On Thursday, the U.S. Department of Justice finally addressed its enforcement strategy as it relates to the recent Washington and Colorado initiatives legalizing marijuana in those jurisdictions. In a memo issued to U.S. Attorneys (PDF), Deputy Attorney General James M. Cole announced that the United States would not sue the states to overturn the voter-endorsed initiatives.
The DOJ instead expects to focus on preventing marijuana sales to minors, illegal cartel and gang activity, interstate trafficking of marijuana, and violence and accidents involving the drug. See generally the New York Times report for complete background.
The announcement was welcomed by the Washington State Liquor Control Board, which endorsed Governor Jay Inslee’s view that the U.S. DOJ “helped lay a path forward for Washington and Colorado to implement its systems of producing, processing and retailing recreational marijuana.” The Board explained that, “[our] primary rule-making focus has been to create a tightly regulated market with emphasis on public safety and restricting youth access. In his letter, AG Holder shared the same concerns. . . . The Board is confident that Washington’s recreational marijuana system will meet most, if not all, of the federal government’s stated concerns.”
What does this mean for Washington businesses? They may go forward, at least on a small scale, without the threat that the federal government will immediately sue to suspend I-502 on supremacy cause grounds. They should be careful, however, not to engage in activities that would trigger federal inquiry -- that is, those activities outlined by the DOJ on Thursday. There is no question that the DOJ will scrutinize Washington’s implementation of I-502 to make certain it reinforces federal law enforcement priorities.
For example, a business selling recreational marijuana that complies with state laws nevertheless could trigger federal wrath if it were involved in selling pot to Oregon distributors from someone connected to the supply of marijuana from illegal sources, including gangs or cartels. Moreover, the fact remains that marijuana will remain classified as illegal for recreational use by the federal government. Although the new policy is certainly friendly toward I-502 and Washington’s thoughtful implementation of a working pot market, a new administration could revoke the policy and choose to enforce federal law. At the end of the day, the policy removes some uncertainty for the time being. It may be a first step toward legalization under federal law, but it is by no means a permanent green light for Washington marijuana businesses.
As we discussed in our December 19, 2012, and January 14, 2013, blog posts here and here, there is inherent tension between I-502’s marijuana legalization policy and federal law. Under the Controlled Substances Act (“Act”), marijuana is classified as a Schedule I drug, making the possession and sale of marijuana illegal under federal law. Since the passage of legalization measures in both Washington State and Colorado, federal authorities have undertaken to review the new laws and issue a response. Although the Obama Administration has been reviewing its options for some time, it has not yet taken a position on the issue.
However, despite the delay in a decision from the federal government, the Washington State Liquor Control Board has not shown any hesitation in moving forward with implementation. The agency is currently progressing along its proposed implementation timeline and expects to begin issuing marijuana producer licenses as early as mid-August of this year.
In remarks before the U.S. Senate Judiciary Committee on Wednesday, March 6, Attorney General Eric Holder confirmed that the Administration was “still considering” the federal government’s reaction to the Washington and Colorado legalization initiatives, though he asserted that it would be completed soon.Continue Reading...
As we pointed out in our post “Understanding the Conflict Between Federal Law and Washington Initiative 502,” possession and sale of marijuana remains illegal under federal law even as states push to legalize marijuana for medical or recreational use. We quoted Jenny Durkan, the U.S. Attorney for the Western District of Washington, as stating that the U.S. Department of Justice’s (“DOJ”) “responsibility to enforce the Controlled Substances Act remains unchanged” in the face of state initiatives like Washington Initiative 502, that legalized the possession of certain amounts of marijuana.
Adam Nagourny of the New York Times reported today on the sobering case of Matthew R. Davies, who was indicted last July on federal charges of cultivating marijuana, following a DOJ raid on two dispensaries and a warehouse filled with nearly 2,000 marijuana plants that Davies owned and operated. Davies reportedly saw a big business opportunity after California legalized the use of marijuana for medical purposes. “We thought, this is an industry in its infancy, it’s a heavy cash business, it’s basically being used by people who use it to cloak illegal activity,” Nagourny quotes Davies as saying. “Nobody was doing it the right way. We thought we could make a model of how this should be done.”Continue Reading...
In Part I of our “Understanding Washington Initiative 502” (“I-502”) series, we described how I-502’s licensing regime is scheduled to go into effect late next year. There is no question that I-502 legalizes possession of certain amounts of marijuana under Washington law, and the state licensing structure aimed at regulating the production, distribution, and retail sale of marijuana reflects this fact. But as a Schedule I drug subject to the federal Controlled Substances Act (“Act”), possession and sale of marijuana remains illegal under federal law. I-502 does not change this basic fact, regardless of whether the Washington State Liquor Control Board succeeds in establishing the rigorous regulatory regime envisioned by I-502.
I-502 intends to establish a well-regulated market that will allow Washington state to tax a commodity that had been pushed into the underground economy. Achieving that goal depends on capital investments in the regulated marijuana market in Washington State. But will investors be willing to fund a marijuana start-up if federal law diverges significantly from state law – particularly when federal law includes criminal sanctions? That will depend on the federal government’s response to states like Washington and Colorado that have chosen to de-criminalize marijuana.Continue Reading...
Litigation concerning the direct shipment of wine has garnered a significant amount of attention in the years since the United States Supreme Court’s seminal decision in Granholm v. Heald. Generally speaking, these disputes have played out in the federal courts, far removed from the typical family winery.
Although direct shipment will remain an important issue both for wineries and for the attorneys who represent them—indeed, it is one of the topics covered in Stoel Rives’ Law of Wine treatise—a winery’s long-term financial success may be just as likely to hinge on the outcomes of lower-profile controversies litigated in front of local government bodies. Depending on the state and locality, these local governments may have the power to prohibit the construction of new tasting rooms or restaurants—a growing source of revenue for many wineries1 —or to regulate the number and character of marketing events held by a winery.Continue Reading...
In the 2005 case Granholm v. Held, the U.S. Supreme Court struck down Michigan and New York laws that effectively prevented out-of-state wineries from shipping directly to in-state consumers but that allowed in-state wineries to conclude in-state direct sales. The Court held that these laws violated the U.S. Constitution’s Commerce Clause. Since then, lower federal courts around the country have had the tools to strike down similar state laws that facially discriminate against out-of-state producers without a permissible justification. For example, federal courts have struck down or enjoined facially discriminatory statutes—or selected provisions of such laws—in states such as Indiana, Kentucky, Massachusetts, New Jersey, Pennsylvania, Tennessee, and Texas.
But these rulings do not apply consistently across the country. For example, although the Sixth Circuit held unconstitutional Kentucky’s law requiring direct sales to be made only pursuant to in-person purchases, Indiana’s law requiring similar in-person sales remains on the books. And a number of other states retain laws restricting direct sales that appear legally dubious in the wake of Granholm and its progeny. But Granholm also has spurred Congressional attempts to restrict its reach. In 2010 and 2011, legislators introduced the Community Alcohol Regulatory Effectiveness (“CARE”) Act in the U.S. House of Representatives. In its latest iteration the bill aims to eliminate the federal statutory requirement that imported alcohol be subject to state laws “to the same extent and in the same manner” as alcohol produced in-state. The original version of the CARE Act did not survive the life of the last Congress, and it is unclear if the current version will find any more support in the present one. But notwithstanding this threat to direct shipping by out-of-state producers, overly restrictive state laws favoring in-state direct sellers remain ripe targets for litigation seeking to enforce Granholm and its reading of the Commerce Clause.