In the Weeds: Top Court Declines Workers’ Compensation Case, MLB Permits CBD Sponsorship, Buyer Beware Delta-9

July 1, 2022
Newsworthy Highlights

Supreme Court Refuses to Hear Medical Cannabis Workers’ Compensation Case. On June 21, 2022, the U.S. Supreme Court denied two petitions for a writ of certiorari brought by injured workers in Minnesota who sought reimbursement for medical cannabis used to treat their work-related injuries. Specifically, the two petitioners sought review of the Minnesota Supreme Court decision holding that the Controlled Substances Act (CSA) preempted Minnesota law, which resulted in the denial of coverage and/or reimbursement for medical cannabis in connection with their workers’ compensation claims.

Prior to denying the petitions, the Supreme Court invited the U.S. Solicitor General to file a brief expressing the views of the United States on the questions. The Solicitor General maintained that that the CSA does in fact preempt state law — though on a different theory than the courts below. The Solicitor General acknowledged disagreement in the state courts on preemption, but she argued that state courts have not yet sufficiently considered the potential theories of federal preemption. The government, therefore, urged the Supreme Court to deny review and permit this fast-evolving area of law to further develop — which is precisely what the court did.

This case is not the first time a state court has ruled on workers’ compensation coverage for medical cannabis. Indeed, in 2014, the New Mexico Court of Appeals approved the reimbursement of claims for medical cannabis for work-related injuries. However, rulings in similar cases in other states have been inconsistent. New Hampshire, New York and New Jersey found that state law was not in conflict with the CSA and authorized workers’ compensation claims for medical cannabis, while Maine, Massachusetts and Minnesota found that CSA preempts state law.

Major League Baseball Approves CBD Sponsorship. Major League Baseball (MLB) directly informed teams that MLB would allow them to sell CBD sponsorships. The MLB requires, however, that any CBD sponsor be certified by the National Science Foundation, and such sponsorships will need prior approval from the commissioner’s office.

Speaking to the Sports Business Journal, MLB Chief Revenue Officer Noah Garden noted, “We’ve been watching [the CBD market] for a while and waiting for it to mature to the point where we can get comfortable with it …. Our fans are very much the kind of customers they are looking for, and we like being first. It’s a good opportunity for us and the clubs.” With MLB opening team and league jersey patch sponsorships in 2023, a CBD brand may secure those sponsorships, though Garden added that “[i]t has to be a brand that represents sports.”

Caveat Emptor Delta-9 Edibles. The world of cannabis recently has seen an increase in various types of “legal delta-9” products that can get people high. The main justification of many of these product manufacturers is that either (1) the product itself is derived from a hemp plant with less than 0.3% delta-9 THC, or (2) the total product volume contains below .3% THC. The math presently appears untested when calculating the amount of delta-9 in a product.

The U.S. Drug Enforcement Administration (DEA) interim final rule stated that “cannabis derivative extract, or product that exceed the .3% Delta-9 THC limit is a schedule I controlled substance,” even if it was derived from a compliant hemp plant. This means DEA may view a product beyond the .3% delta-9 THC threshold as contraband. Moreover, DEA has a strong track record of winning with the U.S. Court of Appeals for the District of Columbia, which recently handed DEA a victory for the interim final rule concluding DEA’s interpretation is consistent with congressional intent and conforming to the Controlled Substances Act.

Although DEA also recently suggested some possibility for the legality of similar products, such as delta-8 products (see McGuireWoods’ Nov. 16, 2021, In the Weeds), the challenge is exactly how the .3% THC is calculated for the product and total product packaging. The federal issue is also separate and apart from whether states would consider any of the “legal delta-9” products to accord with their marijuana regulatory schemes.

DOJ Reconfirms Hands-Off Approach in Marijuana Prosecution. Recently, Attorney General Merrick Garland stated in front of a Senate subcommittee hearing that the Department of Justice will not prioritize prosecuting marijuana use. As a follow up, Sen. Brian Schatz submitted a question asking whether the DOJ intended to update and reissue the Cole and Wilkinson memo, given the increased numbers of states that have legalized marijuana. These memoranda are guidance for U.S. attorneys on marijuana enforcement priorities, which generally urge discretion in states where marijuana is legal. Former Attorney General Jeff Sessions rescinded these memoranda in January 2018.

In his response, Garland restated his testimony that DOJ resources are not put to their best use in prosecuting nonviolent, low-level marijuana offenses, even in jurisdictions where marijuana is illegal. Instead, resources should focus on violent crimes and other offenses that cause societal harm. The DOJ is examining marijuana issues such as production, sales and use, and intends to address them in the days ahead.

