Cannabis Case Summaries

Cannabis attorneysMarijuana is a valuable asset and insurance can be a necessary tool in protecting that investment. We have written about how marijuana inventory can be covered under a general liability insurance policy. However, not all courts are willing to hold that an insurance policy covers cannabis.

In USAA v. Tracy (D. Haw. Mar. 16, 2012), a US District court in Hawaii ruled that a homeowner’s insurance policy does not cover medical marijuana. On May 18, 2010, USAA Casualty Insurance Company issued Barbara Tracy a homeowners’ insurance policy. Tracy was a medical marijuana patient who was permitted under Hawaiian state law to possess and grow marijuana. A thief stole 12 of Ms. Tracy’s marijuana plants, valued at $45,600, from Tracy’s property and she submitted a claim to USAA. USAA made an initial payment on the claim but Tracy argued that the amount was insufficient. USAA informed Tracy it would not make any further payment on the policy. Tracy sued USAA for breach of contract, seeking additional funds for the stolen cannabis plants. USAA moved for summary judgment to have Tracy’s claim dismissed, arguing that her marijuana was not covered under her policy.

USAA’s policy covered theft of “trees, shrubs, and other plants” and Tracy argued that this should include her marijuana plants. USAA first contended that Tracy did not have an insurable interest in medical marijuana. Hawaiian Law defines an insurable interest to be any “lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage.” USAA argued that an interest in medical marijuana is not “lawful” because Hawaii’s medical marijuana law “does not legalize the medical use of marijuana, but provides an affirmative defense to marijuana-related state law crimes for the medical use of marijuana.” USAA also pointed to the fact that Hawaii’s medical marijuana law states that “this part shall not be construed to require insurance coverage for the medical use of marijuana.” The court rejected both arguments by determining that Hawaii does permit the use of medical marijuana, making it lawful, and that although Hawaii’s medical marijuana law did not require insurance coverage, it does not prohibit insurance coverage. The court determined that Tracy did have an insurable interest in marijuana as legally compliant medical marijuana user.

However, the court was persuaded by USAA’s second argument that it could not purchase medical marijuana using insurance proceeds as that would violate federal law. The court cited to cases that established that Hawaiian courts can refuse to enforce contracts that violate federal law. The court ruled Tracy’s possession and use of marijuana violated federal law because it directly conflicted with the federal Controlled Substances Act, even though she was compliant with state law.  The court concluded that the insurance policy purportedly covering her marijuana plants was an illegal contract that could not be enforced and that USAA had no obligation to provide her insurance proceeds for the plants. As a result, it granted USAA summary judgment, holding that it did not owe Ms. Tracy anything more.

For more on insurance and marijuana, please see the following:

Cannabis attorneysToday’s Cannabis Case Summary looks at a novel example of the intersection between state-legal  cannabis and employment law. The plaintiff, Bobbie Henry, worked at an Outback Steakhouse in Flint, Michigan, from 1997 to 2014 when she was fired along with four other employees because of drug-related activities. Henry, a registered medical marijuana caregiver under Michigan law, sued Outback, alleging her medical marijuana activities were used as a pretext for age discrimination and her termination on that basis was defamatory. Unfortunately for Henry, a federal judge disagreed and the U.S. District Court for the Eastern District of Michigan granted Outback’s motion for summary judgment.

The meat (pun intended) of this case is in its facts, which involve two different groups of Outback employees involved in two very different kinds of “drug activity.”

One was made up of Henry and a second Outback employee who was a registered medical marijuana cardholder and a patient of Henry’s. Henry transferred cannabis to the co-worker patient in her role as a registered medical marijuana caregiver permitted by state law.

The second was a group of four employees the kitchen manager had observed exchanging a “small black object” he suspected was an illegal substance for cash. The employees claimed it was a “bridge card,” but after an investigation and a conference call with management the four employees were terminated for cause. The four employees did not go quietly, however, and in exit interviews alleged Henry was “selling drugs” and “dealing dope” at the restaurant. When confronted, Henry claimed that though she did sell medical marijuana to her co-worker patient she did not sell medical marijuana to her co-worker patient on company property. She was terminated the same day for behavior “unbecoming” of the company.

