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After Maine Agrees to Drop Residency Requirement for Marijuana Licenses, Challengers File Suit Against Residency Preference in City Ordinance

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After Maine Agrees to Drop Residency Requirement for Marijuana Licenses, Challengers File Suit Against Residency Preference in City Ordinance

Faced with a lawsuit challenging the constitutionality of its residency requirement for marijuana licensees, the State of Maine has agreed to no longer enforce the requirement. 

As we wrote about recently, out-of-state businesses had challenged as unconstitutional a provision in Maine’s marijuana licensing rules that required the majority of the ownership interest and all of the officers, directors, managers, and general partners of business applicants to be held by Maine residents. However, after being “advised by the Attorney General that the [Residency Requirement] is subject to significant constitutional challenges and is not likely to withstand such challenges . . . , defendants will not be enforcing the Residency Requirement or any agency rules, regulations or guidance which enforce or implement the Residency Requirement.” Stipulation of Dismissal, NPG, LLC, et al. v. Figueroa, Case No. 1:20-cv-00107-NT (D. Maine, May 11, 2020).

Now, with the case against the state settled, the plaintiffs are going after a residency preference in a city ordinance. Specifically, plaintiffs filed a lawsuit challenging the constitutionality of a provision in Portland, Maine’s marijuana ordinance that gives a preference to Maine residents in obtaining local approval of a marijuana license. See Complaint, NPG, LLC, et al. v. City of Portland, Case No. 2:20-cv-00208-NT (D. Maine, June 15, 2020).

Under the City’s ordinance, applicants are awarded points based on eight criteria in order to select which applicants receive a limited number of available licenses. Points under one of these criteria are available only if the applicant has been a Maine resident for at least five years. As they did in their suit against the state, plaintiffs argue such preferences violate the Dormant Commerce Clause of the United States Constitution because they discriminate against interstate commerce. Such discrimination, i.e., “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter,” is almost invariably held to be unconstitutional. See Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality of State of Or., 511 U.S. 93, 99 (1994); Hughes v. Oklahoma, 441 U.S. 322, 337 (1979).

However, given the stipulation and dismissal of the state suit, it is still unclear whether a federal court will entertain the new challenge given marijuana’s illegality under federal law. Unlike the state, however, the City of Portland has indicated it will defend the suit. With the State of Illinois and local governments in Michigan enacting similar preferences in their marijuana licensing laws, if the federal court does decide the merits of this case, the decision may offer significant insight into whether those preferences will withstand judicial scrutiny elsewhere. And, of course, equal protection claims challenging these preferences may also be brought in state courts applying rights guaranteed by state constitutions.

Keep checking Dykema’s Cannabis Law Blog for updates as this case develops.