Residence requirements for cannabis licensees (who are stupid) are likely to be unconstitutional

One interesting thing about the cannabis law is how much of it relates to the “first principles” or fundamental principles of the US Constitution. We lawyers spend our days signing deals and suing people (always for good reason) and defending clients in legal proceedings (which are always BS), so we rarely go back to first principle.

But these principles contain massively important things such as legal conflicts that arise from the Supremacy Cause of the constitution (in favor of the federal government) compared to the “reserved” rights of the states according to the Tenth Amendment. In the case of today’s blog post, the constitutional issue is the Dormant Trade Clause (“DCC”) related to cannabis residence requirements. A federal court in Missouri just frozen those requirements.

Photo by Kevork Djansezian / Getty Images

Before I go any further, I want to confirm that I am not a litigator and certainly not a great constitutional lawyer. The next thing I get closest to any of these things is: 1) writing hard letters before handing a file to one of the very smart litigators we fortunately have at the law firm, and 2) taking a course on cannabis law and – politics to teach here at the local law school. Otherwise, I mainly advise people on business matters and help them solve problems out of court.

Anyway, the dormant trade clause (“DCC”) is a fascinating little legal issue that we’ve been nibbling on on this blog since 2015 at least. The DCC comes from the US constitution, but is not actually written there. Instead, the DCC is a legal doctrine that courts have derived from the (non-dormant) trade clause in Article I. In short, the DCC prohibits state laws that discriminate against interstate or international trade. Our favorite example? Residency requirements in the case of owning cannabis businesses.

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Aside from these nativist requirements being legally questionable, our position in general has been that residence restrictions are a bad idea. They are terribly difficult to write (and often by lawyers with no business knowledge); they are more difficult to enforce; and they rarely achieve the desired protectionist results. People play it like crazy! However, if you want to prevent someone from taking out a loan from their overseas grandmother to start a small business, or if you want to ensure that minority communities with limited access to capital have even less chance of success, then the reside permit is the requirements are great in my opinion.

In general, when we work in resident states (like Washington), we’ve found that there is simply more work to do for lawyers and regulators while the industry suffers. In my view, Oregon was basically a fiasco until the residency requirements were abolished in 2016. Everyone should follow suit. Eventually they will. Finally, the requirements of the cannabis program will go the way of the federal cannabis ban.

Photo by Cavan Images / Getty Images

Anyway, back to that federal court ruling. Given what I wrote above, I was glad that this important decision was made a few days ago. On June 21, the US District Court for the western district of Missouri, Central Division, provisionally banned (blocked) the local regulator from enforcing the ill-conceived 51% residency requirement for that state. The court’s rationale is that Mark Togo, the plaintiff seeking residency waiver, is likely to prevail at the end of this lawsuit on DCC grounds. As a result of this decision, the Missouri Department of Health and Human Services (DHSS) is not permitted to enforce the residency requirement against Mr. Togo or anyone else until the case is fully resolved or resolved.

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I would be interested to know whether DHSS is pursuing the time-honored management strategy of slow-walking transactions while a lawsuit is pending, or whether the agency is stepping back from this bozo rule. The latter approach is what Maine pursued last year. This state was also sued based on a DCC theory regarding its residency requirement. In response, the state decided (on the advice of its lawyers) to stop enforcing the residence permit altogether. Presumably, Maine is now like Oregon or California or Nevada or any of the other common sense states that don’t discriminate against their neighbors.

Will the Missouri lawsuit ultimately succeed? Hard to say. As I said earlier, the ruling looks promising as the court believes that Mr Togo is likely to prevail (and the court only requested that he leave a $ 10,000 bond, which is minor in that regard). That is, other plaintiffs in other states have failed. In Oklahoma, for example, a federal judge recently dismissed one of these DCC lawsuits by a Washington plaintiff, ruling that the state was protected from the lawsuit by the Eleventh Amendment. So it is possible that we are waiting for a circuit break, as the litigators say.

We will keep you up to date on this interesting topic. In the meantime, check out the following blog posts for more information on cannabis and the dormant trade clause:

Vince Sliwoski is an attorney with Harris Bricken, a law firm with attorneys in Seattle, Portland, Los Angeles, San Francisco, Barcelona, ​​and Beijing. This story was originally published on the Canna Law Blog and was republished with permission.