Henry sued Outback, first alleging that her medical marijuana-related activities were used as a pretext for age based discrimination. Henry’s claim was based on the fact that she was the longest-tenured member of the team and had been there for fourteen years before being terminated, despite winning service awards for “Top Performing Bar Team.” She also pointed to an unlitigated situation where a second employee had been terminated for what he felt was age-based discrimination.

The court looked at the pretext issue and was unsympathetic towards Henry, pointing out that she admitted to having a medical marijuana card and to selling drugs to a co-worker. Based on these two things, the court concluded there was a legitimate, non-pretextual reason for Outback to terminate Henry. The court secondarily found that Outback, as Henry’s employer, had a qualified privilege to discuss allegations that she sold medical marijuana to co-workers, which she did not dispute.

This case is just another example of how a state’s permissiveness of medical marijuana or adult-use cannabis will usually not impose a duty on an employer to tolerate marijuana use or override other legal doctrines that give power to employers. Even though Henry was apparently correct that she was in compliance with Michigan law, a little discretion could still have gone a long way. We cannot resist noting the foolishness of an employer terminating a good employee for helping a co-worker.

NOTE: The above is part of our plan to summarize all cannabis civil cases with a published court decision. By civil case, we mean any case that involves cannabis or the cannabis industry that is not a strictly criminal law matter. These cannabis case summaries are intended both to keep you up to date on cannabis laws as interpreted by the courts and also to serve as a resource for anyone conducting cannabis law research. We also will seek to provide key unpublished cannabis law decisions as well, when available.

Cannabis attorneysCommercial leases for cannabis businesses are a major concern for many of our clients largely because cannabis businesses operate in an industry prohibited under federal law. Generally, contracts that are illegal are unenforceable and there is an argument to be made that any and all cannabis contracts are illegal, at least at the federal level. But a recent Arizona state court shows that state courts are not always receptive to that argument and that a contract that violates federal law is not necessarily unenforceable.

Green Cross Medical, Inc. v. Gally (April 18, 2017) addressed whether a commercial lease with a medical marijuana grow operation in Arizona was enforceable. John Gally owned commercial property in Winslow, Arizona that he leased to Green Cross Medical to operate a medical marijuana dispensary. Two weeks later, Gally sent a letter to Green Cross revoking the lease. At the time Gally terminated the lease, Green Cross had not received the necessary license to operate a dispensary. However, the lease permitted Green Cross to sublease the property and nothing in the lease stated the lease would be terminated if Green Cross did not receive a license to run a dispensary.

Green Cross sued Gally for breach of contract and attempted to obtain a temporary restraining order to prevent Gally from revoking the lease. Gally argued that the lease was illegal and therefore unenforceable because it involved cannabis distribution. The trial court was persuaded by Gally’s argument and ruled that the lease agreement was indeed unenforceable because violated both federal and state law. Based on this, the trial court did not grant Green Cross the restraining order and it denied Green Cross damages for Gally’s having revoked the lease.

Green Cross appealed the trial court’s decision.  First, the appeals court determined that Green Cross could seek damages against Gally even though Green Cross did not receive a license to operate a dispensary on the leased property because the right to sublease was a valuable property right. As a result, Green Cross was permitted to seek damages for the loss of the lease.

The appeals court also held that the lease was not illegal on under Arizona law. The court stated that the Arizona Medical Marijuana Act (AMMA) protects rights of dispensaries to enter into commercial leases and that dispensaries have a contractual right to enter into lease agreements with landlords. The appeals court concluded that “[g]iven the language of the AMMA, a court may not void or refuse to enforce a dispensary’s lease with a landlord simply because the dispensary would be supplying marijuana in compliance with the AMMA.”

The appeals court also rejected Gally’s arguments that he as the landlord could face criminal liability under state law because he was facilitating marijuana distribution by leasing property to a cannabis dispensary. The appeals court pointed to the fact that Gally agreed to execute the lease understanding that Green Cross intended to operate in Arizona’s medical market:

We emphasize that nothing in the AMMA requires a landlord to rent a property to a proposed dispensary. Gally was free not to enter into the lease if he was uncomfortable with the proposed use of the Property. But once he chose to do so, he was not free to rescind his contractual commitments without facing potential monetary liability. Accordingly, leasing property to a medical marijuana dispensary that is in compliance with the AMMA is not illegal under Arizona law. Thus, the superior court erred when it found the lease was void and dismissed the complaint seeking damages for the breach.

