NAMSDL Case Law Update
September 2016
In This Issue
This issue of NA MSDL Case Law Update presents summaries of several new cases related to marijuana, including a
Tenth Circuit Court of Appeals case of V asquez vs. Lewis involving a stop by two Kansas police officers of an
individual with a Colorado license plate. Not included in this issue is the U.S. Supreme Court case of Birchfield vs.
North Dakota regarding the legality of warrantless blood tests for individuals alleged to be driving under the
influence. A full discussion of that case will appear in a forthcoming issue of NA MSDL News. Additionally,
NAMSDL continues to follow cases mentioned in previous issues of NA MSDL Case Law Update.
Awaiting Action
Adams vs. Bute
Alwin Lewis vs. Superior Court for the State
of California and the Medical Board of
California
City of Chicago vs. Purdue Pharma, L.P., et
al
CASES IN THIS ISSUE
Cristina Barbuto vs. Advantage Sales and Marketing LLC, et al
Eve Davis vs. Wal-Mart Stores East, L.P., et al
Feinberg, et al vs. Commissioner of Internal Revenue
Daniel Maddox vs. City of Brandon,
Mississippi, et al
Fourth Corner Credit Union vs. Federal Reserve Bank of Kansas City
Gerlich vs. Leath
Named Plaintiffs (29) vs. Tug Valley
Pharmacy, et al
Fourth Corner Credit Union vs. National Credit Union Administration
People of the State of California vs. Purdue
Pharma L.P., et al
Josephine Hensley, et al vs. Attorney General and Another
State of California vs. Lisa Tseng
State of Colorado vs. Richard Kirk
Justin L. Smith, et al vs. John W. Hickenlooper, Governor of the State of
Colorado
Green Earth Wellness Center vs. Atain Specialty Insurance Co.
State of West Virginia vs. Cardinal Health
State of West Virginia vs. McKesson
Corporation
United States vs. Moshe Mirilishvili
United States vs. Robert Carl Sharp
United States vs. Stephen J. Schneider and
United States vs. Linda K. Schneider
Resolved Since Last Issue
Gerald M. vs. Department of Child Safety
Menominee Indian Tribe of Wisconsin vs.
D.E.A. and U.S. Department of Justice
Sorenson vs. Professional Compounding
Pharmacists of Western Pennsylvania, Inc., et
al
State of Arizona vs. Gear
Matthew John Allen, et al vs. Attorney General and Another
Olsen vs. Iowa Board of Pharmacy
Oregon Prescription Drug Monitoring Program, et al vs. United States Drug
Enforcement Administration
Patients Mutual Assistance Collective Corporation d.b.a. Harborside Health
Center v. C.I.R.
Safe Streets Alliance, Phillis Windy Hope Reilly, and Michael P. Reilly vs. John
W. Hickenlooper, Jr., Barbara J. Brohl, W. Lewis Koski, and Pueblo County
Liquor & Marijuana Licensing Board, et al
United States vs. John Ways, Jr.
United States vs. Pickard, Scheweder, et al
United States vs. Jeffrey Green and Karen
Hebble
United States vs. McFadden
United States vs. Steve McIntosh, et al
United States vs. Real Property and
Improvements Located at 1840 Embarcadero,
Oakland, California, et al
Wilson vs. Lynch, et al
United States vs. Real Property Located at
2106 Ringwood Avenue, San Jose, California
Vasquez vs. Lewis
NAMSDL Case Law Update
September 2016
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Cases Related to Prescription Monitoring Programs
Eve Davis vs. Wal-Mart Stores East, L.P., et al, 4th Circuit Court of Appeals, Case No. 16-1677. A full summary of
this case can be found in previous issues of NA MSDL Case Law Update. As mentioned in the last issue of NA MSDL
Case Law Update, the Plaintiff filed a Notice of Appeal to the U.S. Court of Appeals on June 14, 2016. On September
9, 2016, an Order was entered dismissing Defendant James V. Harney, Jr. from the case as the parties had reached an
agreement regarding terms with that Defendant. The parties filed corrected Briefs with the court on September 12,
2016.
