Mature hemp plants are examined at the CBDRx Natural Healing organic hemp farm in Longmont, Colorado, in October 2015. (RJ Sangosti, Denver Post file)

Hemp lawsuit in federal court alleges DEA overstepped on “extracts” rule

A federal lawsuit involving hemp is heating up.

Lawyers representing the Hemp Industries Association and hemp businesses have filed an opening brief in a 9th U.S. Circuit Court of Appeals case against the Drug Enforcement Administration, fleshing out claims that a new drug code for marijuana extract violates multiple laws and stands to chill a multibillion-dollar business.

The DEA in December adopted a rule that applies a Controlled Substances Code Number for “marihuana extract,” products containing one or more cannabinoids — chemical compounds found within the plant species Cannabis sativa L. Agency officials previously said the coding was the result of proposed rulemaking put into motion in 2011, is primarily administrative in nature, helps to enable research, and complies with international treaties.

The rule notice did not reflect a change in any control status or the federal drug schedule, the DEA previously told The Cannabist.

The hemp industry argues otherwise.

The new rule opens the doors for potential enforcement actions to be taken against businesses, notably sellers of hemp-derived products that contain cannabinoids, said attorneys for Denver’s Hoban Law Group, representing petitioners Hemp Industries Association and hemp businesses Centuria Natural Foods and R.M.H. Holdings Inc. in the federal case.

“Their final rule is essentially a scheduling action disguised as an administrative rule,” Patrick D. Goggin, a Hoban Law Group attorney, said in an interview Tuesday with The Cannabist.

DEA spokesman Russ Baer could not be reached immediately for comment. Baer previously stated that the agency does not comment on pending litigation.

In the opening brief, Hoban and fellow attorneys utilize case law, congressional testimony and statutes including the Controlled Substances Act to argue that the extracts rule should be invalidated or amended to remove phrasing that indicates cannabinoids are a determining factor of a marijuana extract “and, effectively, a controlled substance.”

“By wrongfully conflating the CSA’s narrow definition of ‘marihuana’ with the entire Cannabis plant, this definition of ‘marihuana extract’ wholly fails to reflect the lawfulness of industrial hemp and non-THC cannabinoids derived therefrom,” attorneys Goggin, Robert Hoban and Garrett Graff wrote in the brief.

Other notable allegations from the brief include:

  • Industrial hemp, with less than 0.3 percent by weight of delta-9 tetrahyrdocannbinol (THC) — the psychoactive component of marijuana — has no potential as a drug of abuse.
  • The 1937 Marihuana Tax Act and, subsequently, the Controlled Substances Act excluded hemp stalk, fiber, seed and oil, except the resin therefrom. The entire genus Cannabis is not unlawful, but rather the non-exempted parts, or “marihuana,” are.
  • In 2014, the “Farm Bill” expanded those exclusions to define and exclude “industrial hemp” from “marihuana.”
  • Non-THC cannabinoids are not per se controlled by international treaties and are not listed as controlled substances under the CSA.
  • The DEA’s final rule is a scheduling action in violation of the CSA.
  • The U.S. met its international treaty obligations by placing “marihuana” within CSA Schedule I in 1970.
  • There are many currently accepted medical uses for “marihuana extract” by the DEA, Food and Drug Administration and state legislatures.
  • The DEA’s final rule violated the Data Quality Act by misstating the law and making misleading statements, notably agency spokesman Russ Baer’s statements to The Cannabist that “CBD oil and other extracts derived from cannabis (which includes hemp) have been and will continue to be Schedule I controlled substances.”
  • The DEA’s final rule violated the Flexibility Act and Congressional Review Act, which mandate that federal agencies consider the impacts of regulations on entities.
  • The final rule will substantially impact hundreds, if not, thousands of businesses with an economic impact in the hundreds of millions or billions.

“There have been numerous violations of federal laws here, which amount to an obscurification of due process that is required under the law to schedule substances under the CSA,” Goggin said in the interview.

The DEA’s answering brief is scheduled to be filed no later than May 3. The petitioners then have 14 days to respond.

Goggin said he anticipates that the case could be heard before a judge by the fall, with a potential decision coming in the winter or spring.

When a final agency action is challenged within 30 days of publication, a statutory procedure allows the action to be challenged in a circuit court of appeal, Goggin said.