The appeals court then acknowledged that federal law prohibits distribution of marijuana under the Controlled Substances Act (CSA) and that it is, therefore, illegal under federal law for an Arizona landlord to lease property to a marijuana business. However, the appeals court went on to state this federal illegality “does not render the contract in this case unenforceable under all circumstances.” The court cited to several cases where contracts involving medical marijuana businesses were upheld by courts despite being prohibited under federal law, showing that courts balance the federal government’s interest in enforcing the CSA with states’ interest in permitting the medical use of marijuana.

The appeals court weighed the interests of the federal government and the state of Arizona and held that the lease was not unenforceable simply because it violated the federal CSA. The appeals court explained that federal government enforcement of the CSA against state-compliant marijuana operators had been in flux for years and that the Department of Justice (DOJ) had instructed US Attorneys not to prosecute individuals acting in compliance with the Cole Memo. The court also noted that Congress has prohibited the DOJ from using funds to prosecute people distributing marijuana in compliance with state law. As a side note, that spending provision was recently extended.

The Arizona Appeals Court sent the case back to the trial court to reconsider the facts of the case in light of the appeals court having held that the lease was not unenforceable and that Green Cross may recover damages for Gally’s terminating the lease.

You can find more on cannabis leases here:

 

 

Cannabis attorneysThe owners of a vineyard in Yamhill County, Oregon, filed a lawsuit in April to block a neighboring property owner from using his land to grow and process cannabis. The plaintiffs alleged that the odor and runoff from the cannabis farm will negatively affect their grapes and claim to have already lost one buyer. Another neighbor, who has plans to turn its property into a vineyard as well, has joined the lawsuit.

The case is interesting because it is in response to a novel fact situation that has not been the subject of much real-world study or legal precedent.

The idea that the odor of cannabis plants could materially alter the quality of grapes in an adjacent parcel of land is a significant divergence from more typical odor-related lawsuits that allege a neighbor’s cannabis activities create a nuisance. Those lawsuits have sometimes succeeded, but in this instance the trier of fact will need to determine whether there actually is an impact on the grapes. Though the plaintiffs say they have already lost a buyer, it is unclear whether that was because the buyer speculated there could be an impact on the grapes or whether there was in fact such an impact. The case has not gotten far enough along for discovery to reveal exactly what kind of evidence the plaintiffs actually have.

As for the cannabis farm owner, he states that he can grow cannabis on his property without seeking permission because it is zoned for that kind of agricultural use and because he is following all rules and regulations. He also asserts that he uses cannabis processing techniques to minimize the smell from his property.

Depending on the results of this case, the issue of adjacent cannabis farms and wine vineyards may be an issue for the Oregon state legislature. Both the cannabis and wine industries are important components of Oregon’s economy and there is significant overlap between locations.

The lawsuit was filed in Yamhill County earlier this week so there is a long way to go for it to reach resolution. If it goes to trial, the court’s reasoning when it comes to the interaction between the two crops and the relationship with their owners’ property and economic rights could be instructive for similar conflicts in the future. We will keep an eye on this case and update you as the lawsuit progresses.

Cannabis attorneysIf you live and work in a state where cannabis is illegal, can you be fired for going on vacation to a state like Colorado and using cannabis while there? A Texas administrative law judge says no.

This week’s Cannabis Case Summary covers the case of Maryam Roland, a high school teacher from Texas, who recently prevailed before the Texas State Office of Administrative Hearings. During winter break of the 2014-2015 school year, Ms. Roland took a vacation to Colorado. While in Colorado, she admits she consumed an edible cannabis product. Roland then returned to Texas to continue teaching for the spring term. Following accusations of marijuana use, she resigned from her teaching position in February 2015.

According to court documents, a “disgruntled” co-worker had notified the school administration by email that a number of school employees used cocaine, marijuana and other substances. Though Roland was not directly named in the email, she was implicated in the matter. In an interview with authorities, Roland stated she had previously used cannabis “occasionally” but had resolved to stop using cannabis and “get her life together” for the new year. She denied any use of drugs or alcohol on school premises or during the time she was working. Roland was then given both a follicle and urine drug test. She passed the urinary analysis, but there was evidence of cannabis in her hair sample.

