The Dormant Commerce Clause and Discrimination in Illegal Interstate Markets

Last week the First Circuit reached an interesting conclusion: the U.S. Constitution prohibits states from adopting protectionist legislation affecting illegal interstate markets.  The case, Northeast Patients Group v. United Cannabis Patients and Caregivers of Maine, involved a state law requiring officers and directors of medical marijuana dispensaries operating in Maine to be Maine residents.  The plaintiff sued, seeking to sell their business to a Delaware corporation despite the Maine law.  The plaintiff invoked the U.S. Constitution’s so-called Dormant Commerce Clause, which prohibits states from placing substantial burdens on interstate commerce via protectionist legislation.

The fundamental issue in the case was whether the Dormant Commerce Clause applies in the context of illegal markets.  The defendants conceded that protectionist legislation, such as the residency requirement in Maine’s medical marijuana law, is virtually always unconstitutional.  They argued, however, that the residency requirement was not invalid because federal law makes the interstate marijuana market illegal.  If the interstate market itself is illegal, there is at least a serious question whether the Constitution prevents states from interfering with interstate commerce in that market.

Judge Barron, writing for the majority, held that it does.  The Court concluded that an interstate market for medical marijuana not only exists despite federal laws to the contrary, but that it has implicitly been recognized by Congress through the enactment of appropriation riders (the Rohrabacher-Farr Amendment) preventing the Department of Justice from interfering with state laws legalizing and regulating medical marijuana.  The Court also concluded that the Dormant Commerce Clause affirmatively protects such illicit markets – at least where Congress has implicitly recognized the existence of such markets and permitted states to regulate the market.  Finally, the Court concluded that Congress had not affirmatively permitted states to adopt protectionist legislation in the medical marijuana market.  According to the majority, the Dormant Commerce Clause applies regardless of the illicit nature of a particular interstate trade.

Judge Gelpí wrote a short dissent concluding that the Dormant Commerce Clause does not apply to illegal markets.  He wrote that the purpose of the Dormant Commerce Clause is to allow an unencumbered stream of interstate commerce.  To Judge Gelpí, this purpose does not apply when Congress has explicitly acted to make the market in question illegal: “The Commerce Clause does not recognize an interest in promoting a competitive market in illegal goods or services.”

It is not hard to think of other potential areas in which this issue – the applicability of the Dormant Commerce Clause to activities illegal under federal law but recognized under state law – will arise.  Given the dissent in this case, it is also not unlikely that we will see disagreement over the issue as other circuits weigh in.

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