Cannabusiness Advisory

On May 30, 2019, the U.S. Court of Appeals for the Second Circuit ⁠—in an opinion delivered by the eminent Guido Calabresi⁠— offered the cannabis industry a glimmer of hope in its pursuit of the federal legalization of marijuana.  In the case of Washington et al. v. Barr et al., a set of plaintiffs challenged the DEA’s classification of marijuana as a Schedule 1 drug under the Controlled Substances Act (“CSA”).  Most courts, including the SDNY (where the case originated), have had a general tendency to dismiss such cases, citing the preeminent precedent established in Gonzales v. Raich, which confirmed the supremacy of the federal government’s prohibition of marijuana over state legalization.  The Second Circuit, in Washington, stopped short of dismissing the appeal from the SDNY and set up the opportunity for a potential challenge to the federal ban in the near future.

While the plaintiffs in Washington surmounted an incredible obstacle, by avoiding outright dismissal, the Court did not go so far as to provide them with the relief they sought.  Instead, Calabresi and his peers opted to concur with the SDNY’s ruling that the plaintiffs had failed to fully exhaust their available alternative remedies under administrative law.  While a failure to show “exhaustion” would otherwise generally lead to a case’s dismissal, the Second Circuit decided to temporarily retain jurisdiction over the case and “hold it in abeyance”, reserving the right “to take whatever action might become appropriate if the DEA does not act with adequate dispatch”.

Although there are some exceptions to the rule of exhaustion, none applied in Washington.  As such, the Court ruled that the plaintiffs in the case should have first petitioned the relevant administrative agencies (the DEA and Department of Health and Human Services) for relief and been denied, before pursuing their case in court.  However, the Second Circuit did take issue with the sluggish pace at which the DEA has reviewed and issued decisions in the past with respect to similar challenges to the scheduling of Marijuana under the CSA.  Noting the potential violations of constitutional rights and health risks involved (several of the plaintiffs are challenging the CSA’s restrictions on using marijuana to treat certain serious medical illnesses), Calabresi opined that the instant case was particularly time sensitive.  As a result, the plaintiffs were given a 6 month window in which to make the proper filings for agency review, in order to obtain relief directly from the DEA or fail to do so and thereby demonstrate exhaustion; all while the Second Circuit maintains its jurisdiction over the case.

The decision to maintain jurisdiction came with an express reservation of the Second Circuit’s right to revisit the case if the DEA does not “act promptly” with respect to petitions for agency review made by the plaintiffs within the 6 month window.  While the opinion did not establish a strict timeline for the DEA’s completion of its review, the mere existence of a requirement for expeditious review will certainly light a fire under the DEA.  In addition, given the subjective nature of the language “promptly” and “with adequate dispatch”, it is indeed quite possible that the Second Circuit may revisit Washington in the near future, even if the DEA has not yet provided any decision on the matter.  Generally speaking, either (a) the DEA will make a timely decision (x) providing relief or (y) denying such or (b) the Second Circuit will exercise its jurisdiction and the case will resume.  Success under the administrative process is highly improbable, given the DEA’s current stance on marijuana.  It is much more likely that Washington will continue to be tried in the courts, by either a showing of exhaustion (if the DEA denies relief, as expected) or if the DEA delays in issuing a decision.

Although there are a number of steps required before Washington is back before the Second Circuit, which will undoubtedly take a least some measure of time, it is conceivably that we may soon see the venerated Court (or the SNDY, at its direction) issue a final ruling on the merits of the case.  If that happens, there are indications that a decision in favor of the plaintiffs may not necessarily be out of the question, in spite of the precedent set by Gonzales.  While far from a slam dunk, the Second Circuit’s decision in Washington marks a significant milestone in the fight for legalization and is indicative of recent trends of normalization and certain courts’ amenability to challenging the classification of marijuana as a controlled substance.