This matter was brought before an administrative law judge charged by the Texas State Office of Administrative Hearings. The judge considered whether there was evidence that Roland had violated Texas law and whether she was “unworthy to instruct and supervise” youth. The judge did not conclude that Roland had violated any law. The judge’s determination was based on the determination that there was no evidence that Roland possessed or used cannabis in the state of Texas. It is crucial to note that the judge observed the plaintiff did not allege any violation of federal law. Had the plaintiff made such an allegation,  the outcome may have been totally different as cannabis is clearly federally illegal.

The judge also considered whether Roland had violated district policies related to employees being under the influence of a controlled substance during working hours. Again, the judge concluded in favor of Roland, finding insufficient evidence that she was ever possessed cannabis or was under the influence of any controlled substance while at work. Despite the positive result of Roland’s hair sample for marijuana, the judge concluded there was no basis for the test because the aforementioned co-worker’s email fell short of giving “reasonable suspicion” that Roland was a drug user. Therefore, the court found, the test was improper.

This is an interesting case at the nexus of employment law and cannabis. Employees, even in states where cannabis is legal, are often unable to secure a right to use cannabis off the clock, whether it be for medicinal or recreational purposes. Though ultimately a rather limited administrative law decision, Roland’s case is an example of how cannabis users and patients may be able to operate going forward. In the judge’s own words: “Possession of a usable quantity of marijuana is a criminal offense in Texas, but so is gambling. The ALJ would not recommend that the Board find a teacher unworthy to instruct in Texas because she legally gambled in Nevada.

Cannabis attorneysCannabis businesses must navigate many hurdles to survive and thrive in today’s evolving marijuana legal landscape, but not all challenges unique to this industry are caused by its precarious status under the law per se. Odor generated by marijuana cultivation is a prime example. As we have written previously, noticeable cannabis odor does not always make for a successful nuisance claim. But because not everyone wants to live next door to a pungent grow house, many localities have instituted specific rules to keep marijuana smell contained. This Cannabis Case Summary looks at the serious cost to cannabis businesses of disregarding cannabis smell rules, the potential difficulty of proving legal causation of marijuana odor, and the value of being a good neighbor.

According to the Boulder Daily Camera, Colorado cannabis producer Dandelion Grow was hit with a $14,000 fine in November for failing to comply with local cannabis odor rules. The citation came after a series of complaints that the grow’s smell could be detected from more than a block away. The city of Boulder requires cannabis businesses to limit odor to their own premises; Boulder County more permissively draws the line at licensees’ property boundaries. In response to the cannabis odor complaints, City of Boulder officials ordered Dandelion Grow eliminate the offensive odor and pay a $4,000 fine.

Just a weeks later, Dandelion Grow incurred a second fine for an identical cannabis odor violation – this time for $10,000. According to a Boulder city spokeswoman, Dandelion Grow had “elected not to make the necessary changes to come into compliance” with Boulder’s marijuana odor regulations. Dandelion Grow disputes this characterization and is moving to appeal the citation.

According to reports, Dandelion Grow is resting on two main theories to support its appeal. First, that such large fines – the largest in the history of Boulder’s legal cannabis industry – are unduly punitive because the company is working in good faith with the city to remedy the smell issue. Second, Dandelion Grow argues that it is only one of several cannabis-related facilities in the immediate area and the City of Boulder is arbitrarily pinning the odor on Dandelion Grow without adequately proving it is the only – or even the major – contributor to the cannabis odor.

This argument raises interesting questions concerning tort liability for a conventional nuisance claim with the same facts where a defendant presses on the element of causality. Unless and until the fabled marijuana breathalyzer begets court-admissible marijuana smell-o-vision, isolating a smell in a cluster of marijuana grow sites in close proximity will probably remain an inexact science.

However the Dandelion Grow case plays out, it should serve as a cautionary tale to cannabis businesses that local cannabis smell ordinances can carry real costs and consequences. Beyond the fines and the publicity, Dandelion Grow has also incurred and will likely continue to incur attorneys fees in fighting against the fines. We do not have enough facts to know what Dandelion Grow might have done differently, if anything at all, but this case should serve as a warning to cannabis growers to be wary of local laws, including cannabis smell laws.

NOTE: The above is part of our plan to summarize all cannabis civil cases with a published court decision. By civil case, we mean any case that involves cannabis or the cannabis industry that is not a strictly criminal law matter. These cannabis case summaries are intended both to keep you up to date on cannabis laws as interpreted by the courts and also to serve as a resource for anyone conducting cannabis law research. We also will seek to provide key unpublished cannabis law decisions as well, when available.