Oregon Prescription Drug Monitoring Program, et al vs. United States Drug Enforcement Administration, 9th Circuit
Court of Appeals, Case No. 14-35402. A full summary of this case can be found in previous issues of NA MSDL
Case Law Update. On July 29, 2016, the ACLU filed a citation of supplemental authorities citing the Ninth Circuit
Court of Appeals case of United States v. Kitzhaber, case number 15-35434, which it claims supports its argument
that the use of an administrative subpoena by DEA agents to acquire certain records is an infringement on the Fourth
Amendment rights of certain individuals as people have a reasonable expectation of privacy in their prescription
records. The Kitzhaber case involved the use of a grand jury subpoena issued for copies of all of Governor
Kitzhaber’s emails, including emails from his personal account. The Ninth Circuit ruled that the subpoena was
overbroad and Governor Kitzhaber had a reasonable expectation of privacy in his personal emails and quashed the
subpoena.
A Notice of Oral Argument was filed by the court on August 30, 2016 setting this case for oral argument on
November 7, 2016.
Marijuana and Medical Marijuana Related Cases
Cristina Barbuto vs. Advantage Sales and Marketing, et al., Suffolk County, Massachusetts Superior Court, No.
1584CV02677. A more detailed summary of this case can be found in previous issues of NA MSDL Case Law
Update. After the trial court dismissed five of the Plaintiff’s six causes of action in May 2016, leaving only an
invasion of privacy claim, the Plaintiff voluntarily dismissed the remaining portion of her case and filed a Notice of
Appeal of the trial court’s decision.
Feinberg, et al vs. C.I.R, U.S. Tax Court (Denver, CO), Case No. 010083-13. As mentioned in the last issue of
NAMSDL Case Law Update, in December 2015, the Tenth Circuit denied two taxpayers’ request to block the turnover
of financial documentation to the IRS about their marijuana business and returned the dispute to the U.S. Tax Court.
After informing the court for several months that the parties were engaged in settlement discussions, the IRS filed a
motion for summary judgment on July 7, 2016. The Tax Court denied the motion on September 2, 2016, and ordered
the parties to advise the court of the case’s status by September 23, 2016.
Fourth Corner Credit Union vs. Federal Reserve Bank of Kansas City, Tenth Circuit Court of Appeals Case No. 161016. A full summary of this case can be found in previous issues of NA MSDL Case Law Update. Since the last
issue of NAMSDL Case Law Update, the Court of Appeals has allowed the filing of an amicus brief by the Board of
Governors of the Federal Reserve System in support of the Defendant, Federal Reserve Bank of Kansas City and
briefs have been filed by the Plaintiff and Defendant.
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Fourth Corner Credit Union vs. National Credit Union Administration, U.S. District Court for the District of
Colorado, Case No. 1:15-cv-01634. A full summary of this case can be found in previous issues of NA MSDL Case
Law Update. On July 5, 2016, the District Court entered an Order granting in part and denying in part the
Defendant’s Motion to Dismiss the Complaint on the grounds that the Plaintiff lacked standing to bring claims for
declaratory relief, the court lacks jurisdiction, and the Plaintiff’s due process claim lacks merit. The court dismissed
the due process and declaratory relief claims but has allowed all other claims to proceed. Since the entry of that
Order, the parties have filed a Joint Status Report setting September 28, 2016 as the date by which they must file a
joint proposed briefing schedule.
Green Earth Wellness Center vs. Atain Specialty Insurance Co., U.S. District Court for the District of Colorado, Case
No. 13-CV-03452. A complete summary of the case can be found in previous issues of NA MSDL Case Law Update.
The case involves the question of insurance coverage under a general property and liability policy for certain losses
suffered by a marijuana business/growing facility. On July 29, 2016, the Plaintiffs advised the court that the parties
settled the case, and the case was dismissed.
Josephine Hensley, et al. v. Attorney General & Secretary of the Commonwealth, Massachusetts Supreme Judicial
Court, Case No. SJC-12106. A more detailed summary of this case can be found in the June 2016 issue of NA MSDL
Case Law Update. This case involved a challenge to Massachusetts Initiative Petition No. 15-27, “The Regulation
and Taxation of Marijuana Act” (the “Initiative”), which is now certified to be on the November 2016 ballot in
Massachusetts. Josephine Henley and 58 other state voters (“Plaintiffs”) sought to decertify the Initiative on the basis
of two alleged constitutional deficiencies: (1) a misleading 500-word summary prepared for voters by the
Massachusetts Attorney General; and (2) the inclusion of unrelated subjects within one petition. Upon review, the
Supreme Judicial Court of Massachusetts rejected the Plaintiffs’ second contention, holding that the Attorney General
did not err in certifying the Initiative because the petition contained only related subjects. As for the first assertion,
the court found the 500-word summary of the Initiative prepared by the Attorney General to be “fair,” but held that
“the title assigned to the petition and the one-sentence statement describing the effect of a ‘yes’ vote” were both
misleading. Accordingly, the court crafted a revised title and one-sentence summary to be used in preparing voting
materials.
