Federal - State Law Conflict

As a number of states and the District of Columbia have moved to permit possession, use and sale of marijuana for both medicinal and recreational purposes and the business of legalized cannabis distribution has grown exponentially, federal law banning such activity remains unchanged.  Deeming the trend in state law irrelevant, federal immigration authorities have in fact moved in the opposite direction.  Last month, on April 19, US Citizenship and Immigration Services announced policy guidance “to clarify that violations of federal controlled substance law, including violations involving marijuana, are generally a bar to establishing good moral character for naturalization, even where that conduct would not be an offense under state law.” (uscis-issues-policy-guidance-clarifying-how-federal-controlled-substances-law-applies-naturalization-determinations)
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Seyfarth Synopsis: The Tenth Circuit is set to decide whether workers in Colorado’s legalized marijuana industry are entitled to wage and hour protections under the FLSA. 

The Fair Labor Standards Act (FLSA) is the federal statute that provides wage and hour benefits to certain employees.  On the other hand, the Controlled Substances Act (CSA) is a federal statutes that categorizes marijuana as a Schedule I drug, meaning it is illegal under federal law.  Simple possession (let alone participating in its manufacture and distribution) is illegal, irrespective of state law to the contrary.  In the wake of widespread legalization of recreational marijuana in states across the country, a questions has arisen as to whether the FLSA was meant to provide wage and hour protections to employees of businesses engaged in the manufacture or distribution of Schedule I drugs under the CSA.

Background

This question has been put to the test in Kenney v. Helix TCS, Inc..  In Kenney, an employee of Helix, which provides armed security and transport services for businesses that grow and distribute marijuana, filed a putative collective action against Helix under the FLSA.  Kenney claims that Helix misclassified him, and similarly situated employees, as exempt and owes them overtime wages.  In response, Helix moved to dismiss the action, arguing that Kenney is not entitled to the protections of the FLSA because he is employed in the marijuana industry, which is entirely forbidden under the CSA.

The District Court denied Helix’s motion to dismiss.  The Court observed that Helix did not cite any cases in support of its theory, while Kenney relied on Greenwood v. Green Leave Lab LLC, which held that a plaintiff employed in a marijuana-testing laboratory under Oregon’s recreational marijuana law was entitled to protections under the FLSA, notwithstanding the CSA’s prohibition on marijuana.  Further, the Court held that businesses are not precluded from complying with federal laws because their business practices may violate other federal laws.  Nonetheless, the Court certified the ruling for immediate appeal to the Tenth Circuit with respect to the issue of whether Kenney is a covered employee under the FLSA. 
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In a split decision last Thursday, the U.S. 9th Circuit Court of Appeals affirmed the conviction of Morro Bay marijuana dispensary owner Charles Lynch and remanded the case to the district court for a factual determination as to whether Lynch’s activities were in strict compliance with California law. [Link to case here.]
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While marijuana possession and use continue to become legal in many U.S. states, either for strictly medicinal purposes or for any purpose at all, it can still be a basis for denial of immigration benefits, such as temporary visas, legal permanent residency, and/or naturalization, or for revocation of existing immigration benefits.  This can even be

Amidst a public disagreement between President Trump and Attorney General Jeff Sessions regarding the conflict between federal and state marijuana laws, Sen. Elizabeth Warren (D-MA) and Sen. Cory Gardner (R-CO), announced introduction of a bipartisan bill to protect states with pot-friendly laws against federal prosecution. The bill, introduced on June 7, 2018 and called the “Strengthening the Tenth Amendment Through Entrusting States Act” or the “STATES Act”  proposes to protect state cannabis industries from the ire of federal drug enforcement authorities. A companion bill also has been introduced in the House.  The full text of the Senate bill, S. 3032, is available here, and the corresponding House bill, H.R. 6043, is available here.
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In October 2017, Green Solution Retail, Inc., a cannabis retailer, petitioned the U.S. Supreme Court (SCOTUS) to review a decision which held that the Anti-Injunction Act and Declaratory Judgment Act barred Green Solution’s request to enjoin the IRS from enforcing § 280E of the Internal Revenue Code.
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In a recent article, senior officials with the Department of Justice’s Office of the United States Trustee (the “UST”), the federal government’s watchdog of the bankruptcy system, reaffirmed the department’s position that bankruptcy relief is not available to businesses in the weed industry.  Such a reaffirmation of a well-established policy is not new. However, the article is noteworthy in that it clarifies just how broadly the UST is willing to expand the scope of that policy and that it may prevent “downstream” participants, such as landlords of marijuana dispensaries, from accessing relief under the bankruptcy code.
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According to reports appearing this morning in the New York Times and the Washington Post, Attorney General Sessions is expected to rescind the Cole Memorandum later today.  The Cole Memorandum is a Department of Justice policy that strongly discourages federal prosecutors from enforcing federal marijuana laws in states in which possession and use of