Cannabis Musings - December 10, 2024

Canna Provisions gets its day in appellate court

Friends – hope you had a productive and fruitful MJBizCon week. That is, if you were there. Around the Strip hotels, I saw more badges for the Amazon Web Services conference and more cowboy hats for the National Finals Rodeo fans than I did cannabis folks. It seemed to me, and just about everyone I talked to, that there were fewer people in Vegas for our conference than in past years. That, together with the relative dearth of afterparties, highlighted the low-level malaise I observed consistently throughout the week. Then again, it depends upon your perspective.

One sign of hope amongst some is the Canna Provisions case. We’ve talked about this lawsuit a number of times – it’s the one filed by Verano and other operators by the law firm of Boies Schiller Flexner LLP, asking federal courts to overturn Supreme Court precedent by holding that Congress does not have the right to regulate intrastate cannabis through the Controlled Substances Act (only interstate). The case was over a year in the making and it’s been winding its way through the courts. Earlier this year, a federal district (trial) court dismissed the lawsuit, which came as a surprise to no one, because a trial court can’t overturn Supreme Court precedent (only the Supreme Court can really do that). The plaintiffs appealed that decision to the First Circuit Court of Appeals (the intermediate court) – you can read the briefs outlining the arguments of both sides if you like that kind of stuff.

On Thursday, the First Circuit held an oral argument of the case. This is a standard exercise on appeal – a lawyer for each side of the dispute stands in front of a panel of judges (usually three for the federal appeals court; all of them for Supreme Court arguments), starts to summarize the case and develop an argument that’s immediately ignored by the judges, who instead pepper the lawyer with questions that push their own perspectives on the issues at bar (lawyer-ese for “before the court” (I’ve never understood why that phrase doesn’t have a definite article)). I can speak from personal experience that it’s a curious exercise.

I listened to the Canna Provisions argument so you don’t have to, but if you’re bored, have at it. From my perspective (and those of others), the court wasn’t buying what the plaintiffs are selling. To me, the death blow came about five minutes into the argument:

“The intuitive thing that seems strange is, if Congress has an interest, recognized in Raich, in regulating personal cultivation that occurs in a place,” the subject of a previous Supreme Court case, “how could it not have an interest in the marijuana market? How could it not have an interest in <lightly, but incredulously, snickers> regulating the sale of marijuana?"

Oy vey.

At heart, the plaintiffs are arguing that, with Rohrbacher-Farr, together with Congress’ rulemaking regarding cannabis in Washington, D.C., Congress is now distinguishing between interstate and intrastate cannabis commerce, something it didn’t do when the Supreme Court first ruled on the issue. The court seemed to disagree, focusing on the government’s argument that the overarching goal of Congress regulating both licensed and unlicensed cannabis sales still exists regardless: “What about Rohrbacher-Farr and the D.C. legislation indicates that the goal articulated in Raich is no longer their view of what [Congress is] trying to accomplish with respect to all sales that are not covered by those two provisions?” Counsel for the plaintiffs responded that Rohrbacher-Farr “requires” that you distinguish between interstate and intrastate, but didn’t get the chance to explain why – his time was up.

In contrast, one judge asked the government’s lawyer whether the court should simply find that the Supreme Court’s existing precedent (prior cases) controls the decision (which would result in a very short written opinion (I doubt this will be the case, though – if the court were going to do this, it might not have bothered with the oral argument)), or go through the exercise of analyzing the case in light of that precedent. The government’s lawyer confidently replied “both” to what, in my mind, was the equivalent of “how easy do you want us to make this for you?” There weren’t many other questions for the government, another bad sign for the plaintiffs.

Regardless, none of this should come as a surprise, even, I can confidently surmise, to plaintiffs’ counsel. It’s really asking a lot of the appeals court to not just distinguish from binding precedent from a superior court, but rule against that precedent. Lawyers know that federal courts don’t like to traffic in chutzpah.

But, never fear - this has all been a set up to get the argument in front of the Supreme Court, which can overturn its own prior decisions. Judges love to profess the gravity and importance of stare decisis (Latin for “let the decision stand”) and hold fast to its prior decisions, at least so long as they like that prior decision. If they don’t, well, who really needs stare decisis anyway? Everything is “judicial activism.” This Supreme Court has been chipping away at Congress’ ability to regulate commerce between the states.

This point really comes through in the rebuttal (the plaintiff’s response) portion of the argument. Plaintiffs’ counsel asserted that Congress doesn’t have the power to regulate all intrastate commercial sales, particularly where the good is produced and sold in the same state. The panel muddled the argument some, leaving it unresolved, but I think this is the point the plaintiffs are hoping the Supreme Court takes on, dangling the delicious opportunity for the highest court in the land to further chip away at its own precedent, bolstering state rights and weakening federal powers.

The plaintiffs are most likely going to lose this appeal. That matters a lot if the Supreme Court decides not to hear the plaintiffs’ inevitable appeal of that decision, something that, statistically, is fairly likely. But if the Supreme Court agrees to hear the case, then none of this really matters and we’ll do this all over again many months from now. Az a glick ahf mir! (“I should have such good luck!”).

© 2024 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín.