With just over two weeks until DEA’s expedited processing deadline for state legal operators to apply for DEA registration, several petitioners litigating the legality of the DEA’s final rule have filed a motion to stay DEA’s final rule in the D.C. Circuit (“Motion”). The Motion was brought by the National Drug and Alcohol Screening Association, Inc. (“NDASA”) and MMJ International Holdings and its subsidiaries (“MMJ”). Surprisingly, Smart Approaches to Marijuana (“SAM”), Nebraska, and Indiana were not parties to this Motion. NDASA is a trade association for the drug and alcohol screening industry, and MMJ “are entities that have invested over $10 million and eight years developing pharmaceutical Schedule I cannabinoid therapeutics exclusively through the federal FDA and DEA regulatory pathways.”
I am not going to sugarcoat it: this Motion is good. It was written for its audience, the D.C. Circuit, and focuses primarily on a D.C. Circuit case from 1977 (the “NORML Case”), where the court held that 811(d)(1) could not be used by the Attorney General (“AG”) to unilaterally reschedule a substance without applying the processes set forth in 811(a) and (b) — a HHS medical and scientific determination and recommendation, plus notice and comment. I’ll discuss below why the NORML Case argument is not as strong as it may sound, but by framing their position around D.C. Circuit precedent, the petitioners may be forcing the court’s hand to hear the case on the merits.
As I recently wrote, if the court finds a plaintiff has standing and hears the case on the merits, it is more likely than not that the final rule is stayed and ultimately reversed. So, petitioners adding weight on why the court should hear the case matters. Telling the court that it already issued a decision that would invalidate the AG’s final rule — so how can it let this one stand — is compelling. The tricky part is getting past the standing threshold. Which I believe NDASA may accomplish.
Standing
In law, “standing“ is the legal capacity of a party to bring a lawsuit or participate in a case. To have standing, a plaintiff must demonstrate a direct, tangible stake in the outcome and show that they have suffered, or will suffer, a specific, concrete injury due to the action being challenged. The doctrine of standing ensures that someone cannot challenge a law simply because they don’t like it or the policy behind it. The law has to affect them.
Much of the Motion is devoted to showing why both NDASA and MMJ have standing. I was surprised at how weak MMJ’s argument is, but NDASA made a strong one.
NDASA’s arguments
NDASA argues that: (1) it will suffer unrecoverable losses in revenue because businesses will stop testing for marijuana; and (2) that NDASA’s members who test their employees for drugs will incur unrecoverable costs revamping their drug testing policies. NDASA’s Executive Director estimates that moving state legal medical marijuana to Schedule III will cost its 700 employer members over $700,000. That number sounds high until you do some basic math and realize it amounts to only $1,000 per employer. Now, the amount of the losses is not necessarily relevant, but I point it out to show how ridiculous this argument is.
Next, NDASA’s Executive Director states that the rescheduling order will put medical review officers out of business or force them to sell to larger companies. These are the officers who, after someone tests positive for a substance, review whether the substance was being taken legally (i.e., by prescription). The argument goes: state legal medical marijuana is not dispensed through a pharmacy, so a doctor’s name does not appear on the medical marijuana packaging (i.e., the bottle). Compounding the problem, not all state medical marijuana systems keep recommendation records or would allow patient records to be disclosed. As a result, it will become much harder for these officers to verify whether a positive THC test was due to illicit use or medical use. And this increased effort will increase costs.
Because of this increased cost, employers are likely to stop testing for THC altogether, which will put these officers out of business or force them to sell to larger companies. There is something inherently off about our system when we are discussing moving medical marijuana from Schedule I to III and a persuasive argument for preventing the move is that the testing business may be harmed. Despite how ridiculous these arguments may sound, they do show NDASA’s members would suffer a specific, concrete injury due to the action being challenged.
MMJ’s arguments
Prior to any motions being filed, I expected MMJ to join SAM in litigation. It made sense to me that a business waiting for DEA registration for over eight years and following FDA and DEA requirements the entire time, would be aggrieved. I assumed an argument showing a specific, concrete injury due to the rescheduling order would be simple for them. I guess I was wrong. The argument made by MMJ appears to put them in the same position they found themselves in in SAM v. Kennedy, where the Circuit Court dismissed the case for lack of standing. I am not disappointed, just surprised. I do feel bad for MMJ because they appear to have gone about everything properly. I would be upset too if I was in their shoes. But for their disappointment to trigger standing, they should have to show more direct harm than what was provided.
MMJ argues that the rescheduling order will inflict irreparable harm on MMJ because they have invested millions for nearly a decade “lawfully developing Schedule I cannabinoid treatments” and that moving competitors’ products into Schedule III will enable those competitors to flood the market and prevent MMJ from obtaining the first-mover advantage it was positioning itself to capture. Again, this argument seems to make sense — until you peel back only one layer. These markets already exist. DEA did not create them by issuing the rescheduling rule. So, MMJ’s grievance cannot be solved by a stay or even by a court overturning the rescheduling order. Further, none of these state legal products are pharmaceuticals, which is exclusively what MMJ manufactures.
Since MMJ can’t show that this rule harms them any differently than if the rule didn’t exist, I doubt they would survive a standing challenge on their own.
The merits argued in the Motions
In the Motions, petitioners make two main argument:
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NORML v. DEA
As I mentioned above, the Motion focuses primarily on the NORML Case. There, the D.C. Circuit held that the AG could not use 811(d)(1) to undercut the medical and scientific review required by 811(a)–(b). The court held that 811(d)(1) allows the AG to set the minimum scheduling threshold for where a drug can be placed pursuant to international treaty obligations. So, if treaty obligations would allow a drug to be placed anywhere between Schedules 1 and 5, then 1 is the minimum. The CSA then requires the AG to seek a medical and scientific determination from HHS as to where the drug should be scheduled. HHS’ recommendation is the ceiling for where the drug can be placed.
There are two big problems with this argument
The first is that the D.C. Circuit’s reasoning was wrong. Courts are supposed to interpret and apply the law as it is written. Only when there are ambiguities are they to look at the legislative history and surrounding discussions to understand the intent of the legislators. Here, there are no ambiguities, and the court’s holding simply goes against the statute’s plain meaning: 811(d)(1) clearly says that “the Attorney General shall issue an order controlling such drug under the schedule he deems most appropriate to carry out” United States treaty obligations. The language assigns responsibility to the AG alone.
Further, 811(d)(1) goes on to state that such a decision is to be made without regard to “the procedures prescribed by subsections (a) and (b) of this section” — HHS review, and notice and comment. That is about as clear as you can get from Congress. 811(d)(1) was intended to grant the AG unilateral authority to reschedule a substance pursuant to treaty obligations without regard to HHS’ medical and scientific findings. And honestly that intent makes sense.
A brief history lesson
Marijuana was incorporated into the Single Convention and the Controlled Substances Act (“CSA”) to ensure that both the federal government and the states had to criminalize it. Harry Anslinger, the chief architect behind criminalizing marijuana under the Single Convention and incorporating that prohibition into the CSA, likely did not want to leave the criminality of cannabis up to an HHS medical and scientific review.
Anslinger had a single focus: to control and prohibit marijuana throughout the US, both state and federal. Anslinger knew that “under the taxing power and regulation of interstate commerce it would be almost hopeless to expect any kind of adequate control” without something more (this was pre-Wickard v. Filburn, for those legal junkies like me). That something more was international treaty obligations. Anslinger was also aware that medical and sociological reviews of marijuana were being conducted, including one commissioned by New York City Mayor Fiorello La Guardia. He wouldn’t have wanted to risk that marijuana’s scheduling placement would be decided on science alone. Treaty authority was the key to control.
Faced with the concern that several groups were lobbying states to liberalize control of marijuana, Anslinger determined that international treaties were the only way to stop them. “In the convention it is very specific that we must prevent its misuse. If the United States becomes a party to the 1961 convention, we will be able to use our treaty obligations to resist legalized use of marihuana” (at the time, no one could have predicted the state legal markets we have today or the gaping loopholes within the Single Convention allowing legal adult-use markets to exist).
Given this history, Anslinger likely would have preferred maintaining control under international treaty obligations, knowing that once cannabis was placed in the strict categories of the Single Convention, removing it from scheduling under the CSA would be almost impossible.
The D.C. Circuit simply ignored this history (as all legislatures have) when analyzing 811(d)(1) and simply legislated from the bench in issuing this decision.
Now back to the Motion at hand
The second problem is that we live in a different world than the one that existed in 1977. Back then, cannabis was placed in Schedules I and IV of the Single Convention, a placement signifying that cannabis had no therapeutic efficacy. In 2020, that changed. The Commission on Narcotic Drugs voted to remove “cannabis” (international treaties do not distinguish between marijuana and hemp and instead use the term “cannabis”) from Schedule IV, leaving it exclusively in Schedule I — a move that acknowledged its therapeutic potential. Two years earlier, in 2018, DEA placed Epidiolex (a pharmaceutical made from marijuana) into Schedule V before completely removing it from scheduling after the 2018 Farm Bill became law. Epidiolex at the time fell into the definition of marijuana, a schedule I drug, but somehow was able to fit into Schedule V without issue. Finally, in 2023, HHS provided DEA with a recommendation that included a robust accounting of state-conducted scientific studies showing the medical efficacy of marijuana. Each of these developments squarely addresses statements by the D.C. Circuit in the NORML Case justifying its abandonment of the plain language of 811(d)(1). To paraphrase an argument from petitioners in their Motion against DEA, a court can’t legislate by judicial fiat to create law it disagrees with.
Lastly, the petitioners make an argument that is difficult to square. They argue that under NORML Case precedent, “where a substance could be placed in more than one Schedule, the issue should be “fully litigated at a DEA rulemaking hearing.” The problem is that Duane Boise, MMJ’s CEO, argues in his declaration in support of the Motion (and pretty much anywhere he can publish) that such administrative hearings are unconstitutional.
The problem with these counterarguments is that if the defendants is permitted to make them, then the industry has likely lost Schedule III. As I have mentioned many times before, I believe that this Schedule III order will fall if the court allows the case to be argued on the merits.
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DEA regulations
The secondary argument from MMJ and NDASA is that DEA is required to submit proposed regulatory changes for notice and comment before they become effective. This I believe is a legitimate argument, but I don’t agree with how far petitioners claim DEA went in proposing regulations.
In the final rule, the AG outlines certain regulatory changes that will take effect to ensure the US maintains compliance with the international drug treaties. While DEA will certainly have to account for finished products, these same rules governing flower and biomass are already implemented through 21 CFR 1318.04. That section covers, among other things, requirements for delivering crops to DEA, DEA’s purchase and possession of the crops, and import and export authorities. All that is required of DEA is to make minimal changes to these regulations to include state legal medical marijuana finished products. The AG, in a 2024 Proposed Rule to move marijuana into Schedule III, already addressed the legality of DEA issuing regulations to address minor changes needed to ensure US compliance with its international obligations. 21 USC 871(b) authorizes the AG to issue regulations “necessary and appropriate for the efficient execution of his functions under this subchapter;” and 822(b) allows the AG to regulate “the extent” of manufacture of a drug through registration.
Such authority can be used to address quota requirements for marijuana in Schedule III and to incorporate finished products into the current DEA framework. All minimal changes. The question therefore is not whether these regulatory changes were appropriate, but whether they should have gone through notice and comment. Again, though, if the AG has to make that argument, the industry has likely already lost.
The most frustrating part
The most frustrating part of all of this is that if the AG had taken a little more time to flesh out its plan, Schedule III would not be at risk. If the AG, instead of reinstating the hearing, had simply issued a final order moving “marijuana” into Schedule III, none of this would be an issue. Doing so would have gutted the petitioners’ arguments around NORML v. DEA, because HHS recommended Schedule III. Then, under a separate proposed rule, DEA could have proposed the current state legal medical marijuana framework. That would have insulated marijuana in Schedule III and focused the argument exclusively on the state legal market gaining access to DEA registration.
