Marijuana Moment: Marijuana Companies Seek To Defend Trump’s Rescheduling Move By Intervening In Opponents’ Lawsuits

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Two medical marijuana companies are taking steps in federal court to intervene in ongoing lawsuits challenging the Trump administration’s ongoing cannabis rescheduling process by joining the side of the government and opposing the litigation from prohibitionists.

The new motion—filed on Monday by attorneys for MedPharm Iowa, LLC, which does business as Bud & Mary’s, and Tri-Mountain Pure, LLC—says the businesses “would be directly harmed” if cannabis reform opponents’ challenges are successful.

Bud & Mary’s, which operates in Iowa, and Tri-Mountain Pure, which is based in Pennsylvania, have both already applied for federal registration using a Drug Enforcement Administration (DEA) form that the agency made available for cannabis businesses seeking protections and benefits that come with rescheduling, the motion says.

The filing claims that the businesses would suffer at least five different kinds of harm if the litigation ends up blocking rescheduling.

First, they said that due to marijuana being partially moved to Schedule III of the Controlled Substances Act (CSA), they are no longer subject to the tax penalty known as 280E that disallows companies that deal in Schedule I and II substances from writing off business expenses. If rescheduling is reversed, they would incur “direct economic harm,” the motion says.

Second, they argue, they would lose the benefit of their pending registrations with DEA “and the business planning they have undertaken in reliance on the final order.”

“The companies would be forced to postpone or abandon planned initiatives, absorb sunk compliance costs, and continue operating under the significant legal and commercial burdens associated with schedule I status,” the motion from attorney Shane Pennington of Blank Rome LLP says.

Third, reverting cannabis to Schedule I status would impose research-related burdens that directly affect” the companies’ businesses and patients.

“The classification restricts clinical research, physician collaboration, university partnerships, product development, collection of medical efficacy data, patient access to insurance reimbursement, and participation in state and federal grant programs,” the filing says. “Those restrictions impair innovation and prevent the development of new therapies for the Iowa and Pennsylvania patients Intervenors serve.”

Fourth, a reversal of the federal reform would hurt the companies’ commercial relationships.

“Although banking access has improved in some respects, marijuana’s schedule I status has made many financial institutions, insurers, payment processors, lenders, secure-cash transporters, investors, and commercial vendors unwilling to work with state-licensed marijuana companies, including Intervenors, or willing to do so only at substantially increased cost,” the motion says. “Schedule I status also limits access to national vendors that provide laboratory equipment, pharmaceutical manufacturing systems, software, logistics services, financing, and other business-critical goods and services.”

Fifth, putting cannabis back in Schedule I would “impair” the businesses’ “ability to recruit and retain specialized personnel.”

“Highly qualified scientists, pharmacists, physicians, executives, and other professionals are often reluctant to work for a schedule I marijuana business because of perceived federal legal risks and professional-licensing concerns,” the filing says. “That limits Intervenors’ ability to attract the talent necessary to expand and improve their patient-focused medical marijuana operations.”

The litigation challenging the federal cannabis rescheduling move is actually comprised of three separately filed lawsuits that have been consolidated by the U.S. Court of Appeals for the District of Columbia Circuit.

One suit is led by prohibitionist organization Smart Approaches to Marijuana (SAM) and the National Drug and Alcohol Screening Association (NDASA), who claim they are “aggrieved” by the reform. Another comes from a coalition of anti-marijuana activists, substance misuse professionals, doctors and a cannabis-focused biopharmaceutical corporation. A third challenge was filed by the attorneys general of Indiana, Nebraska and Louisiana—though the later state later withdrew from the suit.

The new motion to intervene says the federal government, which is currently the only party involved in defending rescheduling in the litigation, cannot “adequately” represent the companies’ interests in the dispute.

“Although Intervenors seek to intervene in support of DOJ, as a government agency, DOJ will necessarily focus its defenses on its own institutional interests and duties. DOJ therefore cannot adequately represent Intervenors’ private commercial interests,” it says. “Unlike DOJ, Intervenors have a specific, focused interest in the transfer of their products to schedule III and the opportunity to register with DEA to ensure their operations do not violate the Controlled Substances Act.”

The filing argues that Bud & Mary’s and Tri-Mountain Pure “are not merely bystanders to this litigation.”

“They are state-licensed medical-marijuana operators that have invested substantial resources in reliance on DOJ’s final order, have applied for DEA registration in the wake of that final order, and will suffer direct economic, regulatory, and operational harm if petitioners succeed in vacating or delaying the final order,” it says. “Intervenors therefore have a concrete interest in intervening to defend DOJ’s final order.”

The development in the litigation comes as DEA this week began an administrative hearing on the marijuana rescheduling proposal in which government witnesses and lawyers are highlighting the medical uses and relative safety of cannabis while opponents are challenging the process by which officials developed the recommendation for the reform.

Under an action announced by Acting Attorney General Todd Blanche in April, marijuana products regulated by a state medical cannabis license immediately moved from Schedule I of the Controlled Substances Act (CSA) to Schedule III, as did any marijuana products that are approved by the Food and Drug Administration (FDA). The ongoing hearing is considering broader cannabis rescheduling, including for recreational products.

The suit from SAM and NDASA challenging rescheduling was signed by attorneys at Torridon Law PLCC, where former U.S. Attorney General William Barr, led DOJ during Trump’s first term in office, is a partner.

SAM had announced in January that it was hiring Barr’s firm to legally combat cannabis rescheduling after Tump signed an executive order directing officials to complete the process expeditiously.

Meanwhile, the House Appropriations Committee voted to block federal officials from taking further steps to carry out cannabis rescheduling. Bipartisan lawmakers told Marijuana Moment, however, that they don’t expect the legislative effort to block rescheduling to succeed.

Separately, SAM and other plaintiffs filed a lawsuit seeking to block a Trump administration program to cover certain hemp-derived products through Medicare. That case was dismissed by a federal judge in May, but that decision is being appealed.

Read the full motion to join the marijuana rescheduling lawsuit below:

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