Justin L. Smith, et al vs. John W. Hickenlooper, Governor of the State of Colorado, Tenth Circuit Court of Appeals,
Case No. 16-1095; Safe Streets A lliance, Phillis W indy Hope Reilly, and Michael P. Reilly vs. John W .
Hickenlooper, Jr., Barbara J. Brohl, W. Lewis Koski, and Pueblo County Liquor & Marijuana Licensing Board, et al,
Tenth Circuit Court of Appeals, Case No. 16-1048. A full summary of these cases can be found in previous issues of
NAMSDL Case Law Update. Since the last issue, the parties have filed briefs in support of their respective positions,
and briefs have been filed by the states of Nebraska and Oklahoma, although no ruling has been made on their Motion
to Intervene at this time. Further, amicus curiae briefs have been filed by the states of Washington and Oregon and by
four law professors in support of the Defendants. At this time, the parties are in the process of submitting reply briefs
and supplemental authority.
Matthew John Allen, et al. v. Attorney General & Secretary of the Commonwealth, Massachusetts Supreme Judicial
Court, Case No. SJC-12117. A more detailed summary of this case can be found in the June 2016 issue of NA MSDL
Case Law Update. This case also involved a challenge to the Massachusetts Initiative Petition No. 15-27, “The
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Regulation and Taxation of Marijuana Act” (the “Initiative”), which is now certified to be on the November 2016
ballot in Massachusetts. Matthew Allen and 62 other voters (“Plaintiffs”), who are supporters of the Initiative,
asserted that both the original short title and one-sentence summary of the Initiative drafted by the state Attorney
General for dissemination to voters were misleading and designed to encourage votes against it. Upon review, the
Supreme Judicial Court of Massachusetts agreed with Plaintiffs’ contentions. Accordingly, the court crafted a revised
title and one-sentence summary to be used in preparing voting materials.
Olsen vs. Iowa Board of Pharmacy, Court of Appeals of Iowa, May 11, 2016, 2016 WL 2745845. A more detailed
summary of this case can be found in the June 2016 issue of NA MSDL Case Law Update. In 2014, Plaintiff sought
judicial review of the Iowa Board of Pharmacy’s decision not to recommend rescheduling marijuana after previously
recommending it. The Iowa Court of Appeals affirmed the Board’s decision in May 2016. Plaintiff appealed the
decision to the Iowa Supreme Court under Case No. 16- 1381. The parties’ appellate briefs have not been filed to
date.
Patients Mutual Assistance Collective Corporation d/b/a Harborside Health Center v. C.I.R., U.S. Tax Court (San
Francisco, CA), Case Nos. 29212-11, 30851-12, 14776-14. Section 280E of the U.S. Tax Code disallows deductions
for any trade or business which “consists of trafficking in controlled substances (within the meaning of schedule I and
II of the Controlled Substances Act).” As a result, businesses involved in such operations may not deduct reasonable
and necessary business expenses—other than the cost of goods sold— in calculating their taxable income. In recent
years, the IRS has asserted that § 280E prevents marijuana suppliers and dispensaries from taking such deductions,
even in states which allow the medicinal or recreational use of marijuana. In the three consolidated cases listed
above, the Plaintiff, one of the largest marijuana dispensaries in the United States, is disputing over $2.4 million in
taxes that the IRS claims is owed due to its interpretation of § 280E. (Plaintiff is the same entity that was subject to
two property forfeiture actions in California that were dropped by the U.S. DOJ earlier this year, as reported in prior
issues of the NA MSDL Case Law Update.) Plaintiff argues that § 280E should apply only to businesses that operate
illegally under state law and, thus, it should be allowed ordinary business deductions prior to determining tax liability.
