Oregon Company Defends Federal Lawsuit Challenging The State’s Ban On Cannabis Exports
An Oregon marijuana business challenging the state’s ban on interstate cannabis commerce asked a federal judge last week to allow the case to be heard in court, arguing that the company has a “right to operate its business—federally legal or not—free of unconstitutional state laws such as the export ban.”
The cannabis wholesaler, Medford-based Jefferson Packing House, sued Oregon officials in November in an effort to overturn the state export ban. Its attorneys claim the law violates the U.S. Constitution’s Dormant Commerce Clause, a provision meant to promote competition among states by preventing them from independently regulating interstate commerce.
The company’s suit says the export ban “harms not only Oregon growers, processors, and wholesalers, but also non-residents, who are denied access to the high-quality marijuana products created in Oregon unless they physically travel to Oregon to purchase those products.”
Lawyers for the state have asked the court to dismiss the case, asserting that Jefferson lacks standing. In a January motion, they wrote that because federal law also prohibits the export of cannabis products, the company’s “alleged injuries are not likely to be addressed by the relief that it is seeking.” Further, they argue the Dormant Commerce Clause does not apply as the lawsuit describes it.
“That doctrine prohibits states from treating interstate and intrastate commerce differently,” the state’s filing says. “Here, however, there is no interstate commerce to treat differently.”
A March 17 reply from Jefferson, however, contends that the federal Controlled Substances Act (CSA) “did not ‘eliminate’ commerce in marijuana any more than a criminal statute ‘eliminates’ the act or conduct it forbids.”
“Plaintiff’s injuries arise out of the fact that it must operate in an environment where Oregon law unconstitutionally regulates the commerce (illegal or not) in which Plaintiff desires to engage,” the latest filing says, “including competing with out of state marijuana businesses, accessing out of state customers, and taking advantage economies of scale.”
The response asks a federal judge to allow the matter to be heard at oral argument. No ruling has been made either on that request or the state’s motion for dismissal.
Under federal law, virtually all cannabis commerce in the United States remains illegal, regardless of the drug’s status at the state level. Currently, no formal federal protection exists to guard businesses, consumers or even medical patients from prosecution. States, however, are generally not legally required to enforce federal law.
The company doesn’t expect the lawsuit to overturn federal cannabis prohibition, as it acknowledged in a letter sent separately to defendants at the time the lawsuit was filed. But it says Oregon’s own law shouldn’t stand in the way as an additional obstacle to cross-border trade.
“We recognize that marijuana is still illegal under federal law, and that this lawsuit will not change that fact,” the letter said. “However, we believe that the State of Oregon should be fully aligned with supporting its local marijuana industry, and therefore that Oregon law should no longer prohibit the export of marijuana to other states.”
Named defendants include Oregon Gov. Tina Kotek (D), Attorney General Ellen Rosenblum (D) and the head of the Oregon Liquor and Cannabis Commission.
The state’s former governor, Kate Brown (D), in fact signed a bill into law in 2019 positioning the state to import and export cannabis. At the time, the state had a vast oversupply of marijuana, and the policy change was seen as a way to give Oregon businesses the ability to export some of that excess to states where prices were higher.
But that law allows Oregon to enter cross-border agreements with other states only if the federal government makes it legal or if the Justice Department implements an administrative policy allowing for such commerce. And as it stands, no such federal policy exists.
At least some of the company’s confidence in the suit stems from a federal appellate court’s August opinion in a case out of Maine.
In that case, the U.S. Court of Appeals for the First Circuit ruled that Maine’s state law prohibiting non-residents from owning medical marijuana businesses was unconstitutional because it violates the Dormant Commerce Clause. Although the Oregon case is not within the First Circuit, and thus not bound by that precedent, legal experts have speculated the decision could have more far-reaching implications for interstate cannabis commerce.
Oregon isn’t the only state to have readied itself for an interstate marijuana market. California’s governor signed a similar measure last year, and lawmakers in Washington State are currently considering a law that would also allow interstate cannabis trade pending federal action.
On the other side of the country, New Jersey’s Senate president filed a similar proposal last year, but it has not yet been enacted.
Despite legislatures laying groundwork for the future, however, bans on exporting and importing cannabis are in place in legal states across the U.S., in large part as a protective measure meant to insulate the states from federal enforcement action given the Justice Department has previously identified interstate marijuana trafficking as a prosecutorial priority.
To remedy the situation, plaintiffs in the Oregon case are asking the court to declare the state’s export ban is unconstitutional and enjoin the state from “implementing, enforcing, or giving any effect to the residency requirement for dispensaries.”
The case is Jefferson v. Kotek (21-CV-1776). Read the latest filings below:
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