New Mexico Class Action Seeks Medicinal Marijuana Insurance Coverage. Recently, a New Mexico cannabis company, Top Organics-Ultra Health, along with six medical marijuana patients filed a class-action lawsuit in Albuquerque state district court seeking insurance coverage for medical marijuana, asserting that medicinal marijuana should be covered because it is a legitimate behavioral health service.

The suit is based on the passage of Senate Bill 317, which requires insurers to cover the full costs of behavioral health services, “including treatments prescribed for behavioral health conditions.” The bill was passed in April 2021 and took effect Jan. 1, 2022. Healthcare providers are recommending that patients use medicinal marijuana to help combat mental and behavioral health issues, but patients are still having to pay for the medicinal marijuana — a practice the patients and Ultra-Health allege violates Senate Bill 317.

Various insurance companies are also named in the suit. The suit alleges that Ultra-Health and the six medicinal marijuana patients are seeking “recovery for themselves, and for every other similarly situated behavioral or mental health patient unlawfully subjected to paying for the entire cost of medically necessary cannabis, in violation of state law.”

The lawsuit comes months after Ultra-Health sent a letter to insurers and the Office of the Superintendent of Insurance advocating for insurers to include coverage for medicinal marijuana used to treat behavioral health conditions. The letter provided data showing that of the 134,307 patients enrolled in the state medical marijuana program, over one-half have been diagnosed with post-traumatic stress disorder. The letter also pointed out that New Mexico law already requires workers’ compensation insurers to provide coverage for medicinal marijuana. When regulators and insurers failed to respond to Ultra-Health’s letter, the parties filed suit.

Grassroots Federal/State Legislative Highlights

California Legislation Aims to Stop Cities From Banning Medical Cannabis. California’s Control, Regulate and Tax Adult-Use of Marijuana Act of 2016 (AUMA) reserved to local jurisdictions specified powers regarding commercial adult-use cannabis activity, including adopting and enforcing local ordinances regulating commercial adult-use cannabis activity.

The California legislature is currently considering SB 1186, the Medicinal Cannabis Patients’ Right of Access Act, which proposes to prohibit local jurisdictions from adopting or enforcing any regulations that prohibit the retail sale by delivery within the local jurisdiction to medicinal cannabis patients, or their primary caregivers, by licensed medicinal cannabis businesses. The prohibition proposed in SB 1186 would be enforceable through a writ of mandate, whereby private parties and the attorney general may sue to compel a governmental agency to perform a legal duty when no other relief exists under law. The writ may be used to force a local jurisdiction to adhere to the provisions of the legislation once passed.

SB 1186 also would increase a patient’s access to medicinal marijuana by delivery; however, the bill explicitly states that nothing in its provisions shall be construed to prohibit the adoption or enforcement of reasonable regulations on retail sale by delivery of medicinal cannabis, including but not limited to reasonable regulations, such as (1) zoning requirements that are not inconsistent with the bill; (2) security or public health and safety requirements; (3) licensing requirements; (4) the remittance, imposition or collection of any applicable state or local taxes upon retail sales occurring within the jurisdictions; and (5) regulations consistent with requirements or restrictions imposed on cannabis businesses. The Assembly Judiciary Committee currently is evaluating the bill and recently released an analysis on the legislation.

Arizona Bill Focuses on Marijuana Testing for Consumer Protection. Arizona’s House Bill 2050 is advancing through the Arizona legislature with several amendments aimed at protecting cannabis consumers within the state. The bill focuses on rigorous marijuana testing, which would require the Arizona Department of Health Services (DHS) to contract with an outside laboratory to confirm whether medical and recreational marijuana dispensaries’ claims for their products are accurate with respect to potency, pesticide limitations, non-contamination, etc.

The dispensaries would be required to separate, label and have the laboratories test marijuana products in single-strain batches, and the outside laboratory would be required to provide an approval certificate to the DHS within five days if the marijuana passes proficiency testing.

According to news articles, bill sponsors indicated that state inspectors found several problems with the production of cannabis products, including contamination with high levels of pesticides, and that the bill lays a foundation to ensure medical marijuana safety for both recreational and medical marijuana consumers.

In addition to tightening testing, the bill (i) requires the DHS to grant new nonprofit medical marijuana dispensary licenses in counties where dispensaries are more than 25 miles apart and ensure there is at least one medical marijuana dispensary in each of the state’s 15 counties; and (ii) waives the biennial $150 medical marijuana card fee for certain veterans. Different versions of the bill have passed in the House and Senate, and the bill now heads to the Conference Committee for approval of final language.

“In the Weeds” is McGuireWoods’ biweekly ounce of highlights in the budding cannabis, hemp and CBD industries. For more information, see our newsletter archive, our Edible Bites podcast series (available on Apple and Spotify), or visit our Cannabis, Hemp & CBD practice.