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Texas Supreme Court upholds ban on making smokable hemp products

The ruling forces two companies to close their smokable hemp division in Dallas and move those operations to their facility in Oklahoma.

AUSTIN, Texas (CN) — Texas’ ban on manufacturing smokable hemp products is in accord with its long history of regulating cannabis, the state Supreme Court ruled Friday, so there is no vested right to this business endeavor under the Texas Constitution.

The history of hemp in America goes back to the Founding Fathers. George Washington grew large crops of it at his farms in Mount Vernon, Virginia, and used its fibers to repair his fishing nets.

Colonists made rope, clothing, ship sails and numerous other goods from it.

But in the early- and mid-20th century the federal government and U.S. states, cracking down on the growing popularity of ingesting marijuana – the flowers of hemp plants that contain the intoxicating compound THC – passed statutes barring use of marijuana.

Both marijuana and hemp derive from the cannabis plant. The laws differentiated the two, defining hemp as the plant’s mature stalks and exempting it from prohibition.

But President Richard Nixon’s signing of the Controlled Substances Act in 1970 effectively banned hemp production because it prohibited substances containing any THC, whether considered marijuana or hemp.

Hemp came full circle in 2018 with Congress’ passage of the Agricultural Improvement Act, also called the Farm Bill.

The Farm Bill distinguishes marijuana from hemp by the latter’s low amount of THC and allows farmers to grow hemp.

It also authorized transport of hemp-based products across states lines for commercial purposes, and sale and possession of them with no restrictions. But it also give states leeway to devise their own hemp-regulation schemes.

Taking the feds’ lead, the Texas Legislature passed HB 1325 in 2019, authorizing the licensed cultivation of hemp and barring local governments from regulating the industry.

The Farm Bill opened the floodgates for entrepreneurs’ production of goods containing CBD, a chemical derivative of the cannabis plant that does not produce the intoxicating effects of THC.

CBD is said to have many health benefits, providing relief for seizures, pain, anxiety, depression and insomnia. U.S. companies now incorporate CBD in a wide range of products—tinctures, lotions, chocolate bars, gummies, chap sticks, bath bombs and oils for dogs, cats and people.

Some of the most popular forms of consuming CBD-containing hemp is via smoking cigarette-like tubes and vape cartridges.

But Texas’ bill directed the state’s health and human services commissioner to adopt a rule effective August 2020 stating, “The manufacture, processing, distribution, or retail sale of consumable hemp products for smoking is prohibited.”

Four companies quickly sued, led by Dallas-based affiliates Crown Distributing LLC and America Juice Co., makers of Hempettes, which are sold under their Wild Hemp brand in packaging identical to cigarette packs and marketed as “the first cigarette-styled CBD pre-roll in the world.”

After blocking the law with an injunction, a state district judge in Austin issued a final judgment last November declaring it unconstitutional and blocking enforcement of the rule barring production and sales of smokable hemp products.

Texas appealed to the state Supreme Court, which heard arguments in March.

The state’s attorney argued the ban is justified due to Texas’ interest in preventing residents suffering health complications from smoke inhalation.

Crown Distributing and America Juice Co.’s counsel, Constance Pfeiffer of the Houston firm Yetter Coleman, countered the ban makes no sense because the Dallas-based plaintiffs merely had to move some of their operations to Oklahoma “where they can lawfully manufacture and process hemp and ship it right back into Texas.”

In a unanimous decision, the all-Republican Texas Supreme Court sided with the state Friday.

Justice Jeff Boyd rejected the hemp companies’ argument that the Texas Constitution’s due-course clause protects their right to produce smokable hemp wares as a common and lawful occupation.

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Boyd noted the companies had argued that because laws passed by the federal government and Texas in the 20th century barring marijuana possession excluded the “non-psychoactive portions of the cannabis plant,” namely its mature stalks, that manufacture and sale of hemp products has always been legal in the U.S. – so Texas was prohibiting them from engaging in a business that has never been outlawed.

But Boyd found the focus must be on the flower of the plant, not the stalks, because that is what the hemp companies use to make their pre-rolls.

“Any product made from other parts of the plant—the flowers, buds, or leaves, for example—was considered to be marihuana and was completely illegal under prior law. The record in this case establishes that the cannabis flower is the key and essential ingredient in the smokable products the Hemp Companies desire to process and manufacture,” he wrote in a 31-page order.

Though Texas now allows the manufacture of products from hemp, this does not transform Crown Distributing’s and America Juice Co.’s desire to produce hemp cigarettes into a constitutionally protected interest, Boyd determined.

“Considering the long history of the state’s extensive efforts to prohibit and regulate the production, possession, and use of the Cannabis sativa L. plant, we conclude that the manufacture and processing of smokable hemp products is neither a liberty interest nor a vested property interest the due-course clause protects,” Boyd concluded.

The high court reversed the trial court’s determination the ban is unconstitutional and rendered judgment for Texas.

In a concurring opinion joined by three of his colleagues, Justice Evan Young said the court needs to resolve whether the due-course clause in the Texas Constitution, adopted in 1876, is of the same scope or broader than the federal due-process clause in the 14th Amendment.

“The very fact that the lower court used the Texas due-course clause to invalidate the statute here illustrates why we should soon expect cases that require more from us,” he wrote in a 34-page opinion.

Another attorney for the hemp companies, Chelsie Spencer with Ritter Spencer in Addison, Texas, said it will force them to close their smokable hemp division in Dallas and move it to their facility in Oklahoma.

“The state unfortunately kicked them out today. Because of this decision, the companies must move manufacturing operations out of state,” she said in an email.

Spencer underscored that in refuting the companies’ claims, Boyd wrote the due-course clause “has never been interpreted to protect a right to work in fields our society has long deemed ‘inherently vicious and harmful.’”

Spencer said, “It is telling when the Court insinuates that cannabis is ‘inherently vicious and harmful.’ The stigma against a plant with verified efficacious medical usage continues in Texas.”

The loss to Texas' coffers will be substantial, she added.

She said an economic expert retained for the case testified at trial that with the ban reinstated, Texas will lose over $1 million in tax revenue through 2025 from the Wild Hemp companies alone.

Zain Maghani, CEO of America Juice Co. and Wild Hempettes LLC, said the ruling is a huge disappointment because the companies put a lot of energy and money into the litigation.

"A massive blow to adults who need access to the convenience that smokable hemp offers," he said in a statement. "The only option now is to change the law in Texas, and that means consumers have to pound on the doors of their state representatives. And companies that previously have not stepped up to secure their rights in the state, now need to fund a lobbying effort to change the law."

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