Fate of hemp seized by Idaho police in hands of appeals court

On Jan. 24, after stopping a tractor-trailer at a port of entry in Idaho, state police seized nearly 7,000 pounds of hemp bound for Colorado.

The question now facing the U.S. Court of Appeals for the Ninth Circuit is whether Idaho authorities had the right to confiscate the goods or whether U.S. law preempted them from interfering with the interstate transportation of hemp sourced from a grower in Oregon and destined for Colorado.

The 2018 Farm Bill, which President Donald Trump signed, removed hemp with no more than 0.3 percent tetrahydrocannabinol (THC) from the Controlled Substances Act. But Idaho state law doesn’t distinguish between marijuana and hemp with any amount of THC.

The seizure was reportedly billed as the largest marijuana bust in the history of the Idaho State Police.

Elijah Watkins is a trial attorney in Boise, Idaho, who represents Big Sky Scientific LLC (Big Sky), whose hemp was seized. A Delaware corporation based in Aurora, Colorado, Big Sky sells cannabidiol (CBD) powder to manufacturers for use in consumer products.

“When a state law conflicts with a federal law, and the federal law preempts or totally controls a given space or area, the federal law is supreme,” Watkins said in an interview for this story, referencing the “Supremacy Clause” in the U.S. Constitution. “And that’s kind of the situation we have here.”

Although federal law treats hemp as an agricultural commodity and not a controlled substance, Idaho "does not even recognize hemp,” he said in an interview. “And they say that in our state, anything with THC in it—which would include hemp—is a controlled schedule I substance.”

Watkins of Stoel Rives LLP suggested Idaho’s actions also ran afoul of the Commerce Clause in the U.S. Constitution.

“A state can certainly regulate the growth and marketing of an agricultural commodity—whether that is hemp or oranges or potatoes—and yet a state cannot fully block the transportation of a product from one state to another state when it’s traveling along a federally funded highway,” the attorney said.

Big Sky lost round one in its legal fight with the state of Idaho. In February, U.S. Magistrate Judge Ronald E. Bush denied Big Sky’s motion for a temporary restraining order and preliminary injunction. The company wanted Idaho State Police and the Ada County Prosecuting Attorney, Jan M. Bennetts, to return the hemp.

According to Big Sky, the 2018 Farm Bill preempted state police from interfering with the interstate transportation of industrial hemp. Idaho authorities argued they had the right under state law to confiscate the hemp, and Big Sky’s arguments were based on a regulatory framework under federal law that had not yet been created.

Interstate commerce of hemp

The magistrate judge keyed in on Section 10114 of the 2018 Farm Bill.

(a) Rule of Construction – Nothing in this title or an amendment made by this title prohibits the interstate commerce of hemp (as defined in section 297A of the Agricultural Marketing Act of 1946 (as added by section 10113)) or hemp products.

(b) Transportation of Hemp and Hemp Products – No state or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.

Subtitle G of the Farm Bill defined the term “hemp” and explained how states can regulate hemp production by submitting a plan to USDA for approval. It also outlined USDA’s obligations to establish plans to monitor and regulate hemp production in states or Indian tribes that don’t have an approved plan.

But the hemp confiscated in Idaho, state authorities said, couldn’t have been produced in accordance with Subtitle G of the Farm Bill because USDA hasn’t yet adopted a regulatory plan for hemp production or approved any state plans.

They also noted the Farm Bill did not preempt states from regulating hemp. Idaho’s Uniform Controlled Substances Act doesn’t distinguish between marijuana and any amount of hemp with THC—and the seized hemp tested positive for THC, Idaho authorities said.

In his order denying Big Sky’s motion for a preliminary injunction, Bush wrote “a reasonable argument can be made” that the seized hemp couldn’t have met the standard in the 2018 Farm Bill for the reasons outlined by Idaho authorities.

Ninth Circuit appeal

In its opening brief filed with the Ninth Circuit, Big Sky reiterated Idaho authorities had no right to interfere with the transportation of its hemp in interstate commerce.

