Ne. Patients Grp. v. Me. Dep't of Admin. & Fin. Servs.

• Decision Date: 11 August 2021
• Docket Number: Docket No. 1:20-cv-00468-NT
• Parties: NORTHEAST PATIENTS GROUP, et al., Plaintiffs, v. MAINE DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES, et al., Defendants.
• Court: U.S. District Court — District of Maine

554 F.Supp.3d 177

NORTHEAST PATIENTS GROUP, et al., Plaintiffs,

v.MAINE DEPARTMENT OF ADMINISTRATIVE AND FINANCIAL SERVICES, et al., Defendants.

Docket No. 1:20-cv-00468-NT

United States District Court, D. Maine.

Signed August 11, 2021

Matthew S. Warner, Alexandra A. Harriman, Preti, Flaherty, Portland, ME, for Plaintiffs.

Paul E. Suitter, Deanna White, Christopher C. Taub, Thomas A. Knowlton, Office of the Maine Attorney General, Augusta, ME, for Defendants Maine Department of Administrative and Financial Services, Kristine Figueroa.

James G. Monteleone, Bernstein Shur, Portland, ME, for Defendant United Cannabis Patients and Caregivers of Maine.

ORDER ON CROSS-MOTIONS FOR JUDGMENT

Nancy Torresen, United States District Judge

Plaintiffs High Street Capital Partners, LLC ("High Street ") and Northeast Patients Group d/b/a Wellness Connection of Maine ("Wellness Connection ") allege that Maine's medical marijuana licensing program violates the dormant Commerce Clause by restricting licenses to residents and resident-owned entities. The Plaintiffs have sued the Maine Department of Administrative and Financial Services ("the Department " or "DAFS ") and the Department's Commissioner, Kirsten Figueroa.¹ Both parties have moved for judgment on a stipulated record (ECF Nos. 14 and 17). I held oral argument via videoconference on July 16, 2021 (ECF No. 25). For the reasons set forth below, the Plaintiffs’ motion is DENIED as to the Department and GRANTED as to Commissioner Figueroa, and the Defendants’ motion is DENIED .

BACKGROUND

In 2009, the Maine Legislature amended the State's existing medical marijuana law to establish a comprehensive system authorizing the sale of medical marijuana. Defs.’ Opp'n to Pls.’ Mot. for J. on the Record and Cross-Mot. for J. on the Record ("Defs.’ Mot. ") 2 (ECF No. 17). The current iteration of the law—the Maine Medical Use of Marijuana Act (the "Act ")—authorizes qualified patients who have a certification from a medical provider for the medical use of marijuana to possess, use, and purchase medical marijuana. Defs.’ Mot. 3; 22 M.R.S.A. § 2423-A. The Act also authorizes two types of entities—registered dispensaries and caregivers—to possess, cultivate, and sell marijuana to qualified patients. Defs.’ Mot. 3; 22 M.R.S.A. §§ 2423-A(2), 2428. While dispensaries and caregivers can engage in similar activities, dispensaries—by statutory design—engage in operations that are much larger than caregivers. For example, caregivers are limited in the number of plants that they can grow and sell, see 22 M.R.S.A. § 2423-A(2), whereas dispensaries can grow an unlimited amount, see 22 M.R.S.A. § 2428(1-A). As of February 2021, there were approximately 3,000 caregivers in the State, and seven dispensaries. Pls.’ Br. in Supp. of J. on the Record ("Pls.’ Mot. ") 3–4 (ECF No. 14). Caregivers accounted for 76 percent of retail sales as of February 2020, with dispensaries accounting for the remaining 24 percent. Pls.’ Mot. 3–4. Together, the medical marijuana industry generated over $110 million in sales in 2019. Compl. ¶ 1.

Although dispensaries can grow more marijuana plants, they are restricted in other ways, including the restriction that is at the center of this case. The Act provides that "[a]ll officers or directors of a dispensary² must be residents of this State," (the "Dispensary Residency Requirement "). 22 M.R.S.A. § 2428(6)(H). "Officer or director" is defined as "a director, manager, shareholder, board member, partner or other person holding a management position or ownership interest in the organization." 22 M.R.S.A. § 2422(6-B). "Resident of the State" is defined as "a person who is domiciled in the State." 22 M.R.S.A. § 2422(13-B).

Plaintiff High Street is a Delaware limited liability company entirely owned by residents of states other than Maine. Joint Stipulation of the Record ("Record ") ¶ 1 (ECF No. 13-1). Plaintiff Wellness Connection owns and operates three of the seven registered dispensaries in Maine's medical marijuana program. Record ¶ 2. From June of 2010 until March of 2020, Wellness Connection operated as a mutual benefit nonprofit corporation without any equity ownership, but when Maine changed its law in 2020 to allow dispensaries to become for-profit companies, Wellness Connection converted to a for-profit corporation and is currently wholly owned by three Maine residents. Record ¶¶ 3–5. High Street states that it would purchase all of the equity in Wellness Connection if the Dispensary Residency Requirement did not prohibit it from doing so.

The Plaintiffs sued the Department—which is responsible for implementing, administrating, and enforcing the Act—and Kirsten Figueroa, who is the Commissioner of DAFS. See Record ¶¶ 7–8. The Plaintiffs allege that the Dispensary Residency Requirement violates the dormant Commerce Clause because it explicitly discriminates against residents of other states and Maine cannot show a legitimate local purpose for the requirement.

