The US District Court for the Western District of Washington (the Court) has upheld the residency requirement set by the Washington Liquor and Cannabis Board (LCB) in the case of Brinkmeyer v. LCB. The residency requirement, which requires individuals owning or controlling a licensed business to establish residency six months prior to applying for a license, prohibited Todd Brinkmeyer, who lived in Idaho, from owning or investing in a cannabis license in Washington.
The Court determined that the Dormant Commerce Clause did not apply to Washington’s residency requirement as cannabis remains illegal under federal law. For background on this case check out our three previous blog posts on the lawsuit:
Dormant Commerce Clause
The Dormant Commerce Clause is a legal doctrine that limits states from passing laws that discriminate against or unduly burden interstate commerce. It is based on the Commerce Clause of the U.S. Constitution, which grants Congress the power to regulate commerce among the states. We wrote about how the Dormant Commerce Clause was recently invoked to prohibit New York from fully implementing its Conditional Adult-Use Retail Dispensary licenses. Here’s a brief summary of Dormant Commerce Clause jurisprudence from that post:
The U.S. Constitution contains a passage, commonly referred to as the “Commerce Clause,” which provides that “Congress shall have Power . . . to regulate Commerce . . . among the several States[.]” The U.S. Supreme Court has long interpreted this clause to include a corollary or “dormant” Commerce Clause which has the effect of prohibiting states from enacting laws inhibiting trade among the states.
In a recent case, Tennessee Wine and Spirits Retailers Association v. Thomas, decided in 2019, SCOTUS invalidated a two-year residency requirement for Tennessee retail liquor stores. In applying the DCC to case at hand, the Court wrote “if a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to advance a legitimate local purpose.” SCOTUS determined that “Tennessee’s 2-year durational-residency requirement plainly favors Tennesseans over nonresidents and found that the law was not “narrowly tailored” to advance a legitimate local purpose and invalidated Tennessee’s residency requirement as unconstitutional.
The Court began its analysis with Tennessee Wine by distinguishing that case from Brinkmeyer because alcohol is legal under federal law while cannabis is not.
The Court also pointed out that many other federal District Courts found that the Dormant Commerce Clause prohibited residency requirements in cannabis, including a decision out of the US Court of Appeals for the First Circuit ruling that Maine’s cannabis residency requirements violated the dormant Commerce Clause. Ne. Patients Grp. v. United Cannabis Patients & Caregivers of Me., 45 F.4th 542 (1st Cir. 2022). In that case, the First Circuit affirmed that Maine’s residency requirement, which is similar to Washington’s, violated the Dormant Commerce Clause of the United States Constitution. However, Maine’s residency requirements applied to only medical cannabis dispensaries.
RELATED: Washington State Cannabis Residency Requirement Upheld By Federal Court
There are limited protections in place at the federal level that apply to medical cannabis operations but not recreational, specifically, the Rohrabacher-Farr Amendment which prohibits the use of federal funds to go after medical cannabis operators in compliance with state law. The Court found that line of thinking inapplicable to the case at hand because Washington has merged its medical and recreational markets:
[T]he Rohrabacher-Farr Amendment applies only to medical cannabis markets. It is unclear what its application would or should be in Washington, where the recreational and medical markets are consolidated.
The Court ultimately ruled that the Dormant Commerce Clause does not apply to Washington’s cannabis market because that market is illegal under federal law. By finding that the Dormant Commerce Clause did not apply, the Court did not reach the question of whether the residency requirement is narrowly tailored to advance a legitimate local purpose, which means that this question may be analyzed on appeal, if Brinkmeyer decides to take this fight to the US Court of Appeals for the Ninth Circuit.
The Court reasoned that Congress expressly and unambiguously prohibited interstate commerce of cannabis by listing it in Schedule I of the Controlled Substances Act. The Dormant Commerce Clause cannot apply when Congress expressly has not exercised its Commerce Clause power to regulate the matter at issue. The Court determined that “[t]here is no dispute that Congress exercised its Commerce Clause power in enacting the CSA and criminalizing cannabis.” The Court went on to state:
Although Washington’s “legalization” of cannabis certainly does not align with Congress’s intent, the residency requirements do. The residency requirements attempt to prevent any interstate commerce in cannabis and to prevent cannabis from Washington from moving into states where it remains illegal, like Idaho.
The Court rejected the idea that Congress “substantially legalized” cannabis just because the Department of Justice exercised prosecutorial discussion to not prosecute state-legal operators for cannabis crimes.
Privileges and Immunities Clause
The Court also granted summary judgment on Brinkmeyer’s claim that the residency requirement violated the Privileges and Immunities Clause of the US Constitution. The Privileges and Immunities Clause is a provision in the United States Constitution, found in Article IV, Section 2. It prohibits states from discriminating against citizens of other states by denying them the “Privileges and Immunities” that it affords its own citizens.
RELATED: Could Residency Lawsuits Upend Social Equity In Cannabis?
Brinkmeyer argued that Washington’s residency requirement for selling cannabis violates the right to pursue a livelihood and the right to travel, which are protected by the Privileges and Immunities Clause. However, the Court determined that that the right to engage in illegal commerce is not an established right under the Privileges and Immunities Clause because the right to engage in commerce that remains federally illegal is not fundamental.
The Court held that:
- The Dormant Commerce Clause did not apply to Washington’s residency requirement as cannabis remains illegal under federal law. The Dormant Commerce Clause cannot apply when Congress has not exercised its Commerce Clause power to regulate the matter at issue.
- Restricting interstate commerce of cannabis was in line with Congress’s intent and that the residency requirements attempt to prevent any interstate commerce in cannabis and prevent cannabis from moving into states where it remains illegal.
- Citizens do not have any constitutional right to engage in illegal activity.
If this case is appealed, it will go to the US Court of Appeals for the Ninth Circuit. If the 9th Circuit upholds the ruling it will likely create a circuit split with the First Circuit’s holding on the residency issue in its Maine case.
It is possible that this case will end up being argued before the US Supreme Court. However, the issue could be moot as Washington lawmakers are considering a bill that would remove the residency requirement from Washington law. We will continue to monitor the situation.
Daniel Shortt is a corporate and regulatory attorney based in Seattle, Washington who works extensively with entrepreneurs in the cannabis industry. You can contact him at info@or (206) 430-1336. This article originally appeared on Green Light Law Group and has been reposted with permission.