Horn v. Med. Marijuana, Inc.
| Decision Date | 21 November 2019 |
| Docket Number | Case # 15-CV-701-FPG |
| Parties | DOUGLAS J. HORN, et al., Plaintiffs, v. MEDICAL MARIJUANA, INC., et al., Defendants. |
| Court | U.S. District Court — Western District of New York |
Presently before the Court are the parties' cross-motions for reconsideration of the Court's April 17, 2019 Decision and Order, which resolved the parties' motions for summary judgment.1 For the reasons that follow, Defendants' motions for reconsideration (ECF Nos. 97, 106) are GRANTED IN PART and DENIED IN PART, and Plaintiffs' cross-motion for reconsideration (ECF No. 112) is DENIED.
Both sides cite Federal Rule of Civil Procedure 54(b) as the basis for their motions. Rule 54(b) provides:
[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.
"A district court has the inherent power to reconsider and modify its interlocutory orders prior to the entry of judgment . . . ." United States v. LoRusso, 695 F.2d 45, 53 (2d Cir. 1982).
A litigant seeking reconsideration must set forth "controlling decisions or data that the court overlooked—matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Richard v. Dignean, 126 F. Supp. 3d 334, 337 (W.D.N.Y. 2015); see also Micolo v. Fuller, No. 6:15-CV-06374, 2017 WL 2297026, at *2 ().
In their motions, both sides take issue with the Court's ruling on whether "Dixie X Dew Drops"—the product at issue—constituted a controlled substance under the federal Controlled Substances Act ("CSA"). See ECF No. 97-3 at 4; ECF No. 112-3 at 3. Some background may be helpful.
Dixie X is a CBD oil. "CBD is short for 'cannabidiol,' and it is one of the 'unique molecules' found in the Cannabis sativa plant." Horn v. Med. Marijuana, Inc., 383 F. Supp. 3d 114, 119 (W.D.N.Y. 2019) (internal citation omitted). The Cannabis sativa plant is the plant from which marijuana and hemp are derived. Id. The difference between the two is that "drug-use cannabis is produced from the flowers and leaves of certain strains of the plant, while industrial-use [hemp] is typically produced from the stalks and seeds of other strains of the plant." Id. This leads to differences in the concentration of tetrahydrocannabinol ("THC") in each variety. THC is "the substance that gives marijuana its psychoactive properties." Id.
In 2012, the time of the relevant events, the general rule was that all parts and derivatives of the Cannabis sativa plant were defined as "marijuana" and prohibited under the CSA.2 See id. at 123 (citing 21 U.S.C. §§ 802(16), 841(a)(1)). Despite its low THC content and lack of psychoactive effect, the industrial hemp plant and any derivatives fell within this definition because hemp "is a variety of the Cannabis sativa plant." Id.; United States v. White Plume, 447 F.3d 1067, 1073 (8th Cir. 2006) ().
But the CSA carved out several exceptions to this general rule. Specifically, "[e]xcluded from the definition of marijuana were certain parts of the plant that are incapable of germination: (1) the mature stalks of the Cannabis sativa plant, (2) fiber produced from the stalks of the Cannabis sativa plant, (3) oil or cake made from the seeds of the Cannabis sativa plant, (4) any compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks, fiber, oil, or cake[], and (5) the sterilized seed of the Cannabis sativa plant." Horn, 383 F. Supp. 3d at 123. Importantly, however, "resin extracted from mature hemp stalks was not excepted from the definition of marijuana." Id.; see also 21 U.S.C. § 802(16) (2012). As a result, hemp-based products could only be lawfully manufactured and sold in the United States to the extent they were derived from excepted parts of the Cannabis sativa plant (and thus were not considered marijuana under the CSA).
But there was another wrinkle: the CSA also separately prohibited THC, see 21 U.S.C. § 812(c)(17), and many hemp-based products contain "trace amounts of THC." Hemp Indus. Ass'n v. Drug Enforcement Admin., 333 F.3d 1082, 1085 (9th Cir. 2003) [hereinafter "Hemp I"]. Thisraised a question: were products made from excepted parts of the Cannabis sativa plant nonetheless unlawful because they contained miniscule, non-psychoactive amounts of THC?