“The district court failed to harmonize the two subsections of Section 10114 and failed to derive their meaning from the context of the 2018 Farm Bill and thus failed to recognize that Congress preempted states from interfering with the interstate commerce of hemp,” Big Sky’s attorneys wrote.

The company also argued its “hemp was produced in accordance with Subtitle G” of the Farm Bill because it was produced under a separate federal law that Subtitle G extended and authorized: the 2014 Farm Bill.

However, Idaho State Police and county prosecutors argued the 2014 Farm Bill only applies to hemp produced for purposes of research and not for purposes of commercial activity.

“Despite the clear federal law authorizing the farming of hemp—by research institutions, or within state pilot programs—for research and education purposes only—many states simply disregarded the federal law and enacted laws allowing for the commercial sale of the industrial hemp as well as derivative hemp unauthorized products like CBD,” Idaho State Police wrote in a Ninth Circuit brief. “Oregon and Colorado both adopted laws permitting commercial sales.”

Ada County prosecutors quoted the language of the 2014 Farm Bill, as well as a “statement of principles on industrial hemp” from USDA, in consultation with FDA and the Drug Enforcement Administration (DEA). The statement, published in 2016, stated, in part, that hemp products may not be sold “for the purpose of general commercial activity.”

“Big Sky has never contended—much less proven to the district court—that its contraband was produced for research purposes, nor could it in good faith do so,” the prosecutors stated in their Ninth Circuit brief. “Big Sky has been exceedingly clear from the beginning of this litigation that its entire argument relies on the premise that its contraband was produced and shipped solely for commercial purposes.”

The American Trade Association of Cannabis and Hemp has requested permission to file a brief with the Ninth Circuit as amicus curiae in support of Big Sky. The trade group represents operators of cannabis growing facilities and dispensaries, as well as ancillary businesses.

“The Agriculture Improvement Act of 2018 (the ‘2018 Farm Bill’) explicitly forbids the actions of the Idaho police by providing that no state may prohibit the transportation of hemp when such hemp is cultivated pursuant to the 2018 Farm Bill or another federal law,” the trade group wrote in its brief, which it asked the Ninth Circuit to consider.

Idaho authorities seized hemp that was grown in Oregon under a program developed under the 2014 Farm Bill, the brief added.

“Therefore, the hemp at issue was cultivated in accordance with a federal law, and under the 2018 Farm Bill, the Idaho police may not interfere with the product’s shipment through Idaho,” the trade group proclaimed.

In a letter to the Ninth Circuit, Ben Thomas, director of the Montana Department of Agriculture, said “several states, including Montana, had fully DEA-compliant hemp programs under the 2014 farm bill.” He said Montana producers have a “significant interest” in hemp and his state led the country in hemp acreage in 2018.

“While the new USDA regulations for the 2018 farm bill are being implemented, the USDA has indicated that states should continue to use the 2014 pilot programs,” Thomas wrote. “We hope that Idaho will allow for interstate movement of these federally compliant crops. Montana's producers deserve the certainty that they will be able to bring their products to market.”

Felony prosecution

The Oregon driver of the tractor-trailer that was transporting the hemp through Idaho, Denis V. Palamarchuk, is being prosecuted for felony trafficking in marijuana. Watkins said the driver faces a minimum sentence of five years behind bars, if he is convicted.

According to local news reports, Palamarchuk pleaded not guilty in April to the felony charge. He is set to go to trial in October and faces up to 15 years in prison if convicted, a television station in Boise, KTVB, reported. James Ball, Palamarchuk’s attorney, did not immediately respond to a request for an interview for this article.

“We are a commercial enterprise, and we have a million dollar shipment sitting in the back of a semi-truck in a police parking lot somewhere that has probably gone completely bad by this point,” Watkins said. “But at the end of the day, it’s a financial and a business issue that we’re dealing with going forward on whether or not we can transport our legal product … through certain shipping routes.”

He added, “Mr. Palamarchuk is facing criminal prosecution, the loss of his commercial driver’s license, etc., and all he did was show up to a job and hook his trailer up to a tractor and said, ‘OK, here I go.’”