NORTHEAST PATIENTS GROUP, et al., Plaintiffs, v. MAINE DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES, et al., Defendants.
Docket No. 1:20-cv-00468-NT
UNITED STATES DISTRICT COURT
August 11, 2021
ORDER ON CROSS-MOTIONS FOR JUDGMENT
Plaintiffs High Street Capital Partners, LLC (“High Street“) and Northeast Patients Group d/b/a Wellness Connection of Maine (“Wellness Connection“) allege that Maine‘s medical marijuana licensing program violates the dormant Commerce Clause by restricting licenses to residents and resident-owned entities. The Plaintiffs have sued the Maine Department of Administrative and Financial Services (“the Department” or “DAFS“) and the Department‘s Commissioner, Kirsten Figueroa.1 Both parties have moved for judgment on a stipulated record (ECF Nos. 14 and 17). I held oral argument via videoconference on July 16, 2021 (ECF No. 25). For the reasons set forth below, the Plaintiffs’ motion is DENIED as to the Department and GRANTED as to Commissioner Figueroa, and the Defendants’ motion is DENIED.
BACKGROUND
In 2009, the Maine Legislature amended the State‘s existing medical marijuana law to establish a comprehensive system authorizing the sale of medical marijuana. Defs.’ Opp‘n to Pls.’ Mot. for J. on the Record and Cross-Mot. for J. on the Record (“Defs.’ Mot.“) 2 (ECF No. 17). The current iteration of the law—the Maine Medical Use of Marijuana Act (the “Act“)—authorizes qualified patients who have a certification from a medical provider for the medical use of marijuana to possess, use, and purchase medical marijuana. Defs.’ Mot. 3;
Although dispensaries can grow more marijuana plants, they are restricted in other ways, including the restriction that is at the center of this case. The Act provides that “[a]ll officers or directors of a dispensary2 must be residents of this State,” (the “Dispensary Residency Requirement“).
Plaintiff High Street is a Delaware limited liability company entirely owned by residents of states other than Maine. Joint Stipulation of the Record (“Record“) ¶ 1 (ECF No. 13-1). Plaintiff Wellness Connection owns and operates three of the seven registered dispensaries in Maine‘s medical marijuana program. Record ¶ 2. From June of 2010 until March of 2020, Wellness Connection operated as a mutual benefit nonprofit corporation without any equity ownership, but when Maine changed its law in 2020 to allow dispensaries to become for-profit companies, Wellness Connection converted to a for-profit corporation and is currently wholly owned by three Maine residents. Record ¶¶ 3-5. High Street states that it would purchase all of the equity in Wellness Connection if the Dispensary Residency Requirement did not prohibit it from doing so.
The Plaintiffs sued the Department—which is responsible for implementing, administrating, and enforcing the Act—and Kirsten Figueroa, who is the Commissioner of DAFS. See Record ¶¶ 7-8. The Plaintiffs allege that the Dispensary Residency Requirement violates the dormant Commerce Clause because it explicitly discriminates against residents of other states and Maine cannot show a legitimate local purpose for the requirement.
United Cannabis Patients and Caregivers of Maine (“United Cannabis“) intervened in this case. (ECF Nos. 11, 16.) United Cannabis opposes the Plaintiffs’ motion for judgment and partially opposes the Defendants’ motion. See ECF Nos. 20, 22.
LEGAL STANDARD
The Commerce Clause empowers Congress “[t]o regulate Commerce . . . among the several States.”
To this end, a state or local law that “discriminates on its face against interstate commerce, whether in purpose or effect, demands heightened scrutiny.” Wine & Spirits Retailers, 481 F.3d at 10. I must invalidate such a law “unless it furthers a legitimate local objective that cannot be served by reasonable non-discriminatory means.”3 Id. at 10-11; see also Tenn. Wine & Spirits Retailers Ass‘n v. Thomas, 139 S. Ct. 2449, 2461 (2019) (“[A] state law [that] discriminates against out-of-state goods or nonresident economic actors . . . can be sustained only on a showing that it is narrowly tailored to advance a legitimate local purpose.“) (internal quotations omitted and alterations adopted). The plaintiff bears the initial burden of showing discrimination, but the state or local government bears the burden of identifying legitimate local purposes and establishing a lack of non-discriminatory alternatives. Family Winemakers of Cal. v. Jenkins, 592 F.3d 1, 9 (1st Cir. 2010).
Importantly, congressional action can alter the application of the dormant Commerce Clause. As the Supreme Court recently stated, “[d]ormant Commerce Clause restrictions apply only when Congress has not exercised its Commerce Clause power to regulate the matter at issue.” Tenn. Wine & Spirits Retailers Ass‘n, 139 S. Ct. at 2465. Thus, Congress “may use its powers under the Commerce Clause to ‘[confer] upon the States an ability to restrict the flow of interstate commerce that they would not otherwise enjoy.’ ” New England Power Co. v. New Hampshire, 455 U.S. 331, 340 (1982) (alteration in original) (quoting Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 44 (1980)). The standard for finding such congressional consent is “high,” and the state has the burden of demonstrating Congress‘s “unmistakably clear intent to allow otherwise discriminatory regulations.” United Egg Producers v. Dep‘t of Agric. of P.R., 77 F.3d 567, 570 (1st Cir. 1996); see also Maine v. Taylor, 477 U.S. 131, 138-39 (1986) (“[B]ecause of the important role the Commerce Clause plays in protecting the free flow of interstate trade, this Court has exempted state statutes from the implied limitations of the Clause only when the congressional direction to do so has been ‘unmistakably clear.’ “); Tri-M Grp., LLC v. Sharp, 638 F.3d 406, 430-32 (3d Cir. 2011).
