As reported here, earlier this month the U.S. Drug Enforcement Administration (DEA) issued a decision declining to transfer marijuana out of Schedule I. As marijuana remains a Schedule I controlled substance under the federal Controlled Substances Act (CSA), marijuana businesses operating in compliance with state law, and those who contract with such businesses, continue to face legal risk under federal law.

However, on August 16, 2016, in United States v. McIntosh, No. 15-10117, 3:14-cr-00016-MMC-3, the U.S Court of Appeals for the 9th Circuit held that section 542 of the Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, 129 Stat. 2242, 2332-33 (2015), prohibits the U.S. Dept. of Justice (DOJ) from spending funds from relevant appropriations acts for the prosecution of individuals who engaged in conduct permitted by state medical marijuana laws and who fully complied with such laws.

The basis for this ruling stems from a December 2014 rider to an omnibus appropriations bill enacted by Congress to fund the government through September 30, 2015. The rider provided that none of the funds made available in the bill to the Department of Justice (DOJ) may be used to prevent certain states/jurisdictions from implementing their laws that authorize the use, distribution, possession, or cultivation of medical marijuana. Id. at 12. Congress has since enacted a new appropriations act, which essentially carries the same rider through the fiscal year ending September 30, 2016. Id. The law applies to 43 jurisdictions. See id. at n.3 (listing these jurisdictions).

The McIntosh decision arises out of indictments of ten separate defendants who were allegedly engaged in the manufacture of marijuana in violation of the CSA. Id. at 9-11. The defendants either moved to dismiss or enjoin the indictments, that were based on violations of the federal Controlled Substances Act, on the basis of the rider, and filed consolidated interlocutory appeals, after losing those motions in District Court. Id. at 10.

After considering the threshold question of jurisdiction (the Court of Appeals recognized that most criminal defendants are not entitled to injunctive relief), the court overturned each of the District Courts’ rulings. See id. at 17. The appellate court held that the rider prevented DOJ from prosecuting individuals under federal law who acted in compliance with state law, because the federal prosecution would have the practical effect of preventing the states from implementing their laws. Id. at 26-27.

However, the appellate court also held that its decision did not apply to entities that were licensed under state law to engage in the manufacture, distribution or dispensing of marijuana, but were not acting in full compliance with state law. Id. at 27-28. According to the court, DOJ’s actions do not have the effect of preventing the implementation of rules authorizing conduct when it prosecutes individuals who engage in conduct unauthorized under state medical marijuana laws. Id. at 30.

Further, the court issued some important caveats. It recognized the temporal nature of its decision: While the rider currently prohibits DOJ from spending funds from specific appropriations acts for prosecutions of those who complied with state law, “it does not provide immunity from prosecution for federal marijuana offenses.” Id. at n.5 (emphasis added). Indeed, “anyone in any state who possesses, distributes, or manufactures marijuana for medical or recreational purposes (or attempts or conspires to do so) is committing a federal crime.” Id. “The federal government can prosecute such offenses for up to five years after they occur.” Id. (citing 18 U.S.C. § 3282). Thus, “Congress could restore funding tomorrow, a year from now, or four years from now, and the government could then prosecute individuals who committed offenses while the government lacked funding.” Id. Moreover, the court dispelled the misconceived notion that any state law may “’legalize’ possession, distribution, or manufacture of marijuana,” as that remains a crime under federal law. Id.

This is not the first time the 9th Circuit has issued a decision unfavorable to DOJ/DEA on issues related to marijuana. In Conant v. Walters, 309 F.3d 629 (9th Cir. 2002), following California’s passage of the Compassionate Use Act, the court upheld a permanent injunction against the U.S. Government, enjoining it from taking licensure action against (or even investigating) physicians, who discuss marijuana with their patients and approve it for treatment. Id.

Ultimately, the McIntosh court remanded the cases to the District Courts for further proceedings, finding the defendants/appellants are entitled to evidentiary hearings to determine whether their conduct strictly complied with all relevant conditions imposed by state law. Id. at 32-33.

We wait to see whether the DOJ continues with these prosecutions.