Court dismisses HIA lawsuit against DEA

A federal judge this week dismissed a lawsuit filed by the Hemp Industries Association (HIA) and RE Botanicals Inc. against DEA. A related lawsuit, however, remains pending in an appeals court in the nation’s capital.

In a memorandum opinion published May 3, U.S. District Judge James E. Boasberg found he lacked “subject-matter jurisdiction” over the controversy between plaintiffs and DEA. Hemp Industry Daily first reported the decision.

The litigation arose after DEA published an interim final rule (IFR) that it said merely conformed its regulations to amendments to the Controlled Substances Act (CSA) in the 2018 Farm Bill—also known as the Agricultural Improvement Act of 2018.

The 2018 Farm Bill legalized hemp with a delta-9 THC concentration not exceeding 0.3% on a dry weight basis. But a cannabis derivative that exceeds 0.3% is a Schedule I controlled substance, DEA stated in the IFR, even if the plant from which it was derived doesn’t exceed the THC limit in the law.

The row between industry and DEA relates to how hemp should be treated during its production—when THC temporarily exceeds the 0.3% threshold—and before the finished product is manufactured.

Plaintiffs sought a declaration in the U.S. District Court in Washington, D.C., that intermediate hemp material (IHM) and waste hemp material (WHM) are not controlled substances subject to the registration requirements of the CSA, according to Boasberg. Plaintiffs also requested an injunction that would bar DEA from enforcing the CSA against such hemp materials, he said.

“Interesting as this question may be, the Court ultimately concludes that it is powerless to entertain the merits of plaintiffs’ entreaty,” Boasberg wrote in his 25-page opinion. “Congress has provided an exclusive pathway for federal-court challenges to final DEA decisions such as the interim final rule at issue here: namely, a petition for review filed in the court of appeals.”

The judge added: “As this lawsuit, in sum and substance, challenges an assertion of agency authority set out in the IFR, it falls squarely within the ambit of that exclusive-review provision. The Court, accordingly, will dismiss this action for lack of subject-matter jurisdiction.”

A related lawsuit remains alive in the U.S. Court of Appeals for the District of Columbia Circuit. That case had been on hold pending the outcome of the lawsuit before Boasberg.

Shawn Hauser, a partner in Denver with Vicente Sederberg LLP, who is part of the legal team representing the plaintiffs, said they disagreed with Boasberg’s conclusion that he did not have authority to hear the case, are “carefully considering” whether to appeal the order and “intend to proceed vigorously with their petition for review in the [U.S.] Court of Appeals.”

“This purely procedural determination forces plaintiffs to proceed in the Court of Appeals, where the equitable remedies they seek are unavailable, and invites DEA to continue pursuing similar procedural machinations in the future,” the lawyer said in a statement. “The District Court’s decision to dismiss plaintiffs’ complaint is all the more disappointing given that multiple members of Congress, including those who drafted the hemp provisions of the 2018 Farm Bill, have made it clear that the possession and/or manufacturing of IHM and WHM are outside of DEA’s jurisdiction.”

Boasberg said his order resolves the case in his court but does not opine “on the underlying merits of plaintiffs’ claims regarding IHM and WHM.”

“Plaintiffs are confident they will prevail on those merits in the Court of Appeals,” Hauser said.

DEA did not immediately respond to a request for comment on Boasberg's recent order.