In a pair of cases from the early 2000s, the Ninth Circuit answered that question in the negative. See Hemp I, 333 F.3d at 1089-90; Hemp Indus. Ass'n v. Drug Enforcement Admin., 357 F.3d 1012 (9th Cir. 2004) [hereinafter "Hemp II"]. First, it held that the prohibition against THC referred to synthetic, not naturally occurring, THC. See Hemp I, 333 F.3d at 1089-90; Hemp II, 357 F.3d at 1017. Second, it held that products made from excepted parts of the Cannabis sativa plant "were not included in the definition of marijuana—and therefore were not unlawful under the CSA—even if they contained trace amounts of [naturally occurring] THC." Horn, 383 F. Supp. 3d at 123. The Ninth Circuit reviewed the legislative history and concluded that "Congress 'knew what it was doing' when it chose to exempt certain derivatives from the definition of marijuana notwithstanding the presence of trace amounts of THC." Id. at 124.
Based on these conclusions, the Ninth Circuit invalidated new DEA regulations to the extent they purported to ban hemp-based products that contained trace amounts of naturally occurring THC. See Hemp II, 357 F.3d at 1018-19. But products containing synthetic THC or marijuana were still prohibited under the CSA. See Horn, 383 F. Supp. 3d at 124.
This Court relied on the above authority to conclude that, in 2012, Dixie X was a controlled substance. See Horn, 383 F. Supp. 3d at 124. Given the apparent absence of dispute, the Court proceeded on the assumption that Dixie X's CBD byproduct constituted a resin extracted from the mature stalk. See id. at 124. This led the Court to conclude that Plaintiffs had a sufficient claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), as a RICO claim may be predicated on the distribution and sale of a controlled substance like marijuana. Id. at 131-32.
Both sides now move for reconsideration of this aspect of the Court's prior order. Defendants argue that the Court erred insofar as it assumed that Dixie X contained "resin extract derived from the Cannabis sativa plant" and thus constituted marijuana. ECF No. 97-1 at 5; see also ECF No. 106. Defendants dispute that fact and contend there is no evidence in the record to support that conclusion.
Plaintiffs, on the other hand, dispute the Court's reasoning but not its conclusion. They contend that "any product that contains any amount of THC was a Schedule I controlled substance in 2012." ECF No. 112-3 at 3.
The Court takes up Plaintiffs' argument first and rejects it. Plaintiffs assert that Dixie X was a controlled substance because it contained THC, which was a Schedule I controlled substance in 2012. See 21 C.F.R. § 1308.11(d)(31). They also assert that Dixie X remained a controlled substance under 21 C.F.R. § 1308.35 because it was intended for human consumption. See 21 C.F.R. § 1308.35(a) ().
The problem with Plaintiffs' argument is that it runs headlong into the Hemp cases, where the Ninth Circuit invalidated the very regulations on which Plaintiffs rely. See Hemp II, 357 F.3d at 1019 (). The court stated in no uncertain terms that those regulations "may not be enforced with respect to THC that is found within the parts of Cannabis plants that are excluded from the CSA's definition of 'marijuana' or that is not synthetic." Id. at 1018. Accordingly, the mere presence of naturally occurring THC in a product does not render it a controlled substance so long as it is derived from an excepted part of theCannabis sativa plant. See id. at 1018-19. Therefore, the Court denies Plaintiffs' motion for reconsideration.
Defendants' argument is persuasive, however. Defendants clarify that they dispute that Dixie X contains a resin extracted from a mature hemp stalk. They submit the affidavit of Stuart Titus, CEO of Medical Marijuana, Inc., who avers that the CBD extract was not produced from the resin of any mature stalks. ECF No. 97-2 at 2.
Despite having an opportunity to do so, Plaintiffs do not proffer any evidence to show that Dixie X contains synthetic THC or is derived from a non-excepted part of the Cannabis sativa plant. Instead, Plaintiffs proffer supplemental affidavits of Kenneth D. Graham, their toxicology expert, who merely reiterates his opinions about the legality of hemp-based products. See ECF Nos. 112-1, 120. Those affidavits fail to create a genuine issue of material fact. See SLSJ, LLC v. Kleban, 277 F. Supp. 3d 258, 268 (D. Conn. 2017) ().
Accordingly, because Plaintiffs have not presented any evidence to show that Dixie X contains either synthetic THC or natural THC derived from marijuana—as the CSA defines that term—Plaintiffs cannot prove their RICO claim to the extent it is premised on the allegation that Dixie X is a controlled substance. See Horn, 383 F. Supp. 3d at 131-32 (discussing RICO standards).
Nevertheless, the Court disagrees with Defendants that the RICO claim should be...
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