Federal Appeals Court Agrees: Using residency to award commercial marijuana licenses violates the Dormant Commerce Clause
On August 17, 2022, the U.S. Court of Appeals for the First Circuit issued a decision in NPG v. Maine Department of Administrative and Financial Services. The decision stems from Maine’s appeal of an earlier District Court judgment finding that a provision of the state’s Medical Marijuana Act violated the Dormant Commerce Clause (DCC) because it banned non-residents from owning or operating a state-licensed medical marijuana dispensary.
I have discussed this and related cases at length in earlier posts, which are collected here:
- Company Sues Maine for Discriminating Against Non-residents When Licensing Marijuana Businesses (4/02/20)
- UPDATE: Maine Drops Residency Requirement for Adult-Use Commercial Licenses, Moots Legal Challenge (5/13/20)
- Locals Sue, Seeking to Force Maine to Re-instate Residency Requirement for Marijuana Licenses (6/27/20)
- UPDATE: Federal Judge Finds that State Residency Requirements for Marijuana Licensing are Unconstitutional (10/07/20)
- State Restrictions on Interstate Commerce in Cannabis are Unconstitutional (3/03/21)
- Did Federal Judge Give Oklahoma a Free Pass to Violate the Constitution? (6/10/21)
- Maine District Court Issues (Another) Decision Invalidating State Residency Requirement on DCC Grounds (8/20/21)
- Three Federal Courts (So Far) Have Held that State Residency Requirements for Cannabis Licenses (Probably) Violate the Dormant Commerce Clause (6/22/21)
In the appeal, the First Circuit upheld that District Court’s judgment. The opinion doesn’t break any new ground so I won’t go into it in depth here. (You can read the full opinion here: NPG v. Maine Dept of Admin. & Fin. Svcs (1st Cir. 2022).) In a nutshell, the Court rejected the state’s claim that the DCC does not apply to state cannabis regulations, either because Congress has suspended the doctrine or because the DCC simply does not apply to any market that Congress has banned. The court’s reasoning largely tracks the arguments I’ve made in my Interstate Commerce in Cannabis article (see here) and that three lower courts (including the Maine District Court) have adopted in their decisions (discussed in the posts above).
There is a short dissent in the case which suggests that a federal court should not grant relief to a party who is violating federal law. A district court in Oklahoma used similar reasoning to dismiss a challenge to the Sooner State’s residency preferences for marijuana licenses. I explained why this clean hands argument is misguided in my earlier post on the Oklahoma decision (see above); the majority in NPG rightly rejects the argument and addresses the challenge on the merits.
Even though the NPG court doesn’t break any new ground, this is the first time a federal appellate court has issued a decision in a DCC challenge to a state marijuana licensing program. For that reason alone, I think the decision in NPG is significant. At a minimum, it adds more credence to the argument that states may not discriminate against interstate commerce in marijuana, even if the federal government continues to ban all commerce in the drug.
I’ll blog again soon with some thoughts on what’s likely to happen next on the DCC front.