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Three Federal Courts (So Far) Have Held That State Residency Requirements for Cannabis Licenses (Probably) Violate the Dormant Commerce Clause

Posted by on Tuesday, June 22, 2021 in News, Updates.

Federal courts in Michigan and Missouri have just issued rulings in lawsuits challenging those states’ residency requirements for cannabis licenses. Both courts found that the plaintiffs were likely to prevail on the merits of their challenges. In particular, both courts held that using residency to award cannabis licenses probably violated the Dormant Commerce Clause (DCC). The courts thus issued preliminary injunctions blocking enforcement of the residency requirements.

Here are the full decisions in the two cases:

Lowe v. City of Detroit Preliminary Injunction Order (E.D. Mich. June 17, 2021)

The Lowe Court discusses the DCC on pages 12-13 and 16-18 of its opinion. In a nutshell, the court endorsed the reasoning in NPG v. City of Portland, which invalidated a nearly identical residency preference adopted by the city of Portland, Maine to award cannabis licenses.  I blogged about that decision in this earlier post: UPDATE: Federal Judge Finds That State Residency Requirements for Marijuana Licensing are Unconstitutional. The Lowe Court also found that Detroit’s residency requirement probably violated the Equal Protection Clause and Right to Travel guaranteed by the state (Michigan) Constitution.

Toigo v. Dep’t of Health & Senior Svcs., Preliminary Injunction Order (W.D. Mo. June 21, 2021)

Most of the opinion by the Toigo Court is spent rejecting Missouri’s insistence that its residency requirement was necessary to conduct a thorough background check on prospective licensees. This is clearly a losing argument. As the Toigo Court (and NPG Court before it) explains, the Supreme Court itself has already rejected the idea that states are unable to conduct satisfactory background checks on non-residents.

Because both cases involve preliminary injunctions, the courts’ rulings are necessarily tentative (the plaintiffs only had to show a likelihood of success on the merits at this stage).

As I’ve noted previously, I’ve written a law review article, Robert A. Mikos, Interstate Commerce in Cannabis, 101 B.U. L. Rev. __ (2021), that identifies, explains, and ultimately debunks each of the arguments that states have used to defend their residency requirements for cannabis licenses against DCC challenges. Given that we now have three (!) federal court decisions that have invalidated such requirements, I am increasingly confident of my position on the issue. To be sure, one federal court (in Oklahoma) recently rejected a DCC challenge to Oklahoma’s residency requirement. But the court did not address the merits of the DCC claim – instead, it dismissed the suit by invoking the clean hands doctrine, which, for reasons I discuss in a prior post, was probably a mistake. See Did Federal Judge Give Oklahoma a Free Pass to Violate the Constitution?

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