Marijuana TrademarksSecuring federal cannabis trademarks is a unique challenge. In a world of federal marijuana prohibition, federal registration of trademarks remains, in nearly all respects, a non-starter. Today’s Cannabis Case Summary illustrates how such a case plays out when owners of intellectual property go forward and attempt to obtain federal intellectual property protections. Spoiler alert: it did not go well for the applicant.

Last month the Trademark Trial and Appeal Board (TTAB) affirmed denial of a would-be registrant’s marks used in connection with the sale of pre-loaded disposable cannabis oil vaporizers marketed as “JuJu Joints.” While some sly cannabis business applicants attempt to pass their registrations off using vague terms like “herbs” or “aroma therapy,” that was not the case here. The applicant, JJ206 LLC, filed to register the marks “Powered by JuJu” and “JuJu Joints” with the intent to use the marks in connection with a “smokeless cannabis vaporizing apparatus, namely, oral vaporizers for smoking purposes.” These marks were rejected by the Examining Attorney both initially and on appeal before the matter reached the TTAB, which affirmed the prior denials.

JJ206 made a number of arguments in support of its application, none of which were persuasive to the Board.

JJ206 first argued that JuJu Joints are in the same “league” as e-cigarettes and therefore should be afforded similar protections. The TTAB quickly dispensed with this argument by citing the Trademark Act’s clear language requiring that an applicant have a “bona fide intent to use the mark in lawful commerce,” and the Controlled Substances Act’s (CSA) prohibition of marijuana as a Schedule I drug with no lawful use.

Next, JJ206 made a type of common law trademark argument, claiming that denial of registration would cause confusion for consumers as to the origin and consistency of potentially competing products. The TTAB did not reach the factual merits of JJ206’s confusion argument, instead hanging its hat on the necessity of lawful use in commerce.

Additionally, JJ206 pointed to other marks that have been granted registration despite their relationship to cannabis. The TTAB distinguished these prior registrations, however, on the basis that they were not used in connection with federally illegal commerce involving the cannabis plant. In fact, these registrations were granted to companies that sell products like hemp lotion and certain seed and stalk extracts permitted by federal laws. Because JJ206 sought to register a mark attached to a product explicitly intended to be used for consumption of cannabis vapor, the TTAB rejected their argument. Similarly, JJ206 pointed to pending trademark registrations “in support of the marijuana industry.” The TTAB dismissed this argument as well because registrations are, by law, considered independent of other applications and the pendency of an application does not speak to its lawfulness or likelihood of approval.

Finally, the TTAB addressed a trio of theories familiar to proponents of recent cannabis reforms. First, that JJ206’s products distributes its products only within states where cannabis is legal on the state level. Second, that there is a legitimate medical use of cannabis. And third, that JJ206 operates in accordance with the Cole Memo’s directives by working only in compliance with state cannabis laws. In response to each, the TTAB noted the continued illegality of cannabis under the CSA, and emphasized that lawful use in commerce under federal law is a fundamental and inescapable prerequisite to federal trademark protection.

As this case illustrates, federal trademark registration remains all but impossible under federal law for cannabis products and it likely will until there is reform at the federal level. Until then, cannabis businesses are best advised to seek state-level trademark protection – if they can, and to speak with their trademark attorney about the possibility of registering their marks for ancillary goods and services at the federal level.

In re JJ206, LLC, dba JuJu Joints. [Link]

NOTE: The above is part of our plan to summarize all cannabis civil cases with a published court decision. By civil case, we mean any case that involves cannabis or the cannabis industry that is not a strictly criminal law matter. These cannabis case summaries are intended both to keep you up to date on cannabis laws as interpreted by the courts and also to serve as a resource for anyone conducting cannabis law research. We also will seek to provide key unpublished cannabis law decisions as well, when available.

RRLast week, the Oregon Land Use Board of Appeals (LUBA) ruled against a certain cross section of pot growers in the state. The Petitioners at issue wanted to grow medical marijuana on land covered by a “rural residential” zoning designation. When Jackson County adopted a zoning ordinance prohibiting such activity, the growers sued. Because LUBA sided with the County, medical marijuana grows in that jurisdiction will be limited to land zoned exclusively for farm (EFU), forest or industrial use. In that sense, the ruling is fairly narrow, although it could discourage prospective litigants in other counties on similar appeals.

