Federal judge dismisses challenge to Washington’s cannabis licensing rules

A federal judge dismissed a lawsuit challenging Washington state’s residency requirements for cannabis retail licenses, dealing another blow to a serial litigator that that was trying to enter the state’s legal marijuana market.

U.S. District Judge Tiffany M. Cartwright ruled Friday that Peridot Tree WA Inc.’s claim under the Dormant Commerce Clause of the U.S. Constitution fails as a matter of law, because Congress has declared the interstate cannabis market illegal, Law360 reported.

“The court’s determination that the Dormant Commerce Clause does not protect an illegal interstate market does not turn on the presence or absence of an underlying property right,” Judge Cartwright wrote.

The ruling adopts the same reasoning used by the court in January when it denied Peridot’s request for a preliminary injunction to block Washington’s licensing rules.

Peridot, which is majority-owned by Michigan resident Kenneth Gay, argued that the state’s requirement that applicants for retail cannabis licenses must have resided in Washington for at least six months unconstitutionally discriminates against out-of-state companies. The Michigan-based company applied for a license under the state’s social equity program but was rejected because its majority owner did not meet the residency requirement.

In her order, Cartwright said Peridot’s arguments did not overcome the fact that Congress, under its Commerce Clause power, has made the interstate cannabis market illegal. She noted that the inapplicability of the Dormant Commerce Clause to the federally illegal cannabis industry does not depend on the existence of a federally protected property right, nor is it negated by the clause’s purpose of preventing trade wars between states.

The judge also said recent statements by Attorney General Merrick Garland and President Joe Biden suggesting a more lenient approach to federal cannabis enforcement do not alter the drug’s current illegal status under federal law.

At least two other federal courts have relied on Cartwright’s earlier reasoning in similar cases, the judge pointed out. With Peridot’s claims failing as a matter of law, Cartwright dismissed the company’s complaint with prejudice.

The case, litigated by Beverly Hills-based attorney Jeffrey Jensen on behalf of Peridot Tree, is one of several similar challenges brought by Jensen in various states, including California, Maryland, New York, and Rhode Island. The lawsuits assert the supremacy of the Dormant Commerce Clause over state policies that allegedly favor in-state cannabis entrepreneurs at the expense of out-of-state players.

Washington’s social equity program, established by the legislature in 2020, aims to award cannabis licenses to individuals with prior cannabis arrests or convictions, those with low household incomes, or residents of neighborhoods disproportionately targeted by past enforcement of cannabis laws.

Jensen has appealed both the January preliminary injunction denial and the recent dismissal, with oral arguments for the former scheduled for mid-August.