Marijuana Moment: Oregon Marijuana Business Files New Lawsuit Challenging Ban On Interstate Cannabis And Hemp Commerce

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An Oregon marijuana business has filed a new federal lawsuit against the state, challenging the constitutionality of laws prohibiting interstate cannabis commerce.

After filing an initial suit in 2022—and later withdrawing it amid expectations of unspecified “big things” coming—the cannabis wholesaler Jefferson Packing House (JPH) filed a revised complaint on Wednesday with the U.S. District Court for the District of Oregon.

The latest suit is lengthier than the original, and it makes additional arguments about the alleged illegality of state laws barring marijuana and hemp businesses from exporting products across state lines.

At issue in the case is the Dormant Commerce Clause (DCC) of the U.S. Constitution, which generally prevents states from imposing restrictions on interstate commerce in order to ensure competitiveness in the open market.

While marijuana remains federally illegal, the plaintiffs assert that the DCC still precludes Oregon from imposing trade restrictions between states.

“Oregon law harms JPH by increasing its operating costs and preventing it from taking advantage of economies of scale,” the filing states, adding that state statute also harms the business with respect to hemp, which was federally legalized under the 2018 Farm Bill.

Barring exports of marijuana and hemp puts JPH “at a competitive disadvantage in the market,” the complaint says, because it can’t source cannabis products from out of state and can’t ship products outside of Oregon, “both of which limit its customer base and ability to offer a complete range of products at the best prices.”

State law “discriminates against interstate commerce by nakedly prohibiting such commerce, without any legitimate, non-protectionist purpose, and is therefore prohibited by the Dormant Commerce Clause of the U.S. Constitution,” it says. “There is no constitutionally adequate reason for Oregon, or any other State, to bar the import or export” marijuana or hemp.

“Attempting to appease the perceived enforcement priorities of the federal government to induce the DOJ to continue its policy of non-enforcement of state-legal marijuana activities (which violate federal law equally as much as interstate commerce in marijuana) implicates fatal separation of powers concerns, as only Congress can authorize the States to regulate interstate commerce, not the DOJ, an agency of the executive branch.”

Therefore, JPH is requesting that the court declare state law prohibiting interstate commerce unconstitutional, enjoin the state from enforcing the law and pay legal fees associated with the lawsuit.

In a blog post about the case, attorney Vince Sliwoski of the firm Harris Sliwoski said that, if the plaintiffs were to prevail in the suit, “Oregon would have the right to appeal, of course, and likely would; and it’s possible the Ninth Circuit would take up the case. The final stop would be the U.S. Supreme Court, though a very small percentage of federal cases get that far.”

But this is the second time JPH has attempted to overturn the state law and gain the right to engage in interstate commerce, which was technically legalized in Oregon under a bill signed by then-Gov. Kate Brown (D) in 2019. That law stipulates, however, that allowing for imports and exports of cannabis across state lines is contingent on a change in federal policy.

Lawyers for the state previously asked the court to dismiss the earlier case, asserting that JPH lacked standing. In a motion, they wrote that because federal law also prohibits the export of cannabis products, the company’s “alleged injuries are not likely to be addressed by the relief that it is seeking.” Further, they argued the DCC does not apply as the lawsuit describes it.

“That doctrine prohibits states from treating interstate and intrastate commerce differently,” the state’s filing said. “Here, however, there is no interstate commerce to treat differently.”

A reply last March from Jefferson, however, contended that the federal Controlled Substances Act (CSA) “did not ‘eliminate’ commerce in marijuana any more than a criminal statute ‘eliminates’ the act or conduct it forbids.”

It remains unclear what might have led the company to drop its prior legal challenge. Federal rescheduling of marijuana—as is currently being contemplated by the Trump administration—would conceivably allow some cross-border cannabis trade, at least of any medications approved by the Food and Drug Administration (FDA), but it’s unlikely a Schedule III designation in itself would allow state-licensed cannabis businesses to broadly engage in interstate commerce.

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Oregon, California and Washington State have each enacted laws related to interstate cannabis commerce in recent years.

In 2022, a federal appellate court ruled that Maine’s law prohibiting non-residents from owning medical marijuana businesses in the state violated the DCC. Some experts believe the same rationale invalidating the residency restrictions comes into play with state-level bans on marijuana imports and exports.

Disallowing imports and exports of medical cannabis between consenting states could be construed as similarly protectionist and unconstitutional, the thinking goes.

Separately in Oregon, the governor and other state officials are asking a federal appeals court to reverse a judge’s decision blocking a voter-approved law to require licensed marijuana businesses to enter into labor peace agreements with workers and mandate that employers remain neutral in discussions around unionization.

Read the Oregon cannabis interstate commerce legal complaint below:

Photo courtesy of Mike Latimer.

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