Even better — and legally justifying the registrations — DEA could have worked with FDA on establishing a program by which each legal medical marijuana market would submit an Investigational New Drug (“IND”) application to the FDA for their state programs. FDA would then have authority under 21 CFR 312.10, to waive application requirements if it found that doing so would not pose a significant and unreasonable risk to human subjects. This implies that some reasonable risks are tolerated.
While some people may pause here and ask how FDA could satisfy that standard, I would counter with studies showing people are drinking significantly less alcohol after consuming marijuana. Looking at the devastating effects of alcohol, including the 488 people who die each day from excessive alcohol use, this substitution sure seems like a public health benefit to me. As I have been talking about since last year and will be presented in Project Four 2029 when it goes live later this year, by coordinating DEA and FDA under an IND, it would have legitimized DEA’s acknowledgement of state legal medical marijuana within the FDA drug framework and further insulated the rule from judicial challenge. There are numerous statutory and regulatory pathways for conducting research. And each of those pathways can lead to different legal commercial markets (i.e. establishing scientific pilot programs for medical, or adult-use, or social equity, or intoxicating hemp beverages).
What DEA should have done is first ensured that marijuana remained in schedule III by simply moving the substance under the initial rescheduling proposed rule. Then DEA and FDA should have worked together to implement scientific medical pilot program under INDs aimed at researching the state legal medical market, patient results, and the effects of legalization on society as a whole.
Whether a Stay Will Be Issued
The Motion will not be decided unless the petitioners can show standing. As discussed above, NDASA has the best shot. If the court determines that NDASA (or the state petitioners who were not included in this Motion) have standing, then, in determining whether a stay should be issued the Court considers
“four factors: (1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies. . . . The first two factors are the most critical and may be balanced against each other, thus a ‘stay may be granted with either a high probability of success and some injury, or vice versa”.
NDASA argues, quite successfully, that irreparable harm will come to them if the stay is not issued, and the DOJ will incur any harm if the stay is issued. The argument is that the government has lived with marijuana in Schedule I for decades — what’s a few more months?
Adding to the persuasiveness of this argument is a declaration from Bertha K. Madras, a Ph.D. from Harvard. Dr. Madras provides a narrative for the court about how dangerous marijuana is to our youth, pregnant women, and society as a whole. She cherry-picks data, some of which is exaggerated (for example, her use of a survey stating that 69% of Colorado dispensaries recommended marijuana to pregnant women. Dr. Madras cites a 2018 study, and 81 Fed. Reg. at 53775 (Aug. 12, 2016), which says nothing of the sort). Dr. Madras’ argument, like so many others, rings hollow when faced with the fact that we live in a country where alcohol use kills hundreds each day in the US, but binge drinking is celebrated. No one is saying that marijuana is completely safe and poses no harms to society. What is being said is that medical marijuana belongs in at least Schedule III. It has medical efficacy and harms that are much less than those of substances in Schedules I and II. That is all. Unfortunately, Dr. Madras’ Harvard pedigree and declaration will likely be persuasive to a court that has historically sided against subject agency overreach.
Conclusion
While there are some problems with this Motion, the arguments appear strong enough to both grant NDASA standing and to justify the court ordering a stay on the Schedule III final rule. Further, this Motion does not even address what I believe is the petitioners’ strongest argument — that 811(d)(1) grants the AG authority to reschedule a “drug,” not state legal programs. If the government is unable to persuade the court that petitioners lack standing, I fear that the industry celebration will be short-lived.
For more on DEA’s Rescheduling please check out these recent posts:
- Standing Is Everything: Three States Join the Medical Marijuana Rescheduling Fight
- Medical Marijuana Rescheduling Q&A: Cutting Through the Noise
- A Calculated Bet: DEA Registration is Open, and the Clock is Ticking
- Marijuana Rescheduling and Income Tax
- The U.S. Opens Its Medical Marijuana Market to Global Trade (For Now); Broader Marijuana Rescheduling on Deck
The post The Motion to Stay DEA’s Schedule III Rule: Strong Enough to Stick? appeared first on Harris Sliwoski LLP.
