Ne. Patients Grp. v. United Cannabis Patients & Caregivers of Maine

45 F.4th 542

NORTHEAST PATIENTS GROUP, d/b/a Wellness Connection of Maine; High Street Capital Partners, LLC, Plaintiffs, Appellees,

v.UNITED CANNABIS PATIENTS AND CAREGIVERS OF MAINE, Intervenor-Defendant, Appellant,Maine Department of Administrative and Financial Services ; Kirsten Figueroa, Commissioner of the Maine Department of Administrative and Financial Services, Defendants.

Northeast Patients Group, d/b/a Wellness Connection of Maine; High Street Capital Partners, LLC, Plaintiffs, Appellees,

v.Kirsten Figueroa, Commissioner of the Maine Department of Administrative and Financial Services, Defendant, Appellant,Maine Department of Administrative and Financial Services ; United Cannabis Patients and Caregivers of Maine, Defendants.

No. 21-1719

No. 21-1759

United States Court of Appeals, First Circuit.

August 17, 2022

Matthew Warner, with whom Jonathan Mermin, Alexandra Harriman, and Preti, Flaherty, Beliveau & Pachios, LLP were on brief, for appellees.

James G. Monteleone, with whom Bernstein Shur was on brief, for appellant United Cannabis Patients and Caregivers of Maine.

Christopher C. Taub, Chief Deputy Attorney General of Maine, with whom Aaron M. Frey, Attorney General of Maine, Thomas A. Knowlton, Deputy Attorney General of Maine, and Paul E. Suitter, Assistant Attorney General of Maine, were on brief, for appellant Kirsten Figueroa.

Before Barron, Chief Judge, Lynch and Gelpí, Circuit Judges.

BARRON, Chief Judge.

This appeal concerns whether the Maine Medical Use of Marijuana Act, 22 M.R.S. §§ 2421 - 2430 (2009) ("Maine Medical Marijuana Act"), violates what is known as the dormant Commerce Clause of the United States Constitution by requiring "officers" and "directors" of medical marijuana "dispensar[ies]," id. § 2428(6)(H), operating in Maine to be Maine residents. The United States District Court for the District of Maine held that Maine Medical Marijuana Act's residency requirement does violate the dormant Commerce Clause, notwithstanding that Congress enacted the Controlled Substances Act ("CSA"), 21 U.S.C. § 801 et seq., to "eradicate the market" in marijuana, see Gonzales v. Raich, 545 U.S. 1, 19 n.29, 125 S.Ct. 2195, 162 L.Ed.2d 1 (2005). The District Court concluded that is so, because the residency requirement is a facially protectionist state regulation of an interstate market in medical marijuana that continues to operate even in the face of the CSA. We affirm.

I.

Maine enacted the Maine Medical Marijuana Act in 2009 to authorize participation in the market in medical marijuana in that state in specified circumstances. See Maine Medical Use of Marijuana Act, 22 M.R.S. §§ 2421 - 2430 (2009) (the "Medical Marijuana Act") (permitting the "acquisition, possession, cultivation, manufacture, use, delivery, transfer or transportation of marijuana" relating to prescribed treatments for certain medical conditions). Among other things, the Maine Medical Marijuana Act provides that a "dispensary" may sell medical marijuana in the state, so long as certain requirements are satisfied. Id. It then goes on to define a "dispensary" as "an entity registered under [ 22 M.R.S. § 2425-A ] that acquires, possesses, cultivates, manufactures, delivers, transfers, transports, sells, supplies or dispenses marijuana plants or harvested marijuana or related supplies and educational materials to qualifying patients and the caregivers of those patients." Id. § 2422(6).

The residency requirement that is at issue in this appeal appears in § 2428(6)(H) of the Maine Medical Marijuana Act. It provides that, for a "dispensary" to be authorized under state law to sell "medical marijuana" in Maine, "all [the] officers or directors of a dispensary must be residents of [Maine]." Id. § 2422(6)(H) (the "residency requirement"). The phrase "[o]fficer or director" is then defined broadly in a separate provision of the Maine Medical Marijuana Act to include "a director, manager, shareholder, board member, partner, or other person holding a management position or ownership interest in the organization." Id. § 2422(6-B).

Northeast Patients Group is a corporation that is wholly owned by three Maine residents and that owns and operates three of Maine's seven licensed dispensaries as a for-profit corporation. High Street Capital is a Delaware corporation that is owned exclusively by non-Maine residents and that wants to acquire Northeast Patients Group. If the deal between the two companies were to proceed, as both High Street Capital and Northeast Patients Group desire, then the resulting company would not be able to function as a dispensary under Maine law in consequence of the Maine Medical Marijuana Act's residency requirement, because the "officers or directors" of that new company would not be only Maine residents.

