On Wednesday, the First Circuit Court of Appeals affirmed the District of Maine’s holding that the Maine Medical Marijuana Act’s residency requirement violates the Dormant Commerce Clause of the Constitution in Northeast Patients Group, et al v. United Cannabis Patients and Caregivers of Maine.
According to the First Circuit’s order, Northeast Patients Group (NPG) is a corporation that operates three of Maine’s seven licensed marijuana dispensaries which is wholly owned by three Maine residents. The order states that the other plaintiff, High Street Capital, is a Delaware corporation owned exclusively by non-Maine residents. Further, the order states that High Street Capital wants to acquire NPG, but the acquisition would prevent the resulting company from functioning as a marijuana dispensary in Maine.
The court purports that the Maine Medical Marijuana Act’s residency requirement states that in order for a marijuana dispensary to be authorized to sell medical marijuana in Maine, all of the officers or directors of the dispensary must be residents of Maine. Therefore, an acquisition of NPG by High Street Capital would disqualify the resulting company from being an authorized dispensary under the Maine Medical Marijuana Act.
Accordingly, NPG and High Street Capital filed the present suit against the Maine Department of Administrative and Financial Services challenging the Maine Medical Marijuana Act on December 17, 2020. NPG and High Street Capital argued the residency requirement violates the dormant Commerce Clause because it expressly privileges Maine residents over residents of other states by allowing them to invest in Maine’s marijuana industry.
Shortly after filing the suit, United Cannabis Patients and Caregivers of Maine, a nonprofit advocacy group that represents medical marijuana businesses owned by Maine residents, moved to intervene as a defendant which the district court granted. On August 11, 2021, the District Court ruled on cross motions for summary judgment and held that the Maine Department of Administrative and Financial Services was immune from suit under the Eleventh Amendment of the U.S. Constitution, but the residency requirement of the Maine Medical Marijuana Act violates the dormant commerce clause. The district court thus granted the plaintiffs permanent injunction against the residency requirement.
United Cannabis timely appealed the district court’s decision leading to the present ruling. Chief Judge Barron authored the opinion affirming the district court’s ruling that the residency requirement is a facially protectionist state regulation of an interstate market. However, the court did note that although the medical marijuana market is an interstate market, it is a market that flies in the face of the Controlled Substances Act. However, the First Circuit ultimately was not convinced that it is impossible to be an interstate market for a good that is contraband under federal law. Therefore, the First Circuit affirmed the permanent injunction against the Maine Medical Marijuana Act’s residency requirement for violating the dormant commerce clause.
NPG is represented by Preti Flaherty Beliveau & Pachios, and United Cannabis is represented by Bernstein, Shur, Sawyer & Nelson.
