A court order that would have enabled out-of-state companies to legally operate medical cannabis stores in Maine has been appealed by a leading industry group. 

Wellness Connection of Maine – the state’s largest cannabis company – and its parent company, High Street Capital Partners of Delaware, are contesting against the dropped residency requirement for adult-use stores.

The state proceeded to eliminate the residency requirement for recreational cannabis stores in 2021. However, the plaintiffs are questioning whether or not the residency rule breaches the U.S. constitution by limiting interstate commerce.

No other case of this kind has been considered in a federal appeals court. It’s a big deal, since the outcome could have major repercussions in other states with legal cannabis markets.

Until the 1st U.S. Circuit Court of Appeals contemplates the issue, the residency rule will not be replaced.

Maine’s residency rule lawsuit: What does it entail?

The two plaintiffs fighting this case are Wellness Connection of Maine – one of the state’s leading dispensary networks – and its holding company High Street Capital Partners of Delaware. 

Commissioner of the Maine Department of Administrative and Financial Services, Kirsten Figueroa, was on the receiving end of last year’s lawsuit. Acting as a third party in the lawsuit was nonprofit trade group, the Maine Cannabis Coalition.

Based on official court documents that were disclosed to reporters, three Mainers own Wellness Connection. However, if it wasn’t for the residency rule, High Street would acquire the entirety of the company’s equity.

Due to the fact that the residency requirement restricts investment flow and hinders both Wellness and High Street’s ability to function as normal companies, the plaintiffs proclaim that it infringes upon the Constitution’s “dormant commerce clause,” which prevents states from adopting laws that exploit and disfavor interstate commerce.

The suing companies were backed by U.S. District Judge Nancy Torresen last August. Although the judge noted that the state’s arguing case was “not without logic,” she made a point of noting that the State of Maine does not prohibit qualified nonresidents from buying medical cannabis or traveling back to their home state with it.

“I recognize that none of the courts that have confronted this specific constitutional issue have rendered final judgments, and it also seems that no circuit court has addressed it,” Torresen wrote. “But given the Supreme Court’s and First Circuit’s unmistakable antagonism towards state laws that explicitly discriminate against nonresident economic actors, I conclude that the Dispensary Residency Requirement violates the dormant Commerce Clause.”

Fighting back, the state insisted that cannabis’ federally illegal status has resulted in the interstate market for medical cannabis being banished outright by Congress. With that being said, the state argued that clause is impractical in this situation.

Maine’s residency rule lawsuit: Plaintiffs have not yet responded to the 1st Circuit 

The 1st Circuit is yet to receive a response from Wellness Connection and High Street. In the past, both companies have celebrated victory in amending the residency requirements for Maine’s cannabis programs. In September, notices of appeal were filed by the coalition and the state, before written briefs were submitted to the 1st Circuit in December.

“Here, the dormant Commerce Clause does not apply to Maine’s intrastate market for medical cannabis,” the state’s brief says. “Nor do the residency requirements in the Maine Medical Use of Marijuana Act burden interstate commerce more severely than Congress, because Congress has already eliminated that market. Because striking down Maine’s residency requirements at issue in this case would do nothing to expand legal interstate commerce in the United States, they should stand.”

A subsidiary of Wellness Connection, NPG LLC, initiated a lawsuit against the state in March of 2020. The lawsuit, which sought to claim compensation, represented the first incident involving a cannabis company fighting against the residency requirements outlined in Maine’s adult-use cannabis statute. 

According to Maine Attorney General Aaron Frey, the residency requirement “is subject to significant constitutional challenges” and is unlikely to stay afloat in a legal scenario. The rule was expected to be rescinded following a May 2020 announcement from the state; an announcement that effectively settled the lawsuit. However, that announcement did not include medical cannabis dispensaries.

Adults aged 21 and older can legally possess a maximum of 2.5 ounces of the green stuff in Maine, including five ounces of potent cannabis concentrate. 

The state’s recreational cannabis law, which was approved by voters on November 8, 2016, allows the use of cannabis inside a vehicle.