A trial of the consolidated cases began in San Francisco, CA in early June 2016. No decision has been issued by the
Tax Court as of the date of this publication.
United States vs. Pickard, Schweder, et al, U.S. District Court for the Eastern District of California, Case No. 11-CR00449. A more detailed summary of this case can be found in previous issues of the NA MSDL Case Law Update.
Defendant Bryan Schweder (“Defendant”) and 15 others were indicted for being part of a marijuana growing
operation. The case subsequently gained notoriety when the court held a week-long hearing in October 2014
concerning the constitutionality of the federal classification of marijuana as a Schedule I controlled substance. After
the hearing, the court found the classification constitutional. Subsequently, all 16 defendants pled guilty to one or
more of their charges prior to trial, with Defendant receiving the longest prison sentence of 13.5 years. In June 2016,
Defendant appealed his conviction to the U.S. Court of Appeals for the Ninth Circuit, under Case No. 16-10272.
Under the current case schedule, it will be early November 2016 before all appellate briefs are filed.
United States v. Steve McIntosh, et al., U.S. Court of Appeals for the Ninth Circuit. August 16, 2016, --- F.3d ----,
2016 WL 4363168. In ten separate criminal actions, Defendants in California and Washington were indicted for
conspiracy to manufacture, manufacturing, and possessing marijuana in violation of the Controlled Substances Act.
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In each case, the Defendant moved to dismiss the cases on grounds that the U.S. Department of Justice (“DOJ”) is
prohibited from spending funds to prosecute them pursuant to the rider in § 542 of the December 2014 Congressional
Appropriations Act that provides that funds authorized by the legislation may not be used “to prevent such States
[including California and Washington] from implementing their own State laws that authorize the use, distribution,
possession, or cultivation of medical marijuana.” All motions were denied by the respective federal district courts,
and the Defendants sought interlocutory review by the Ninth Circuit. After concluding that it had jurisdiction over
the matter and the Defendants had standing to bring their claims, the Ninth Circuit reversed the District Court
decisions. The court held that “at a minimum, § 542 prohibits DOJ from spending funds from relevant appropriations
acts for the prosecution of individuals who engaged in conduct permitted by the State Medical Marijuana Laws and
who fully complied with such laws.” Accordingly, the Ninth Circuit remanded the matters back to the district courts
to hold evidentiary hearings on each Defendant’s strict compliance with applicable law concerning the use,
distribution, possession, and cultivation of marijuana for medical purposes. In concluding, the Ninth Circuit noted
that this was a “temporal” problem for the DOJ only, since it had funding to bring these prosecutions originally, then
lost it (at least as to Defendants complying with state law), but could regain funding at any time if Congress so
decided.
Vasquez v. Lewis, U.S. Court of Appeals for the Tenth Circuit, August 23, 2016, Case No. 14-3278. Plaintiff filed suit
against two Kansas police officers for violating his civil rights by detaining him and searching his vehicle without
reasonable suspicion after stopping him for having an unreadable temporary license plate. The officers asserted,
among other things, that the search was justified because Plaintiff was a citizen of Colorado, driving alone on
Interstate 70 through Kansas in the middle of the night, and in a recently purchased, older-model car. At trial, the
District Court granted the officers’ Motion for Summary Judgment, concluding that Plaintiff had not shown that they
clearly violated established law, which would be necessary to overcome the officers’ qualified immunity from suit.
On appeal, the Tenth Circuit reversed the decision and remanded the case back to the District Court for trial. The
Tenth Circuit found the officers’ reliance on Plaintiff’s Colorado citizenship, allegedly because it is “known to be
home to medical marijuana dispensaries,” to be “most troubling” and “unconvincing.” Noting that half of U.S. states
permit marijuana use for medical purposes and five jurisdictions permit some recreational use under the law, the
Tenth Circuit found it “wholly improper to assume that an individual is more likely to be engaged in criminal conduct
because of his state of residence.” Accordingly, the court continued, “it is time to abandon the pretense that state
citizenship is a permissible basis upon which to justify the detention and search of out-of-state motorists, and time to
stop the practice of detention of motorists for nothing more than an out-of-state license plate.”
