Bio Gen, LLC v. Sanders

690 F.Supp.3d 927

BIO GEN, LLC, et al., Plaintiffs v. Sarah Huckabee SANDERS, et al., Defendants

4:23-CV-00718-BRW

United States District Court, E.D. Arkansas, Central Division

Signed September 7, 2023

Abtin Mehdizadegan, Allison Tschiemer Scott, Joseph Charles Stepina, Hall Booth Smith, P.C., Little Rock, AR, Justin Swanson, Pro Hac Vice, Paul D. Vink, Pro Hac Vice, Bose McKinney & Evans LLP, Indianapolis, IN, for Plaintiffs.

Jordan Broyles, Christine Ann Cryer, Arkansas Attorney General's Office, Little Rock, AR, for Defendants Sarah Huckabee Sanders, John Timothy Griffin, Todd Murray, Sonia Fonticiella, Devon Holder, Matt Durrett, Jeff Phillips, Will Jones, Teresa Howell, Ben Hale, Connie Mitchell, Dan Turner, Jana Bradford, Frank Spain, Tim

Blair, Kyle Hunter, Daniel Shue, Jeff Rogers, David Ethredge, Tom Tatum, II, Drew Smith, Rebecca Reed McCoy, Michelle C. Lawrence, Debra Buschman, Tony Rogers, Nathan Smith, Carol Crews, Kevin Holmes, Chris Walton, Chuck Graham, Jim Hudson, Greg Sled, Wes Ward, Matthew Marsh.

ORDER

BILLY ROY WILSON, UNITED STATES DISTRICT JUDGE

Pending are Plaintiffs' Motion for Preliminary Injunction (Doc. No. 2) and Defendants' Motion to Dismiss (Doc. No. 38). The issues have been fully briefed. After hearing arguments and reviewing the evidence presented during the hearing on August 23, 2023, I am fully advised in the premises. For the reasons set out below, the Plaintiffs' motion is GRANTED and Defendants' motion is DENIED.

I. BACKGROUND

A. 2014 Farm Bill

On February 7, 2014, President Obama signed into law the Agricultural Act of 2014 ("2014 Farm Bill")¹, which permitted states to grow "industrial hemp" under certain conditions. "Industrial hemp" was defined in the 2014 Farm Bill as the plant Cannabis sativa L., or any part of such plant, "with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis."² The 2014 Farm Bill did not remove industrial hemp from federal controlled substances schedules.

In the Arkansas General Assembly passed Act 981 which allowed the state to develop a hemp research program.

B. 2018 Farm Bill

On December 20, 2018, President Trump signed into law the Agriculture Improvement Act of 2018³ ("2018 Farm Bill"), which removed hemp from the federal schedule of controlled substances and amended the Agricultural Marketing Act of 1946 "to allow States to regulate hemp production based on a state or tribal plan."⁴ The 2018 Farm Bill also expanded the 2014 Farm Bill's definition of hemp to include "the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis."⁵

The 2018 Farm Bill explicitly states that "No Preemption" is intended of any law of a state or Indian tribe that "regulates the production of hemp" and "is more stringent" than federal law.⁶ However, the 2018 Farm Bill prohibited states from restricting the transportation of hemp in interstate commerce:

(a) RULE OF CONSTRUCTION. - Nothing in this title or an amendment made by this title prohibits the interstate commerce of hemp (as defined in section 297A of the Agricultural Marketing Act of 1946 (as added by section 10113) or hemp products.

(b) TRANSPORTATION OF HEMP AND HEMP PRODUCTS. - No state or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.⁷

The Conference Report for the 2018 Farm Bill states that, "[w]hile states and Indian tribes may limit the production and sale of hemp and hemp products within their borders, . . . such states and Indian tribes [are not permitted] to limit the transportation or shipment of hemp or hemp products through the state or Indian territory."⁸ Additionally, the Conference Report explains that "state and Tribal governments are authorized to put more restrictive parameters on the production of hemp, but are not authorized to alter the definition of hemp or put in place policies that are less restrictive."⁹

In 2019, Arkansas passed Act 504 which distinguished hemp from marijuana by removing hemp as defined in the 2018 Farm Bill from the state's Uniform Controlled Substances Act. Then, in 2021, the Arkansas legislature removed the requirement that a research plan be provided in order to obtain a hemp license.¹⁰

C. Act 629

During the 2023 legislative session, the 94th General Assembly passed Senate Bill 358 amending the law "concerning certain Delta THC substances; to prohibit the growth, processing, sale, transfer, or possession of industrial hemp that contains certain Delta THC substances; to include Delta-8, Delta-9, and Delta-10 THC in the list of Schedule VI controlled substances; to declare an emergency; and for other purposes."¹¹ On April 11, 2023, the bill was signed into law by Governor Sanders as Act 629.

