Case Update: US v. Marin Alliance for Medical Marijuana

On October 19, 2015, in US v. Marin Alliance for Medical Marijuana, the US District Court for the Northern District of California held that under the Rohrabacher-Farr Amendment (Amendment), a permanent injunction granted to the Department of Justice (DOJ) in 2002 prohibiting the Marin Alliance for Medical Marijuana (MAMM) and Lynette Shaw from engaging in cannabis related business could only be enforced to the extent that the actions of MAMM and Shaw are illegal under California law. While the court declined to vacate the injunction entirely, the decision is the first to make clear that the DOJ may not interfere with medical marijuana-related businesses that are legal under state law.

 The Amendment states that:

None of the funds made available in this Act to the Department of Justice may be used, with respect to the States of Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Washington, and Wisconsin, to prevent such States from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.”

The first version of the Amendment was introduced in 2004, but was not passed until 2014 as part of the 2015 Appropriations Act, which governed federal spending until through September 30, 2015. The amendment was renewed and to be effective until at least December 11, 2015.

Since its passage there has been uncertainty over the functional effect that the amendment would have on Cannabis businesses. While it was clear that the authors intended the amendment to prohibit the DOJ from interfering with medical cannabis businesses that were deemed legitimate under state law, the DOJ’s own interpretation had caused concern in the industry. The DOJ has largely ignored the spirit of the Amendment, continuing to operate as it had since the release of the Cole memo in 2013.  In a leaked memo, the DOJ outlined its view that the Amendment only applied to actions that directed at the state itself, allowing the DOJ to continue pursuing and prosecuting individuals and businesses engaged in activity legal under state law.

With this decision, the cannabis industry has won a major victory, as the decision makes clear that individual conduct is shielded from prosecution, so long as that conduct complies with state law.

Background

The present case originated in 1998 when Shaw, MAMM and five other dispensaries were preliminarily enjoined from engaging in the distribution of marijuana under the Controlled Substances Act, although medical marijuana had become legal under California law in 1996. Defendants openly violated the injunction, inviting contempt proceedings, which ultimately resulted in the case appearing before the Supreme Court. Holding that there was no medical necessity exception to the Controlled Substances Act, the Supreme Court noted that the public interest (generally a consideration when examining requests for equitable relief such as an injunction) was replaced by the clearly expressed congressional judgment that marijuana had no medical benefit. US v. OCBC, 532 U.S. 483 (2001). On June 10, 2002, the District Court entered a permanent injunction against Shaw, MAMM and the other defendants.

MAMM continued to operate its medical marijuana business out of its same location until 2011, when the US Attorney’s office sent cease and desist letters to MAMM and other local dispensaries, threatening the businesses with forfeiture.  In response, the mayor of Fairfax sent letters to the US attorney stating that ”MAMM was operating as a model business in careful compliance with its local Use Permit in a ‘cooperative and collaborative relationship’ with the community,” especially with regard to the high number of breast cancer patients that used the facilities, and that closure of the dispensaries would “’increase public safety concerns for local law enforcement’ if the market were pushed underground.” The District Court dismissed MAMM’s action for a temporary restraining order that would have stopped the forfeiture action, and the US Attorney eventually settled with MAMM’s landlord, who agreed to no longer lease the property to MAMM in exchange for the government’s agreement not to seize the property.

District Court Litigation

After the passage of the Rohrabacher-Farr Amendment 2014, MAMM revisited the case, arguing that the injunction had become unenforceable and should be lifted.

The District Court agreed and modified the injunction to the extent that MAMM and Shaw were operating legally under state law by distributing medical marijuana. Citing OCBC, the DOJ’s previous victory at the Supreme Court level, the District Court held that its only directive was “to interpret and apply Congress’s policy choices, as articulated in its legislation.” Since the plain language of the Rohrabacher-Farr Amendment prohibits the DOJ from expending any funds to enforce laws that interfere with a State’s ability to implement its own medical marijuana program, the Court held that it could only enforce the CSA to the extent that a business is not in full compliance with “[s]tate law that authorizes the use, distribution, possession, or cultivation of medical marijuana.”

The government’s arguments mirrored those included in its previously leaked memo - that the language of the Amendment only prohibited federal funds from being used to interfere with state activity, allowing the DOJ to continue the prosecution of individuals and businesses. In rejecting the government’s arguments, the Court noted that:

-       The government implicitly asserted that the closure of one dispensary (MAMM) does not prevent the state from implementing its own law regarding the availability of medical marijuana.  However, that argument assumes the continued operation of other dispensaries. The operation of those other dispensaries a fortiori demonstrates that the injunction in its current form is inappropriate.

-       The argument that closing one dispensary will not prevent the implementation of state law because others continue to operate is at odds with fundamental notions of the rule of law. The Amendment either allows the government to shut down dispensaries under the CSA or it does not and “[i]t has never been a legal principle that an otherwise impermissible government intrusion can be countenanced because any one defendant is a small piece of the legal landscape.”

-       The legislative history does not support the “counterintuitive and opportunistic” meaning supported by the government. It is clear that the Amendment was intended to protect patients, doctors and local businesses that are certified and operating in accordance with state and local law from punishment under federal law.  Moreover, the authors of the amendment themselves, Congressmen Rohrabacher and Farr, sent a letter to Attorney General Eric Holder that the government’s interpretation of the Amendment was “emphatically wrong.”

According to the Court, the government’s interpretation of the Amendment was clearly incorrect, however, the Court was only able to modify the injunction to allow for activities legal under state law because the CSA continues to prohibit any marijuana related activity that is not explicitly protected by the Amendment.  Even with this ruling, MAMM had already closed its doors and does not appear to have any immediate plans to reopen.

While this decision marks a victory for the medical marijuana industry in every state that has authorized the use, distribution and cultivation of medical marijuana, significant questions still remain. For instance, businesses in California currently operate under both state and local law, and with regard to cultivation, many localities have permissive zoning statutes that allow all activities that are not explicitly prohibited. As Robert Raich's office has pointed out, many cultivators question whether cultivation under these permissible zoning statutes are in technical compliance with state law for the purposes of certifying compliance to be eligible for a state license upon their availability in 2018. 

On the other hand, the Amendment was aimed at stopping the DOJ from wasting time and energy on medical marijuana related activities condoned by individual states. Since each state with a medical marijuana program has implemented it differently, in order to continue medical marijuana prosecutions against individuals that are potentially violating state law, the DOJ would have to expend a tremendous amount of resources examining each individual state’s program to determine precisely how state laws were violated. Moreover, any DOJ prosecution would implicate those questions of state law, which would have to be decided by a state court system, even though the DOJ would likely be required to bring charges under the CSA in federal court, greatly increasing litigation and court costs.

While the decision may create additional questions going forward, it is clear that individuals that operate in strict compliance with state law now have a one more tool to aid in their defense against DOJ prosecution. 

Christopher Davis works in Finance, Banking and Securities Law. He is a member of the California and New York Bars.