Border Wars—Colorado Weed Under Fire

December 22, 2014

Law Week Colorado

News of Nebraska and Oklahoma suing Colorado for legalizing recreational marijuana spread like a windswept wildfire on the prairie.  The case raises to the forefront the lingering question of the impacts of the Supremacy Clause and the federal Controlled Substances Act (“CSA”) on the several states whose voters have passed marijuana legalization or decriminalization measures.

The suit, filed as an original action in the U.S. Supreme Court on December 18, 2014, is novel in the debate over marijuana, and presents the Justices with thorny questions regarding Federalism, states’ inherent and retained rights under the 10th Amendment, as well as federal investigative and prosecutorial discretion.

The CSA, enacted in 1970, places drugs into five schedules.  Marijuana is on Schedule I, and therefore outright banned, along with drugs like LSD and heroin.

Beginning with California in 1996, 23 states and the District of Columbia—including Colorado in 2000—have enacted some form of medical marijuana legalization/decriminalization.  In 2012, Coloradans passed Amendment 64, legalizing recreational marijuana, and, joined by Washington, became the first states in the Union to do so.  Most recently, Oregon and Alaska legalized recreational marijuana this year.

Initiatives in Nebraska and Oklahoma attempting to place medical marijuana amendments on the ballot for 2014 failed for lack of sufficient signatures.  Proponents in each state pledged to raise the initiatives again in 2015.

To implement Colorado’s recreational marijuana amendment, the Colorado Legislature tasked the Department of Revenue and the Department of Public Health and Environment with regulating marijuana cultivation, sale and taxation.  Through mid-December, Colorado has collected approximately $30 million in tax revenue on the sale of marijuana; however, due to a provision in TABOR, the State may be required to refund the taxes.

With respect to the federal government’s enforcement of the CSA, the Obama Administration has issued several policy statements (popularly termed the “Cole Memos”), indicating the Executive Branch will focus on eight law enforcement and prosecutorial priorities (“the Great Eight”), as opposed to vigorously enforcing federal marijuana laws.  These policy objectives include:

  • Preventing the distribution of marijuana to minors;
  • Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;
  • Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
  • Preventing state-authorized marijuana activity from being used as cover or pretext for the trafficking of other illegal drugs or other illegal activity;
  • Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
  • Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
  • Preventing growing marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
  • Preventing marijuana possession or use on federal property.

Additionally, the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a similar policy statement regarding money laundering laws, all in an effort to allow banks to service the growing marijuana industry. 

On December 11, 2014, the Administration indicated in yet another policy statement that it will no longer prosecute federal marijuana laws on Tribal lands, even where the Tribal lands lie in states that have not legalized marijuana.  There are six tribal reservations in Nebraska, raising the question of whether Nebraska would sue a tribe that legalizes marijuana on its reservation.  Oklahoma does not have Indian reservations, as they were dissolved prior to statehood.  

As mere policy statements, however, the Administration’s pronouncements of prosecutorial and investigative priorities can carry no legal force or effect, and could be reversed by future administrations.

In order to allow banking for the marijuana industry, Colorado recently took steps to create the world’s first credit union for the industry, called the “Fourth Corner Credit Union.”  Although it has been issued a state charter, it awaits insurance from the National Credit Union Administration, a process which can take two years.  In the interim, it will be able to operate pending the insurance decision.

With the Colorado Supreme Court’s addition of Comment 14 to Colorado Rule of Professional Conduct 1.2 in March of this year, Colorado attorneys are now able to counsel and represent the marijuana industry without fear of running afoul of the ethics rules.  The U.S. District Court for the District of Colorado, however, recently proposed a rule opting out of Comment 14, which, if adopted, would bar attorneys appearing in the federal court from advising clients in the industry with regard to future conduct.  As an example of the schism between state and federal courts, the U.S. Bankruptcy Court has on at least two occasions dismissed bankruptcy petitions filed by marijuana industry participants, based on their violation of federal marijuana laws.  

