concerns in not wanting to retroactively
`prosecute those who in good faith entered into state
`medical cannabis industries based upon prior federal
`statements, actions, and abstinence from enforcing
`the supremacy of the CSA.
`
`Mr. Barr testified about the undeniable constitu
`tional conflict stating “However, I think the current
`situation is untenable and really has to be addressed.
`It’s almost like a backdoor nullification of federal
`law.”10 Questioned further about the “backdoor nullifi
`cation” Senator Booker asked “Do you think it’s appro
`priate to use federal resources to target marijuana
`businesses that are compliant with state law?” to which
`Mr. Barr responded “No”.11 He further explained that
`“ . . . to the extent that people are complying with the
`state law’s distribution and production and so forth,
`we’re not going to go after that. But I do feel we can’t
`stay in the current situation.” He testified that the
`nullification was “ . . . breeding disrespect for the fed
`eral law.”12
`
`9 https //news.yahoo.com/barr signals support ending marijuana
`legalization 212041886.html See also, Kyle Jagger, Marijuana
`Moment, January 15, 2019, https //www.marijuanamoment.net/
`trump attorney general nominee pledges not to go after legal
`marijuana businesses/
`
`10 Id.
`
`11 Id.
`
`12 Id.
`
`
`
`10
`
`This crisis identified by Attorney General Barr was
`not recognized six years earlier in U.S. v. Canori,
`787 F.3d 181 (2nd Cir. 2013). There, the Second Circuit
`Court of Appeals held that the Ogden and Cole pros
`ecutorial guidance memoranda did not have the force
`of law and did not cause a “de facto rescheduling” of
`marijuana–thus, no constitutional crisis had been
`created. Id. at 183. But, since 2013, each of the three
`branches of federal government, despite the separation
`of powers doctrine, have made statements and taken
`affirmative actions to assist the other in directly and
`collaterally protecting and promoting those state
`regulated cannabis programs.
`
`2. Acts of Congress
`
`Because of supremacy, Congress through the
`“commerce clause” can preempt all state cannabis
`programs and criminalize the conduct of patients and
`market participants. See, Gonzales v. Raich, 545
`U.S. 1, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005). In 2014,
`however, Congress took a different tack passing the
`“Rohrbacher Farr Amendment” to the Commerce,
`Justice, Science, and Related Agencies Appropriations
`Act, 2015 (H.R. 4660). The Amendment prohibited
`the federal law enforcement from using federal funds
`to investigate and prosecute state compliant medical
`cannabis operators and patients. That Amendment
`was signed into law by President Obama on December
`16, 2014. It was extended as the “Rohrbacher Blum
`enauer Amendment” by means of Consolidated Appro
`priations Act of 2016 (a/k/a the 2016 Omnibus Spend
`ing Bill, Pub. L. 114 113), signed into law on December
`18, 2015. Further extensions have been in the Consol
`idated Appropriations Act 2018 (a/k/a the 2018 Omni
`bus Spending Bill, Pub. L. 115 141) signed by President
`
`
`
`11
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`Trump on March 23, 2018, and extended again by
`him to November 21, 2019 (H.R. 4378). On December
`20, 2019, President Trump signed the “Consolidated
`Appropriations Act, 2020” (H.R. 1158), which is in
`effect today.
`
`According to Marijuana Moment, as of September
`9, 2020, there are more than 1,544 bills pending before
`state and federal legislatures to promote, protect,
`and/or establish legalized cannabis programs.13 Pend
`ing before various committees of Congress are
`
`a. The Marijuana Opportunity Reinvestment
`and Expungement Act (MORE Act of 2019–
`H.R. 3884)–Due for full House vote in Sep
`tember, 202014
`
`b. The Strengthening the Tenth Amendment
`Through Entrusting States Act (STATES Act,
`H.R. 2093 of 2019)
`
`c. The Secure and Fair Enforcement Act
`(SAFE Act of 2019–H.R. 1468)
`
`Given the discourse taking place in Congress to
`protect and promote state cannabis programs through
`spending appropriations restrictions and bills to
`strengthen state’s rights over them, it is quixotic
`why Congress chooses to proceed only half way in
`efforts to legalize cannabis rather than simply de
`schedule it. That is why invocation of the doctrine of
`estoppel is needed to end the nullification crisis and
`to protect those who relied on the guidance of federal
`
`13 https //www.marijuanamoment.net/bills/
`
`14 https //www.leafly.com/news/politics/marijuana legalization
`more act news
`
`
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`12
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`officials and agencies and engaged in the cannabis
`space despite federal illegality.
