Washington’s residency requirement upheld in court. . . Once again

The United States District Court for the Western District of Washington (the Court) has affirmed the residency requirement established by the Washington Liquor and Cannabis Board (LCB) in Brinkmeyer v. LCB. The residency requirement, which requires individuals who own or control a licensed business to establish residency six months before applying for a license, barred Todd Brinkmeyer, who resided in Idaho, from owning or investing in a cannabis license in Washington.

The court found that the Dormant Commerce Clause does not apply to Washington’s residency requirement because cannabis remains illegal under federal law. For background information on this case, read our three previous blog posts on the lawsuit:

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Dormant Commercial Clause

The Dormant Commerce Clause is a legal doctrine that prevents states from enacting laws that discriminate against or unduly burden commerce between states. It is based on the US Constitution’s Commerce Clause, which gives Congress the power to regulate trade between states. We’ve written about how the Dormant Commerce Clause was recently enforced to prohibit New York from fully implementing its conditional retail licenses for adult use. Here is a brief summary of the dormant commerce clause case law from this post:

The US Constitution contains a passage commonly referred to as the “Commerce Clause” which provides that “Congress shall have power . . . to regulate trade. . . among the several states[.]The U.S. Supreme Court has long interpreted this clause as containing a corollary or “dormant” commerce clause that prevents states from enacting laws that inhibit trade between states.

In a recent case, Tennessee Wine and Spirits Retailers Association v. Thomas, SCOTUS ruled in 2019 that SCOTUS invalidated a two-year residency requirement for Tennessee liquor retail stores. In applying the DCC to the present case, the Court wrote: “Where a state law discriminates against foreign goods or non-resident economic operators, the law can only be upheld if it is shown to be closely tailored to further a legitimate local purpose. Noting that “Tennessee’s 2-year permanent residency requirement clearly favors Tennesseans over nonresidents, SCOTUS determined that the law was not “narrowly tailored” to advance a legitimate local purpose and declared the Tennessee residency requirement unconstitutional.”

The court began its analysis with Tennessee Wine, distinguishing this case from Brinkmeyer because alcohol is legal under federal law but cannabis is not.

The court also noted that many other federal district courts had found that the Dormant Commerce Clause prohibited cannabis residency requirements, including a decision by the US Court of Appeals for the First Circuit ruling that Maine’s cannabis residency requirements violated the Dormant Commerce Clause . No. patient group v. United Cannabis Patients & Caregivers of Me., 45 F.4th 542 (1st Cir. 2022). In this case, the First Circuit affirmed that Maine’s residency requirement, which is similar to Washington’s, violates the Dormant Commerce Clause of the United States Constitution. However, Maine residency requirements only applied to medicinal cannabis dispensaries.

RELATED: Federal Court upholds Washington state cannabis residency permit

At the federal level, there are limited protections that apply to medical cannabis operations, but not for recreational purposes, most notably the Rohrabacher-Farr Amendment, which prohibits the use of federal funds to keep medical cannabis operators in compliance with state laws pursue. The court found that this line of thinking does not apply to the present case, since Washington has merged its medical and recreational markets:

[T]The Rohrabacher-Farr change only applies to medicinal cannabis markets. It’s unclear what its application would or should be in Washington, where the recreational and medical markets are consolidated.

The court ultimately ruled that the Dormant Commerce Clause does not apply to the Washington cannabis market because that market is illegal under federal law. In finding that the Dormant Commerce Clause was not applicable, the court did not address the issue of whether the residency requirement is narrowly tailored to the pursuit of a legitimate local purpose, meaning that this issue can be examined on appeal if Brinkmeyer chooses to fight in the US Court of Appeals for the Ninth Circuit.

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intention of Congress

The court reasoned that Congress had expressly and unequivocally prohibited the interstate trade in cannabis by listing it in Schedule I of the Controlled Substances Act. The dormant Commerce Clause may not be applied where Congress has expressly failed to exercise its power under the Commerce Clause to regulate the matter in question. The court found that “[t]It is undisputed that Congress exercised its powers under the Commerce Clause in passing the CSA and criminalizing cannabis.” The court further stated:

While Washington’s “legalization” of cannabis is certainly not in line with Congressional intent, residency requirements are. The residency requirements seek to prevent any interstate trade in cannabis and to prevent cannabis from entering states where it remains illegal, such as Washington, from Washington. B. Idaho.

The court rejected the idea that Congress had “essentially legalized” cannabis simply because the Justice Department had prosecutorial discussions not to prosecute state-legal operators for cannabis crimes.

Privileges and immunities clause

The court also ruled in summary judgment on Brinkmeyer’s contention that the residency requirement violated the preferential and immunity clauses of the US Constitution. The Privileges and Immunities Clause is a provision of the United States Constitution found in Article IV, Section 2. It prohibits states from discriminating against citizens of other states by denying them the “privileges and immunities” that it grants to their own citizens.

RELATED: Could residency lawsuits upend social justice over cannabis?

Brinkmeyer argued that Washington’s residency requirement for selling cannabis violates the right to earn a living and the right to travel, which are protected by the preferential and immunity clauses. However, the court found that the right to illicit trade is not an established right under the preferential and exemption clause because the right to commerce that remains illegal at the federal level is not fundamental.

bottom line

The court ruled that:

• The Dormant Commerce Clause did not apply to Washington’s residency requirement because cannabis remains illegal under federal law. The dormant Commerce Clause may not be applied if Congress has not exercised its powers under the Commerce Clause to settle the matter in question.
• Restricting the interstate trade in cannabis was consistent with the intent of Congress and that residency requirements seek to prevent all interstate trade in cannabis and prevent cannabis from entering states where it remains illegal.
• Citizens have no constitutional right to engage in illegal activities.

If this case is appealed, it will go to the United States Court of Appeals for the Ninth Circuit. If the 9th Circuit upholds the ruling, it will likely create a division of the circuit with the First Circuit’s involvement in the residency issue in its Maine case.

It is possible that this case will go before the US Supreme Court. The issue could be moot, however, as Washington lawmakers are considering a bill that would remove the residency requirement from Washington law. We will continue to monitor the situation.

Daniel Shortt is a Seattle, Washington-based corporate and regulatory attorney who works extensively with entrepreneurs in the cannabis industry. You can reach him at info@gl-lg.com or (206) 430-1336. This article originally appeared on the Green Light Law Group and has been republished with permission.