Act 629 excluded hemp derived-cannabinoid products from the definition of marijuana, but criminalized all hemp products "produced as a result of a synthetic chemical process" and "[a]ny other psychoactive substance derived therein."¹²

Act 629 attempts to address interstate transportation issues with the following provisions:

This section does not prohibit the continuous transportation through Arkansas of the plant Cannabis sativa L., and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than three-tenths percent (0.3%) on a dry weight basis, produced in accordance with 7 U.S.C. § 20 1639o et seq.¹³

This subchapter does not prohibit in any form the continuous transportation through Arkansas of the plant Cannabis sativa L., and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a total delta-9trahydrocannabinol concentration of not more than three-tenths percent (0.3%) on a dry weight basis, from one licensed hemp producer in another state to a licensed hemp handler in another state.¹⁴

On July 31, 2023, Plaintiffs filed their Complaint for Declaratory and Injunctive Relief¹⁵ and on that same day, Plaintiffs filed a Motion for TRO and Preliminary Injunction.¹⁶ Plaintiffs contend that Act 629 is preempted by the 2018 Farm Bill, violates the Commerce Clause, is a regulatory taking in violation of the Fifth Amendment, and is unconstitutionally vague.

On August 8, 2023, Defendants filed their Response to Plaintiffs' motion and included a motion to dismiss certain named Defendants based on sovereign immunity.¹⁷ On August 15, 2023, Plaintiffs filed an Amended Complaint.¹⁸ The Amended Complaint removed the State of Arkansas as a Defendant and identified Jim Hudson, in his official capacity as director of the Arkansas Department of Finance and Administration; Greg Sled, in his official capacity as director of the Arkansas Tobacco Control Board; Wes Ward, in his official capacity as secretary of the Arkansas Department of Agriculture; and Matthew Marsh, in his official capacity as director of the Arkansas State Plant Board, as party Defendants, which they contend mooted Defendants' motion to dismiss. Defendants disagree and argue that Governor Sanders and Attorney General Griffin are entitled to sovereign immunity and should be dismissed.¹⁹

II. APPLICABLE LAW

A. Sovereign Immunity and Standing

Article III of the U.S. Constitution limits the jurisdiction of the federal courts to "Cases" and "Controversies."²⁰ "[S]tanding is an essential and unchanging part of the case-or-controversy requirement."²¹ To establish standing, a plaintiff must show that he has suffered an injury in fact that is fairly traceable to the challenged conduct of the defendant and will likely be redressed by a favorable decision.²² Plaintiffs must establish standing for declaratory and injunctive relief.²³

"The Eleventh Amendment confirms the sovereign status of the States by shielding them from suits by individuals absent their consent." The Eleventh Amendment also bars suits brought against state officials if "the state is the real, substantial party in interest."²⁴ In Ex Parte Young, the Supreme Court established a significant exception to this immunity.²⁵ The Court held that a suit to enjoin a state official's enforcement of state legislation on the ground that the official's action would violate the Constitution is not a suit against the State, and is thus not barred by the Eleventh Amendment, so long as the official has "some connection with the enforcement of the act."²⁶ The Court reasoned that unconstitutional state legislation is "void," and that a state official's enforcement of that legislation therefore "is a proceeding without the authority of, and one which does not affect, the state in its sovereign or governmental capacity."²⁷ Enforcement of unconstitutional legislation "is simply an illegal act upon the part of [the] state official," and the State may not immunize officials from suit for such violations of the Constitution.²⁸

If state officials have "some connection with the enforcement" of a state law for purposes of the Ex Parte Young doctrine, then the case or controversy requirement of Article III is satisfied.²⁹

B. Private Right of Action Under the 2018 Farm Bill

Other jurisdictions that have addressed the preemption of state laws attempting to regulate "industrial hemp" under the 2018 Farm Bill, considered whether the 2018 Farm Bill created a private right of action for a Section 1983 claim.³⁰ Neither party initially raised the issue, so I directed the parties to brief it. Defendants seized on this opportunity...