ALABAMA – The SB 46 proposed by Senator Tim Melson provides a broad framework for a comprehensive medical cannabis regime. The proposal envisages a competitive licensing program in which licenses are granted to a limited number of breeders, processors and donors of medical cannabis.
Strict residence requirements apply to the cultivation and the integrated licensees. For example, an applicant for a cultivation license must:
Provide records showing that the controlling interest is attributable to an individual or persons with proof of residence in that state for an uninterrupted period of at least eight years prior to the application date.
Likewise a vertically integrated license:
Recent United States Supreme Court precedents for review of residency requirements
As we found out in the summer of 2019, the United States Supreme Court, in a 7-2 vote in the Tennessee Wine and Spirits Retailers Association against Thomas, struck down a Tennessee law requiring anyone with a retail license to sell alcohol Wishing in Tennessee was required to have lived in the state for at least two years.
The Court’s majority opinion, drafted by Justice Alito, found that the Tennessee Act’s two-year residency requirement “specifically discriminates against non-residents” in violation of the Constitution’s commercial clause.
All nine judges in the court appeared to agree that a similar discriminatory residence requirement would be unconstitutional if imposed on retailers selling anything other than alcohol, such as groceries or auto parts. However, the court disagreed as to whether the 21st amendment, which lifted the ban and gave each state some latitude in adopting alcohol-related public health and safety measures, saved Tennessee law. The majority felt that the 21st amendment did not save the Tennessee Residence Act because the act “has little to do with public health and safety.”
Residency Challenges in the Cannabis Industry
Most commentators agree that while the Court explicitly examined residency requirements in the alcohol industry, the same trade clause analysis we conducted applies to other industries. It should come as no surprise that since the court ruling in the Tennessee Wine and Spirits Retailers Association, a number of residency requirements have been posed in state cannabis laws. Here are some examples:
- In Missouri, a Pennsylvania marijuana investor filed a lawsuit in federal court contesting the requirement that medical marijuana licenses go to companies owned by Missouri residents. The provision in question requires that medical marijuana require facilities to be “majority owned by individuals who were Missouri nationals for at least one year prior to filing the application.” This case is still pending.
- In Maine, the Marijuana Policy Office announced in March 2020 that it would not enforce residency requirements for entrepreneurs applying for adult cannabis licenses. The decision followed a statement from the Maine Attorney General that he believed the residency requirement would not pass constitutional muster as a prohibited form of protectionism. Then, in August, a Portland federal court issued a local ordinance that weighted residence in deciding who to license cannabis to in Portland. The court based its decision on dormant trade clause grounds and relied heavily on the Tennessee Wine and Spirits Retailers Association.
- Finally, an Oklahoma law that required a cannabis company to be at least 75% owned by anyone who has lived in Oklahoma for at least two years has faced a number of challenges in 2020, and those cases are currently pending.
- Takeaways
What does all of this mean for the likelihood that the residency requirements in Alabama’s proposed medical cannabis program would survive a legal challenge?
On the one hand, it’s not difficult to draw a clear line between the Supreme Court ruling in the Tennessee Wine and Spirits Retailers Association and the residency requirements in Alabama’s proposal. As explained above, courts and law enforcement officers in other states have done just that in the two years since this case was ruled. There is certainly a reasonable argument that the type of policies the Supreme Court sought to defend in this case is related to the requirements for being in cannabis. Opponents of the residence requirements will argue that the Tennessee Wine and Spirits Retailers Association has control that cannabis is not materially different from alcohol for the purposes of dormant trade clause analysis and that it should be an open case.
On the other hand, if the history of cannabis law in the United States has taught us anything, it is that things are rarely that simple. Is there anything about the cannabis industry that sets it apart from the alcohol business enough to lead to a different outcome than the Tennessee Wine and Spirits Retailers Association? For example, is the analysis of the trade clause different due to the federal cannabis ban – i.e., a state law governing a state program may for legal reasons violate the role of Congress in regulating international trade if Congress has determined that the regulated activity is this cannot be done in interstate trade? A federal court in Portland recently dismissed this argument, but another court may come to a different conclusion. Or are the residency requirements of a medical cannabis program more “public health and safety” than those of the Tennessee alcohol program, so that the residency requirements for cannabis meet the elevated standards set by the Court? Defenders of the requirements will likely have to prevail against any of these arguments in order for the requirements to pass legal pattern.
If there is anything we know of as virtual certainty, it is that when Alabama passes a medical cannabis law with residency requirements, there will be litigation over, among other things, the constitutionality of those requirements. Given the consequences of this litigation – including tax revenues and the ability of qualified patients to gain access to medical cannabis – this dispute will be significant to the litigants, the cannabis industry, and the citizens of Alabama.
