Appeals court smokes NY weed license plan

MANHATTAN (CN) — Second Circuit judges ripped New York’s cannabis seller licensing scheme Tuesday, ruling in favor of two out-of-state vendors who say the state unfairly prioritizes applicants who were convicted of state marijuana-related offenses.

The three-judge panel reversed a trial court’s finding that cannabis companies Variscite New York Four and Variscite New York Five can’t challenge the practice under the Constitution’s dormant commerce clause, which prevents states from discriminating against interstate commerce, because the law doesn’t apply to markets that Congress has criminalized.

“That was an error,” Senior U.S. Circuit Judge Dennis Jacobs, a George H. W. Bush appointee, wrote the majority opinion.

Congress must clearly authorize exceptions to the dormant commerce clause, Jacobs said, and has made no exception when it comes to state-permitted weed sales. New York’s Legislature voted to legalize the stuff in March 2021.

“The only thing Congress has clearly authorized by criminalizing marijuana is federal prosecution for the manufacture, distribution, and possession of marijuana," Jacobs wrote. “Congress has given New York no clear permission to favor its residents over others whose businesses skirt the federal drug laws.”

Chief U.S. Circuit Judge Debra Ann Livingston dissented in part. She said her colleagues were wrong to conclude that the dormant commerce clause bars partial state restrictions on “federally illegal interstate commerce that amount to something more than an incidental burden and something less than perfect protectionism.”

“In my view, that is neither a ‘bright-line rule’ nor a sensible one,” the George W. Bush appointee wrote.

When Congress criminalizes a market, she continued, “I would presume that it authorizes states to enact their own laws that aid that objective, whether by banning, restricting, or burdening those transactions. And I certainly would not interpret a doctrine implied from the commerce clause — an affirmative grant of power to Congress — to require states to enact laws that promote the very interstate commerce Congress wants to eradicate.”

Alexandria Twinem, an attorney for the state, argued a similar point during oral arguments in December. She said Congress made clear that it doesn’t want market competition in the drug trade.

Pointing to the federal Controlled Substances Act, Twinem said, “It wanted all of it to be forbidden.”

The state has also said its licensing practice doesn’t violate the dormant commerce clause because its purpose is restorative justice, not economic protectionism.

New York’s Office of Cannabis Management said it was reviewing the decision and had no comment.

U.S. Circuit Judge Guido Calabresi, a Bill Clinton appointee, joined Jacobs’ opinion in full.

Follow @NinaPullano