Would-be marijuana retailers in Sacramento can resume their constitutional challenge to a city requirement that dispensary operators be Sacramento residents, without first going through California's state courts, a federal appeals court has ruled.
On March 4, a three-judge panel of the U.S. Ninth Circuit Court of Appeals ruled that a federal district court judge in Sacramento wrongly decided federal courts couldn't hear the case, because of conflicts between state and federal law over regulating the sale and use of marijuana.
The case dates to 2022, when Kenneth May, of Michigan, and his company Peridot Tree Inc., filed suit against the city of Sacramento, challenging the city's cannabis dispensary residency rules.
May and Peridot Tree have filed other suits in Washington state and elsewhere challenging marijuana dispensary regulations in the name of social justice and equity.
The suit against Sacramento leveled similar accusations, asserting the city had violated the U.S. Constitution's so-called dormant Commerce Clause by requiring those obtaining permits to operate storefront cannabis dispensaries to also be residents of Sacramento.
The lawsuit asserts the city unconstitutionally discriminates between Sacramento residents and non-residents, which restricts interstate commerce. The Constitution delegates the power to regulate interstate commerce solely to the federal government.
The lawsuit was filed in California's Eastern District federal court in Sacramento.
There, U.S. District Judge Kimberly J. Mueller placed the case on hold. In doing so, she ruled that she and other federal courts should abstain from hearing such cases. The judge noted that, while the sale and use of marijuana is legal under California state law, the federal government has not loosened its laws governing the distribution and use of cannabis.
Faced with such "obvious conflict" between the two sets of laws, Judge Mueller ruled that federal courts would be left in the position of extending "constitutional protections to federally unlawful conduct."
She directed the challengers to head to California state court instead, to "clarify" Sacramento's residency rule under California state law.
May and Peridot Tree then appealed, winning a reprieve at the Ninth Circuit.
Circuit Judge Salvador Mendoza Jr. authored the opinion for the unanimous panel. Circuit Judge Sidney R. Thomas and U.S. District Judge Solomon Oliver Jr. concurred in the opinion.
Judge Oliver, of the Northern District Court of Ohio, sat on the panel by special designation.
In the appellate opinion, Mendoza said Judge Mueller should not have ducked the case.
Mendoza noted that Sacramento's residency rules are not unclear or ambiguous. Neither do Peridot Tree's constitutional claims implicate California state law in any way, he said.
"Indeed, Peridot Tree’s claim does not resemble one asserting that 'a state agency has misapplied its lawful authority or has failed to take into consideration or properly weigh relevant state law factors,' which might warrant abstention," Mendoza wrote, citing a 1992 decision addressing abstention.
"Instead, this case presents 'pronounced' federal interests, implicating the 'substantial federal concern' of whether the dormant Commerce Clause applies to conduct lawful under state law and unlawful under federal law."
Mendoza and his colleagues said they understood Mueller's "hesitation to resolve whether the Constitution's dormant Commerce Clause prohibits Sacramento's alleged conduct," noting the case "may require venturing into the murky forests of state and federal recreational-marijuana law."
But the appellate judges said the district court must tackle the difficult questions, nonetheless.
Mendoza noted that the U.S. First Circuit Court of Appeals in Boston has done so, striking down similar state-level cannabis dispensary residency requirements in Maine.
"And many district courts ... have grappled with similar issues," Mendoza wrote. "We trust the district court (Mueller) will do the same."
Mueller is the chief judge for the Sacramento division of the U.S. District Court for the Eastern District of California. She is a former member of the Sacramento City Council, where she served from 1987-1992. She was appointed to the post of district judge by former President Barack Obama in 2010.