`
`3. Acts of the Judiciary
`
`With cannabis programs flourishing in the
`majority of the United States, Courts must grapple
`with the constitutional crisis across a kaleidoscopic
`range of contexts.
`
`In the context of criminal law, the Rohrbacher Farr
`Amendment’s handcuffing of federal law enforcement
`by prohibiting federal prosecution of state compliant
`individuals and businesses was upheld in U.S. v.
`McIntosh, 833 F.3d 1163 (9th Cir. 2016). There, the
`Ninth Circuit Court of Appeals stated
`
`“[Department of Justice] is currently prohi
`bited from spending funds from specific appro
`priations acts for prosecutions of those who
`complied with state law. But Congress could
`appropriate funds for such prosecutions
`tomorrow. Conversely, this temporary lack
`of funds could become a more permanent lack
`of funds if Congress continues to include the
`same rider in future appropriations bills.”
`U.S. v. McIntosh, 833 F.3d at 1179.
`
`The McIntosh Court’s pointing out the potential
`for shifting political sands regarding federal cannabis
`tolerance is akin to what Attorney General Barr was
`alluding to in his confirmation testimony.
`
`The Ninth Circuit reiterated the legitimacy of
`Congress limiting the ability of the Executive branch
`to faithfully execute the laws stating that
`
`“ . . . Congress passed the Consolidated and
`
`
`
`13
`
`Further Continuing Appropriations Act of
`2015 (“Appropriations Act of 2015”), which
`put the kibosh on all expenditures of federal
`prosecutions for marijuana use, possession,
`or cultivation if the defendant complied
`with the state’s medical marijuana laws.”)
`U.S. v. Pisarski, 965 F.3d 738, 740 (9th Cir.
`2020).
`
`Likewise, the Tenth Circuit Court of Appeals has
`stated that
`
`“Despite its legalization in” numerous states
`and Washington, D.C. “for medical use” and
`in a number of states “for recreational use,
`marijuana is still classified as a federal ‘con
`trolled substance’ under schedule I of the
`Controlled Substances Act.” The United
`States Department of Justice, however, “has
`declined to enforce [21 U.S.C.] § 841 when a
`person or company buys or sells marijuana
`in accordance with state law.”
`
`Sandusky v. Goetz, 944 F.3d 1240, 1242 (10th Cir.
`2019), quoting, Green Sol. Retail, Inc. v. U.S., 855 F.3d
`1111, 1113 14 (10th Cir. 2017)
`
`In commercial litigation, courts have alluded to
`the nullification crisis, but declined to address it
`head. In Mann v. Gullickson, the District Court upheld
`contractual payment obligations of a cannabis busi
`ness purchaser since the transaction could be accomp
`lished without violating the CSA. 2016 WL 6473215
`at *7 (N.D. Cal. Nov. 2, 2016). Likewise, in Energy
`Labs, Inc. v. Edwards Engineering, Inc., the District
`Court required defendants to follow through with the
`purchase of air conditioning units to be specifically
`
`
`
`14
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`used for a cannabis cultivation because fulfilling that
`obligation was not a violation of the CSA. 2015 WL
`3504974 at *4 (N.D. Ill. 2015). Similarly, in Ginsburg
`v. ICC Holdings, LLC, the District Court upheld
`Defendant’s obligations to pay sums certain due on
`promissory notes related to the acquisition of a
`cannabis business because the payments under the
`notes were not derived from the profits of the cannabis
`business. 2017 WL 5467688 (N.D. Tex. Nov. 13,
`2017).
`
`Regarding insurance, the District Court in Green
`Earth Wellness Ctr., LLC v. Atain Specialty Ins. Co.,
`dismissed an insurer’s argument that it had no obli
`gation to pay damage claims related to the insured’s
`cannabis business because the contract was void as a