Wilson v. Lynch, et al., U.S. Court of Appeals for the Ninth Circuit, August 31, 2016, Case No. 14-15700. Plaintiff
acquired a Nevada medical marijuana registry card and then sought to purchase a firearm. The firearms dealer,
however, knew that Plaintiff had a registry card and refused to sell her a gun because of a September 2011 “Open
Letter” from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) to firearm dealers which stated,
among other things, that “if you are aware that the potential transferee is in possession of a card authorizing the
possession and use of marijuana under State law, then you have ‘reasonable cause to believe’ that the person is an
unlawful user of a controlled substance. As such, you may not transfer firearms or ammunition to the person.”
Plaintiff sued the U.S. Attorney General and others challenging the federal statutes, regulations, and guidance that
prevented her from buying a gun. The District Court dismissed the suit. On appeal, the Ninth Circuit affirmed the
dismissal. Although the court noted that medical marijuana users may be less likely to commit violent crimes due to
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their illnesses, it found that such a hypothesis is “not sufficient to overcome Congress’s reasonable conclusion that the
use of such drugs raises the risk of irrational or unpredictable behavior with which gun use should not be associated.”
Moreover, the court acknowledged that while the laws, regulations and Open Letter “will sometimes burden—albeit
minimally and only incidentally—the Second Amendment rights of individuals who are reasonably, but erroneously,
suspected of being unlawful drug users,” the U.S. Constitution “tolerates these modest collateral burdens in various
contexts, and does so here as well.” Finally, the court rejected Plaintiff’s contention that the Open Letter
impermissibly makes a blanket assertion that any individual with a registry card is a marijuana user. The court found
instead that the Letter “simply clarifies that a firearms dealer has ‘reasonable cause to believe’ an individual is an
unlawful user if she holds a registry card,” which is a permissible inference since a card is circumstantial evidence of
recent marijuana use or possession.
Novel Psychoactive Substances Cases
United States v. John Ways, Jr., U.S. Court of Appeals for the Eighth Circuit, August 11, 2016, Case No. 15-1716. In
August 2014, Defendant, John Ways, Jr., was found guilty by a jury in a federal case of four charges: conspiracy to
sell drug paraphernalia, conspiracy to distribute controlled substances, conspiracy to commit money laundering, and
being a felon in possession of ammunition. Defendant operated four “head” shops in Nebraska and Iowa called
“Exotica.” On appeal, Defendant challenged the District Court's denial of a Motion to suppress evidence obtained
through allegedly faulty search warrants, asserted that there was insufficient evidence to support his conviction on
each charge, and argued that the forfeiture of his property was not supported by evidence. On appeal, the Eighth
Circuit affirmed all convictions except for the charge of being a felon in possession of ammunition. With respect to
the charge of conspiracy to distribute controlled substances, the court undertook an extensive analysis of the evidence
brought at trial, keeping in mind that, under the U.S. Supreme Court’s decision in McFadden, “there must be evidence
that the defendant either knew that the substance in question was a controlled substance, or that he knew the identity
of the substance.” According to the court, the fact that the Defendant spoke about his business openly to his probation
officer, allowed the officer to visit one or more shops, and worked with an accountant and lawyer in an attempt to not
violate the law, all tended to show that Defendant was not aware he was selling controlled substances. Nevertheless,
the Eighth Circuit noted that there was “substantial” evidence to the contrary that did show such knowledge, including
the descriptions used by sales people talking about the effects of the substances for sale, selling some substances in
unmarked packages so that customers “wouldn’t know who to sue,” and keeping misleading lab reports on hand to
show if anyone asked about the chemical makeup of substances. Taking account of all the evidence, the Eighth
Circuit found that there was sufficient evidence for a reasonable jury to conclude that Defendant knew he was selling
illegal controlled substances.
© 2016 The National Alliance for Model State Drug Laws (NAMSDL).
Headquarters Office: 100½ E. Main Street, Suite C, Manchester, IA 52057.
This project was supported by Grant No. G15599ONDCP03A, awarded by the Office of National Drug Control Policy. Points of view
or opinions in this documents are those of the author and do not necessarily represent the official position or policies of the
Office of National Drug Control Policy or the United States Government.
The successor to the President’s Commission on Model State Drug Laws, NAMSDL is a 501(c)(3) non-profit corporation that was created in 1993.
A non-partisan provider of legislative and policy services to local, state, and federal stakeholders, it is a resource for comprehensive and
effective state drug and alcohol laws, policies, regulations and programs and is funded by the United States Congress.