As covered in the LUBA decision itself, the zoning change was consistent with Jackson County’s Comprehensive Plan and ORS 475B.500, which allows cities and counties to adopt “reasonable regulations on the operation of marijuana grow sites.” The Board found that a county keeping medical marijuana grows off rural residential land is “reasonable” for a couple of reasons, including that there are over one million acres of land in Jackson County that remain suitable for marijuana cultivation under the new ordinance.

The growers took an interesting approach to the “reasonable regulations” issue; they first argued that marijuana production is an exercise in free speech under the First Amendment of the Constitution. Due to this broad protection, the growers argued, the County’s zoning amendments would have to serve a “significant government interest” to withstand scrutiny. As you might expect, LUBA dismissed that argument quickly. More compellingly, the growers also argued that marijuana is now a “crop” under Oregon statutes, and the County did not prohibit other “crops” from being grown on rural residential land. In response, LUBA pointed to the large amount of land still  available for medical marijuana grows even outside the rural residential context.

Though not mentioned in the opinion itself, LUBA surely took note of how Jackson County entertained significant public input before adopting the zoning regulations. Local jurisdictions tend to do this ahead of controversial decisions. In theory, the jurisdictions want to gain as much public input as possible before making impactful decisions; but cynics argue that this process affords only the veneer of democracy, designed to insulate government from criticism and lawsuits. In our experience, early advocacy may be fruitful, if the approach is correct.

As further background to this case, LUBA also surely understood that farmers who had been on rural residential land prior to the ordinance can still “grandfather in” as a non-conforming use under Jackson County Code. We have worked on this issue with growers all around the state, as most local land use codes contain a section on non-conforming uses and vested rights. These concepts allow people to continue to operate as they had operated before a zoning change, even after the change occurs. As such, the only people that should be effected by this decision are those who will resist paying the fee to grandfather in, and those who had not yet begun to operate on rural residential land when the ordinance passed.

The growers in this case have vowed to fight on, which means a date in the Court of Appeals. They will argue, as they did in the press last week, that “it is hard to understand how an ordinance that stops 3,500 farmers from producing medicine for their patients is a reasonable regulation.” It is possible, but unlikely, that they will win. Meanwhile, prospective litigants around the state will have some food for thought when it comes to challenging local land use regulations.

Fortunately, there will be opportunities to distinguish the claims brought by the Jackson County growers, which are limited to a certain class of land in a certain county. This adverse decision should have only minimal impact on the Oregon cannabis industry’s momentum overall.

 

 

Marijuana LitigationIn Wilson v. Lynch, the United States Court of Appeals for the Ninth Circuit held that federal law prohibits registered medical marijuana users from legally purchasing guns. The plaintiff, S. Rowan Wilson attempted to purchase a gun in her home state of Nevada. Wilson contacted a firearms dealer who refused to sell to her because Wilson held a medical marijuana registry card.  The dealer was acting under federal law dictates that prohibit selling firearms to known drug users. Wilson brought a lawsuit in federal court against Attorney General Loretta Lynch to challenge the law preventing her from purchasing a firearm.

Wilson challenged federal statute 18 USC § 922, which prohibits unlawful drug users from owning firearms or ammunition and prohibits firearm dealers from selling guns to known drug users. Wilson also challenged regulations by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). In September 2011, the ATF issued a letter stating that federally licensed firearms dealers could not sell to medical marijuana users because marijuana was an unlawful drug. Wilson argued this letter was invalid because the ATF failed to provide an opportunity for the public to comment on its proposed interpretation of federal law. The court disagreed, ruling that the letter was an interpretive rule, meaning the ATF could enforce it without first providing notice to the public.

The court also upheld the statute. On the issue of gun ownership by an unlawful drug user, the court determined that Wilson lacked standing to challenge the law. Wilson alleged, and the court accepted as true, that she was not actually a marijuana user, but instead obtained a registry card as a sign of support for legalization. Wilson also never claimed she actually owned a firearm. As a result, the federal law preventing unlawful drug users from possessing firearms did not injure her and she could not challenge it.

