Maine Cannabis Residence Suits Raise Thorny Federal Issues

• Published date: 25 June 2020
• Subject Matter: Cannabis & Hemp
• Law Firm: Wilson Elser Moskowitz Edelman & Dicker LLP
• Author: Ms Kara Thorvaldsen

Maine's adult-use cannabis industry is off to a bumpy start.

In 2016, voters in the state approved a ballot initiative to allow the regulation and sale of adult-use marijuana by a slim margin. However, nearly four years later, recreational sales have yet to begin. The process has been delayed in part due to opposition from the state's governor, who twice vetoed enabling legislation presented by the state legislature.

The Maine Office of Marijuana Policy, or OMP, a division of the Department of Administrative and Financial Services, or DAF, was finally able to promulgate regulations last spring, and as of this April had approved 16 conditional licenses.

However, just as the coronavirus pandemic hit the U.S. causing the OMP to delay the opening of the recreational market, two would-be adult-use applicants sued the OMP and its commissioner in federal court, contesting the statutory residency requirements.

Facing this challenge, the DAF announced it would not enforce the requirement, and was promptly sued by the United Cannabis Coalition of Maine and two individual adult-use license applicants in state court, seeking a declaration and injunction that the residency requirement must be enforced.

Hot on the heels of the state court action, a new federal lawsuit was brought against the city of Portland, challenging the residency preference in its permitting scheme.

How this may play out, and regardless of whether the controversy will be resolved through the legislature or in the courts, it will surely be closely watched by the cannabis industry locally and nationally.

The Challenged State Residency Requirement

The Maine Marijuana Legalization Act as enacted by the Legislature sets forth the requirements for various types of marijuana licenses. As currently drafted, it mandates that any applicant for a marijuana license, other than a testing facility, must be a Maine resident.

In the case of an entity, "every officer, director, manager, and general partner of the business entity must be a natural person who is a resident," and a majority of the shares or ownership interests must be owned by residents or businesses owned by residents.¹

As currently formulated, a "resident" is defined as a natural person who:

1. Has filed a resident individual income tax return in this state pursuant to Title 36, Part 8 in each of the four years prior to the year in which the person files an application for licensure under this chapter. This paragraph is repealed June 1, 2021
2. Is domiciled in this state; and
3. Maintains a permanent place of abode in this state and spends in the aggregate more than 183 days of the taxable year in this state.²

As of June 2021, part A of this definition will be replaced with one that removes the four-year residency requirement; however, current residency requirements would still apply.

Notably, prior to the legal challenges being brought, the DAF was fairly explicit in explaining that Maine's licensing program was designed specifically to ensure that...