United Cannabis Patients and Caregivers of Maine ("United Cannabis ") intervened in this case. (ECF Nos. 11, 16.) United Cannabis opposes the Plaintiffs’ motion for judgment and partially opposes the Defendants’ motion. See ECF Nos. 20, 22.

LEGAL STANDARD

The Commerce Clause empowers Congress "[t]o regulate Commerce ... among the several States." U.S. Const. art. I, § 8, cl. 3 ; see also Dep't of Revenue of Ky. v. Davis , 553 U.S. 328, 337, 128 S.Ct. 1801, 170 L.Ed.2d 685 (2008). Although the Commerce Clause only contains an affirmative grant of power, "[o]ver time, courts have found a negative aspect embedded in this language—an aspect that prevents state and local governments from impeding the free flow of goods from one state to another." Houlton Citizens’ Coalition v. Town of Houlton , 175 F.3d 178, 184 (1st Cir. 1999). This "dormant Commerce Clause" prohibits "protectionist state regulation designed to benefit in-state economic interests by burdening out-of-state competitors." Wine & Spirits Retailers, Inc. v. Rhode Island , 481 F.3d 1, 10 (1st Cir. 2007) (internal quotations omitted); see also Davis , 553 U.S. at 337–38, 128 S.Ct. 1801. The dormant Commerce Clause is intended "to effectuate the Framers’ purpose to prevent a State from retreating into the economic isolation ... that had plagued relations among the Colonies and later among the States under the Articles of Confederation." Davis , 553 U.S. at 337–38, 128 S.Ct. 1801 (internal quotations and citations omitted and alterations adopted).

To this end, a state or local law that "discriminates on its face against interstate commerce, whether in purpose or effect, demands heightened scrutiny." Wine & Spirits Retailers , 481 F.3d at 10. I must invalidate such a law "unless it furthers a legitimate local objective that cannot be served by reasonable non-discriminatory means."³ Id. at 10–11 ; see also Tenn. Wine & Spirits Retailers Ass'n v. Thomas , ––– U.S. ––––, 139 S. Ct. 2449, 2461, 204 L.Ed.2d 801 (2019) ("[A] state law [that] discriminates against out-of-state goods or nonresident economic actors ... can be sustained only on a showing that it is narrowly tailored to advance a legitimate local purpose.") (internal quotations omitted and alterations adopted). The plaintiff bears the initial burden of showing discrimination, but the state or local government bears the burden of identifying legitimate local purposes and establishing a lack of non-discriminatory alternatives. Family Winemakers of Cal. v. Jenkins , 592 F.3d 1, 9 (1st Cir. 2010).

Importantly, congressional action can alter the application of the dormant Commerce Clause. As the Supreme Court recently stated, "[d]ormant Commerce Clause restrictions apply only when Congress has not exercised its Commerce Clause power to regulate the matter at issue." Tenn. Wine & Spirits Retailers Ass'n , 139 S. Ct. at 2465. Thus, Congress "may use its powers under the Commerce Clause to ‘[confer] upon the States an ability to restrict the flow of interstate commerce that they would not otherwise enjoy.’ " New England Power Co. v. New Hampshire , 455 U.S. 331, 340, 102 S.Ct. 1096, 71 L.Ed.2d 188 (1982) (alteration in original) (quoting Lewis v. BT Inv. Managers, Inc. , 447 U.S. 27, 44, 100 S.Ct. 2009, 64 L.Ed.2d 702 (1980) ). The standard for finding such congressional consent is "high," and the state has the burden of demonstrating Congress's "unmistakably clear intent to allow otherwise discriminatory regulations." United Egg Producers v. Dep't of Agric. of P.R. , 77 F.3d 567, 570 (1st Cir. 1996) ; see also Maine v. Taylor , 477 U.S. 131, 138–39, 106 S.Ct. 2440, 91 L.Ed.2d 110 (1986) ("[B]ecause of the important role the Commerce Clause plays in protecting the free flow of interstate trade, this Court has exempted state statutes from the implied limitations of the Clause only when the congressional direction to do so has been ‘unmistakably clear.’ "); Tri-M Grp., LLC v. Sharp , 638 F.3d 406, 430–32 (3d Cir. 2011).

DISCUSSION

I. Claims Against the Department

As a threshold issue, the Defendants assert that the Department is immune from suit under the Eleventh Amendment because it is an "arm of the state." Defs.’ Mot. 2, 15–17. The Plaintiffs did not respond to this argument in their opposition brief.⁴

I agree that the Department is shielded from suit in federal court. "Long interpreted as an affirmation of state sovereign immunity," the Eleventh Amendment bars individuals—regardless of their citizenship—from bringing a federal court action against a state, "including instrumentalities of the state, such as state agencies." Town of Barnstable v. O'Connor , 786 F.3d 130, 138 (1st Cir. 2015) (quotations and citations omitted); see also PennEast Pipeline Co., LLC v. New Jersey , ––– U.S. ––––, 141 S. Ct. 2244, 2258, 210 L.Ed.2d 624 (2021). By statute, the Department "is established as the principal fiscal department of State Government." 5 M.R.S.A. § 281. It is responsible for "coordinat[ing] financial planning and...