With regard to the lawsuit brought by Nebraska and Oklahoma, one of the areas of the Supreme Court’s original and exclusive jurisdiction, are disputes among the several states.  The complaint brings two claims: 1) declaratory judgment; and 2) injunctive relief.  In particular, Nebraska and Oklahoma ask the Justices to declare Amendment 64 unconstitutional under the Supremacy Clause of the U.S. Constitution on two bases: 1) that Amendment 64 stands as an obstacle to the accomplishment of the full purposes and objectives of Congress in enacting the CSA; and 2) that it stands as an obstacle to the accomplishment of the full purposes and objectives of Congress (and the overall U.S. government) in entering into several foreign treaties regarding the prohibition of marijuana.

For injunctive relief, the plaintiff states ask the Court to enjoin Colorado from implementing Amendment 64 and any enabling statutes and regulations.  Interestingly, the complaint is silent with regard to the earlier-enacted Amendment 21 allowing medical marijuana.  Currently, the Colorado Supreme Court is considering its first case on medical marijuana involving an employee’s use of medical marijuana, which case touches on issues of preemption (Coats v. Dish Network). 

Nebraska and Oklahoma cite the alleged increase in interstate trafficking of Colorado marijuana—and the attendant strain on law enforcement, judicial and corrections resources—as the grounds for the suit.  Anecdotally, reports have surfaced of profiling Colorado drivers visiting surrounding states which have not legalized marijuana, including Wyoming, Kansas, Oklahoma and Nebraska.  Further, Washington, Oregon and Alaska (the other states with recreational marijuana laws) are not named as parties to the suit, because Nebraska and Oklahoma do not share a common border with them.

The Supreme Court has not yet accepted the case; however, given the importance of the issues presented—and that approximately half of the states could potentially be affected—the Court will likely take the case.  The chances of the Court taking the case would increase if other states seek to join in the action, however, the merits of the underlying legal questions would not be affected.

At its essence, the case presents the question whether Amendment 64—and, by implication, the various other enactments decriminalizing marijuana across the country—presents a “positive conflict” with the CSA.  If the Court determines a positive conflict exists, Amendment 64 will be declared unconstitutional under the Supremacy Clause.  If it is not a positive conflict, the Court need not declare it unconstitutional.

On its face, the CSA does not “occupy the field” of drug laws; accordingly, there is no express or field preemption of Amendment 64.  Instead, the issue is whether Amendment 64 stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in enacting the CSA.  Another form of positive conflict is where a person cannot comply with both state and federal law simultaneously; however, that form of conflict is not implicated with marijuana laws, as one can simply abstain from use or possession.

In areas of traditional states’ rights, such as public health and police powers, there is a presumption against preemption—a presumption which Amendment 64 will enjoy.  Further, Amendment 64 does not portend to affect the CSA, nor does it inhibit federal enforcement of the CSA, should the federal government decide to enforce its laws. 

On the other hand, by allowing, and, perhaps, facilitating the perceived expansion of the cultivation, sale and use of marijuana, a logical argument can be made that Amendment 64 stands as an obstacle to the full purposes of Congress’ ban on marijuana under the CSA.  Given the Court’s divergent views on issues generally, and especially states’ rights, it is difficult to anticipate how the Court may come down on the issue.  The issue will be perhaps especially difficult for those inherently conservative Justices who have historically championed states’ rights.

The ramifications of declaring Amendment 64 unconstitutional are tremendous, and likely impossible to fully foresee.  The potential effects on Colorado and the other states whose citizens have decided federal drug policy on marijuana is outdated and imprudent could only be described as disastrous.  On the other hand, if the Court determines there is no positive conflict, a long-lingering question will be resolved and other states will likely be emboldened to move towards legalization. 

The mere fact of the pending suit may spur Congress to amend the CSA to remove marijuana from Schedule I.  Given the partisan wrangling recently displayed in Congress, however, swift action is unlikely.  The Obama Administration has shown its willingness to exercise the unilateral Executive Powers to the limits of the Constitution—most recently with foreign policy towards Cuba, and, before that, immigration reform—and so perhaps will take further action.

Regardless of the eventual outcome, what is assured is Colorado’s place at the spear’s tip of the debate over individual and State’s rights.  

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

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