Northeast Patients Group and High Street Capital ("plaintiffs") filed this suit under 42 U.S.C § 1983 and 28 U.S.C. § 2201 against the Maine Department of Administrative and Financial Services ("the Department") and Kirsten Figueroa, the Commissioner of the Department, on December 17, 2020, in the District of Maine to challenge the Maine Medical Marijuana Act's residency requirement. The complaint alleges that the residency requirement violates the dormant Commerce Clause by permitting only in-staters to serve as "officers or directors" of "dispensaries."

Figueroa and the Department answered the complaint on January 29, 2021. Shortly thereafter, United Cannabis Patients, a nonprofit advocacy group that represents medical marijuana businesses owned by Maine residents, moved to intervene in the action as a defendant under Federal Rule of Civil Procedure 24(a)(2). The District Court granted the motion on March 23, 2021.

The parties filed a stipulated record that same month, and the plaintiffs moved for summary judgment on that record. Figueroa and the Department cross-moved for summary judgment on the record on April 26, 2021. United Cannabis Patients opposed the plaintiffs' motion that same day.

The District Court ruled on the parties' motions on August 11, 2021. The District Court granted judgment for the Department on the ground that the Department was immune from suit under the Eleventh Amendment to the U.S. Constitution. Ne. Patients Grp. v. Maine Dep't of Admin. & Fin. Servs., 554 F. Supp. 3d 177, 181-82 (D. Me. 2021). The District Court held with respect to the plaintiffs' claims against Figueroa that Maine's residency requirement violated the dormant Commerce Clause. On that basis, it granted the plaintiffs' motion for a permanent injunction and enjoined Figueroa from enforcing Maine's residency requirement. Id. at 185. It also denied the defendants' motion for judgment on the stipulated record on the same basis. Id.

Figueroa and United Cannabis Patients timely appealed. They simultaneously moved for the District Court to stay its injunction while the appeal was pending. On October 27, 2021, the District Court granted the motion and stayed the injunction. This appeal followed.

II.

The Commerce Clause of the U.S. Constitution provides that "Congress shall have [the] [p]ower ... [t]o regulate Commerce ... among the several States." U.S. Const. Art. I, § 8, cl. 3. The Supreme Court of the United States has long construed the Commerce Clause to be not only an affirmative grant of authority to Congress to regulate interstate commerce but also a negative, "self-executing limitation on the power of the [s]tates to enact laws [that place] substantial burdens on [interstate] commerce." S.-Cent. Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87, 104 S.Ct. 2237, 81 L.Ed.2d 71 (1984) ; see also Gen. Motors Corp. v. Tracy, 519 U.S. 278, 287, 117 S.Ct. 811, 136 L.Ed.2d 761 (1997) ("The negative or dormant implication of the Commerce Clause prohibits state taxation or regulation that discriminates against or unduly burdens interstate commerce and thereby ‘imped[es] free private trade in the national marketplace.’ " (internal citations omitted) (alteration in original) (quoting Reeves, Inc. v. Stake, 447 U.S. 429, 437, 100 S.Ct. 2271, 65 L.Ed.2d 244 (1980) )). Thus, the negative aspect of the Commerce Clause in and of itself protects interstate commerce from "the evils of ‘economic isolation’ and protectionism" that state regulation otherwise could bring about. City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978).

The District Court concluded in this case that the "dormant implication of the Commerce Clause" prohibits Maine's residency requirement from being given legal effect. The defendants do not dispute that Maine's residency requirement, if applied to a lawful market, would comport with the dormant Commerce Clause (as the Clause's negative aspect is often called) only if that requirement were "narrowly tailored to ‘advanc[e] a legitimate local purpose,’ " Tenn. Wine and Spirits Retailers Assoc. v. Thomas, ––– U.S. ––––, 139 S. Ct. 2449, 2461, 204 L.Ed.2d 801 (2019) (quoting Dep't of Revenue of Ky. v. Davis, 553 U.S. 328, 338, 128 S.Ct. 1801, 170 L.Ed.2d 685 (2008) ). The defendants also do not dispute that, at least with respect to a lawful market, "where simple economic protectionism is effected by state legislation, a virtually per se rule of invalidity has been erected." City of Philadelphia, 437 U.S. at 624, 98 S.Ct. 2531. Finally, the defendants do not dispute that they cannot show that Maine's residency requirement, if it were applied to a lawful market, would be narrowly tailored to serve a legitimate local purpose, because they agree that, as applied to such a market, the requirement would "basically [be] a protectionist measure," id. at 624, 98 S.Ct. 2531, that would both "discriminate[ ] against" and "unduly burden[ ] interstate commerce," Gen. Motors Corp., 519 U.S. at 287, 117 S.Ct. 811.

The defendants' acceptance of these propositions should come as no surprise, given the Maine Medical Marijuana Act's sweeping definition of "officers" and "directors." In Tennessee Wine and Spirits...