On the issue of purchasing a gun, the court ruled that Wilson’s Second Amendment rights were not impeded by the law. The court used a two-prong analysis to determine that the law did not violate the Second Amendment. First, the court examined whether the law burdened conduct protected by the Second Amendment. Second, the court examined whether the restriction is appropriate, weighing the importance of the government’s interest in enforcing the law with the restriction on the individual’s right.

The court determined that the restriction on the sale of guns was something traditionally protected by the Second Amendment. On the second prong of the analysis, the court reasoned that only the manner in which Wilson could obtain firearms was burdened. The court stated the law and ATF letter “bar only the sale of firearms to Wilson–not her possession of firearms. Wilson could have amassed legal firearms before acquiring a registry card.” The court also noted that Wilson could surrender her registry card to illustrate she was not an unlawful drug user and she would then be able to purchase firearms.

The court concluded that the government has a substantial interest in preventing gun violence and that the law prohibiting illegal drug users from buying firearms was reasonably related to that interest. The government cited to previous cases where it had presented studies showing a link (not a causal connection) between violence and illegal drug use, including marijuana. The court accepted the reasoning, but conveyed concern that Wilson did not challenge the evidence:

While it would have been helpful for the Government to provide the studies in this case, Wilson has not challenged their methodology. We therefore have no occasion to evaluate the reliability of the studies and surveys, and instead accept them as probative.

Critics of this case, including Wilson’s own lawyer, point out the hypocrisy of allowing persons on the no-fly list to purchase guns while medical cannabis users cannot. The federal government simply does not provide broad protections for unlawful drug users. Medical marijuana users are included in this category and, as a result, their Second Amendment rights have been limited. Until the law changes, this type of decision should not be surprising.

 

Marijuana LitigationThis week’s Cannabis Case Summary comes to us from the United States Patent and Trademark Office (USPTO) Trademark Trial and Appeal Board. The case reviewed a USPTO Examining Attorney’s decision to deny a cannabis business’s application to register the name “HERBAL ACCESS” as a federal trademark. As we have written before, the difficulty of protecting cannabis-related intellectual property under federal law is a serious challenge for cannabis businesses that invest in building a recognizable brand.

The applicant, Morgan Brown, sought to register the mark “HERBAL ACCESS” in connection with its “retail store services featuring herbs.” The Trademark Examining Attorney who reviewed Brown’s application denied it on the basis that the herbs Brown was selling included cannabis, which is outlawed by federal law.

In doing so, the Examining Attorney cited two rules that bar registration of certain marks. Generally, trademark registrations will not be granted when a violation of federal law is indicated by the application record or by other evidence, or when the application-relevant activities involve a per se federal law violation. The Examining Attorney did not exclude Brown’s registration under the first rule, but concluded it violated the latter.

To draw this conclusion, the Examining Attorney identified several aspects of Brown’s application that indicated a per se violation of federal law. As explained in the Administrative Trademark Judge’s decision, the materials included the following:

  • A picture of a green cross that, per a review of multiple online retailers such as Amazon, constitutes “the symbol of the organized medical marijuana industry.”
  • An image of a cannabis plant inviting customers to “stop by” to “find exactly what [they] are looking for.”
  • A map showing the establishment’s location with the wording “Marijuana For The Masses.”

Brown stated that the establishment “may also sell marijuana,” which, as Brown acknowledged, is “admittedly illegal under the CSA [Controlled Substances Act].”

In light of the foregoing, the Examining Attorney denied Brown’s application, and the Administrative Trademark Judge affirmed its denial.

The takeaway: USPTO Examining Attorneys have been around the block and euphemisms like “herbal retail” will not trick them nor prevent them from denying your application. In many instances, the cost of prosecuting, defending, and appealing a denial of a federal trademark registration is probably not worth the unlikely benefit that trademark registration would afford cannabis businesses. Our advice is that you explore protecting your marks under state law as an alternative.

In re Morgan Brown, U.S.P.T.O. Trademark Trial and Appeal Board, Serial No. 86362968 (July 14, 2016).

NOTE: The above is part of our plan to summarize all cannabis civil cases with a published court decision. By civil case, we mean any case that involves cannabis or the cannabis industry that is not a strictly criminal law matter. These cannabis case summaries are intended both to keep you up to date on cannabis laws as interpreted by the courts and also to serve as a resource for anyone conducting cannabis law research. We also will seek to provide key unpublished cannabis law decisions as well, when available.