On May 3, the Columbia District Court (“Trial”) dismissed a petition filed by the Hemp Industries Association and others (“Petitioners”) contesting a DEA Provisional Definitive Rule (the “Rule”), which changed its provisions following the entry into force of the Agriculture Improvement Act of 2018 (“Farm Bill 2018”). While this is not a good result for the hemp industry, all hope of challenging the rule is not lost as a similar case has been filed in the District of Columbia Court of Appeals (the “DC Circuit”).
Here the court rejected the challenge to the rule for lack of factual jurisdiction, essentially telling the petitioners that the DC Circuit is the only court that can grant the relief they are requesting.
Nathalie Bougenies and other hemp attorneys at Harris Bricken have followed the rule since it was first adopted and the litigation that has followed it since its inception:
In conclusion, the rule has significant negative consequences for hemp extractors / processors. This is because the rule “suggests that hemp extract be a Schedule I controlled substance during the process at any point in time its THC concentration exceeds 0.3 percent on a dry weight basis.” In other words, hemp processors can use DEA – Be subjected to raids and criminal liability for the processing of raw hemp into oil or other derivatives, even though the THC content of the final product on a dry weight basis is less than 0.3 percent.
The DEA claims (no surprise) that the rule was intended to align its rules with the legal changes to the 2018 Farm Bill. We assume, as stated in the articles above, that “it is clear that the rule is a pretext for the DEA to maintain its authority over cannabis”.
If you find that the DEA’s position is clearly at odds with the purpose and language of the 2018 Farm Bill, you are not alone. Hence the two lawsuits against the rule, the first in the DC Circuit, the second in the legal process.
An important finding for non-lawyers is that the decision of the court is not a decision on the merits. It is in no way a confirmation of the DEA’s position. Rather, the court argued that the applicable laws and precedents compelled it to state that the challenge to the rule must be made by the petitioner in the DC Circuit and heard by the latter. Even the court’s decision on jurisdiction was narrowly defined:
It is important to clarify what this decision does not mean. The Court does not conclude that an unrestricted challenge affecting an issue related to DEA falls within the scope of Section 877 and a district court may not address it. Nor is it established that section 877 necessarily exercises exclusive jurisdiction [in the] Courts of appeal on all enforcement actions under the CSA. Rather, their stance is far more humble: if the content of a legal dispute challenges an assertion by the agency authority set out in a DEA rule required by law to exclusively review the court of appeal, then such legal dispute falls within the scope of that exclusive review provision .
(Quotations and quotations omitted). As a result, this decision is not a big win for the DEA in the long run either, as the court did not disapprove of its ability to hear other challenges related to the DEA and did not comply with the rule.
What happens next?
As mentioned earlier, the same petitioners filed the rule against the DC Circuit. In October 2020, the DC Circuit put its case on hold pending the decision of the legal process. After the matter of the judicial process is resolved and no appeal has been made, the DC Circuit may “reopen” the litigation and obtain the merits of the petitioners’ challenge to the rule.
The short-term practical impact of the court’s decision is also limited, which is not good for the hemp industry. The rule has been in place for almost a year and will continue to do so. The court’s decision also means there will be no immediate exemption from the rule through an injunction preventing the DEA from enforcing the rule. Hemp extractors and processors will therefore remain in legal limbo for the foreseeable future. One bright spot, I suppose, is that the news from the hemp industry hasn’t been dominated by headlines about DEA raids on extractors. However, the chilling effect on capital investment and industry growth as a result of the rule is no small matter.