DISCUSSION
I. Claims Against the Department
As a threshold issue, the Defendants assert that the Department is immune from suit under the Eleventh Amendment because it is an “arm of the state.” Defs.’ Mot. 2, 15-17. The Plaintiffs did not respond to this argument in their opposition
I agree that the Department is shielded from suit in federal court. “Long interpreted as an affirmation of state sovereign immunity,” the Eleventh Amendment bars individuals—regardless of their citizenship—from bringing a federal court action against a state, “including instrumentalities of the state, such as state agencies.” Town of Barnstable v. O‘Connor, 786 F.3d 130, 138 (1st Cir. 2015) (quotations and citations omitted); see also PennEast Pipeline Co., LLC v. New Jersey, 141 S. Ct. 2244, 2258 (2021). By statute, the Department “is established as the principal fiscal department of State Government.”
In addition to claims against the Department, the Plaintiffs seek injunctive relief against the Commissioner. The State does not contend that these claims are barred by sovereign immunity, see Ex parte Young, 209 U.S. 123, 159-60 (1908); O‘Connor, 786 F.3d at 138-39, so I go on to address the merits of the Plaintiffs’ claims against the Commissioner.
II. Claims Against the Commissioner
This case raises a novel question, and it involves a unique scenario in the Commerce Clause realm. The Controlled Substances Act (“CSA“) makes it unlawful under federal law “to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance.”
Against this backdrop, the Plaintiffs recite traditional arguments about the dormant Commerce Clause. They assert that the Dispensary Residency Requirement violates the dormant Commerce Clause because it plainly favors Maine residents over residents of other states. Noting that Maine‘s medical marijuana industry is booming, Pl.‘s Mot. 3, the Plaintiffs argue that the requirement “reserves . . . enormous economic opportunities . . . for long-term residents,” excluding non-residents from participating in “the largest and most lucrative type of medical marijuana business[ ] in Maine,” Pls.’ Mot. 7-8. And the Plaintiffs emphasize that the requirement “facially discriminates against non-residents” and thus is “virtually per se invalid.” Pl.‘s Mot. 8 (quoting Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564, 575 (1997)).
The Defendants and Intervenor emphasize the unique context of this dormant Commerce Clause challenge. At oral argument, the Defendants pointed out that, at its core, the dormant Commerce Clause is not about protecting individual rights but rather about preserving a national market and prohibiting state laws that interfere with that national market. The Defendants do not argue that there is any justification for the Dispensary Residency Requirement that could overcome a constitutional challenge. Rather, they argue that Congress has eliminated the national market for marijuana and thus there is no national market with which Maine can interfere.5
Defs.’ Mot. 4, 6-7. In other words, the
The Defendants’ argument is not without logic, but I see several issues with it. First, the notion that the medical marijuana industry in Maine is wholly intrastate does not square with reality. Maine does not prevent qualified nonresidents from purchasing marijuana for medical use at Maine facilities, see
Nor does Maine seem to prohibit nonresidents who purchase marijuana here from taking it home with them. And Maine appears to allow nonresidents to participate in some aspects of the medical marijuana market.8 See, e.g.,
Second, the Defendants have the burden of showing Congress‘s “unmistakably clear intent to allow otherwise discriminatory regulations.” United Egg Producers, 77 F.3d at 570. The CSA says nothing about eliminating a national market, but merely criminalizes various acts of possession, manufacture, and distribution of controlled substances.9 The Rohrabacher-Farr Amendment further muddies the question of congressional intent.
Finally, the Defendants cite no authority for their position. Instead, in apparently all cases where federal courts have confronted dormant Commerce Clause challenges to state or local laws that favor residents in the recreational or medical marijuana context, the courts have held that such laws are likely unconstitutional.10
See Toigo v. Dept. of Health and Senior Servs., No. 2:20-cv-04243-NKL (W.D. Mo. June 21, 2021) (ECF No. 25) (granting preliminary
These courts recognized that the law or ordinance at issue was “the sort of economic protectionism that the Supreme Court has long prohibited.” See Lowe, 2021 WL 2471476, at *9 (citing Davis, 553 U.S. at 337-38). In those cases, as here, the defendants had not shown “unmistakably clear” intent from Congress to authorize states to discriminate in this way.11 See United Egg Producers, 77 F.3d at 570; see also South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87-88, 91-92 (1984) (explaining that the “requirement that Congress affirmatively contemplate otherwise invalid state legislation is mandated by the policies underlying dormant Commerce Clause doctrine“). I have no authority to invent such an affirmative grant where Congress has not provided it. See New England Power Co., 455 U.S. at 343 (“[W]hen Congress has not expressly stated its intent and policy to sustain state legislation from attack under the Commerce Clause, . . . [courts] have no authority to rewrite its legislation based on mere speculation as to what Congress probably had in mind.” (internal quotations and citations omitted)).
I recognize that none of the courts that have confronted this specific constitutional issue have rendered final judgments, and it also seems that no circuit court has addressed it. But given the Supreme Court‘s and First Circuit‘s unmistakable antagonism towards state laws that explicitly discriminate against nonresident economic actors, I conclude that the Dispensary Residency Requirement violates the dormant Commerce Clause.
CONCLUSION
For the reasons stated above, the Court GRANTS the Plaintiffs’ motion for judgment on the stipulated record as to Defendant Figueroa, DISMISSES the claims against Defendant DAFS, and DENIES the Defendants’ motion for judgment on the stipulated record. The Commissioner shall be enjoined from enforcing the Dispensary Residency Requirement.
SO ORDERED.
Dated this 11th day of August, 2021.
/s/ Nancy Torresen
United States District Judge