“Counsel for the parties fundamentally misunderstood how this proceeding, this tribunal and this judge are legally-bound to proceed—and in so doing have potentially set back the entire movement for cannabis reform.”
By Khurshid Khoja, Greenbridge Corporate Counsel P.C.
As legal counsel representing the National Cannabis Industry Association (NCIA) during the Drug Enforcement Administration’s (DEA) marijuana rescheduling hearings, I think it’s vital that industry operators understand something pivotal about the cancellation of the hearings—and the potentially indefinite delay in the hard-fought progress that cannabis advocates have been working toward for decades.
That is, people should know this was initiated by multi-state operator (MSO) backed lawyers who insisted on engaging in a procedural sideshow, rather than working constructively to secure desperately needed relief for the cannabis industry from punitive federal taxation under IRC Section 280E.
In addition to lacking the legal standing to participate in this hearing on behalf of the industry, these parties were also repeatedly found to be devoid of viable legal grounds for their demand to eject DEA from their own hearings. Even worse, they had already been told so by DEA’s chief administrative law judge (ALJ) on multiple occasions and long before they filed their disastrous motion, initiating this setback and potential debacle.
Their arguments, characterized by the ALJ as “bizarre” and “without authority or common sense,” had already been thoroughly rebuffed by the ALJ’s previous order (the Ex Parte Order or EPO, referenced in the quotes below) and also rebuked in open court during the Preliminary Hearing (view the proceedings here, at beginning at 35:50, again at 42:34, and again at 47:30; NCIA’s appearance, by my pro bono co-counsel Nik Komyati of Fox Rothschild, starts at 1:17:09).
Indeed, the most recent order from the ALJ is replete with references to how these parties not only failed to move the needle on the cause of rescheduling with motion after motion, but have now risked undermining it completely.
“The [Movants] persists in [their] insistence that the tribunal possesses the authority to remove the DEA Administrator (that is, the DEA Administrator who is soon to be replaced by the new administration and who assigned the ALJ to adjudicate this matter) from her role as the proponent of (and presumably in adjudicating) the [Proposed Rule]. This theory stands as unsupported and strange now as it did when first proposed in the [Movants’ previous Ex Parte Motion (or EPM)]. I can no more remove or re-designate the Administrator than I can hold parties in contempt and fine them. The strangeness of this unsupported approach is amplified by the fact that the appointment of a new DEA Administrator by a different political party is imminent. Similarly, the concept that the Movants are somehow entitled to an agency head who is steadfastly convinced of the correctness of their position before the first witness has been sworn, is as peculiar as their insistence that the ALJ assigned to the case has some bizarre, inherent authority to remove the head of the Agency from its place as the proponent of the NPRM. In this regard, the [Movants’ Motion to Reconsider (or MTR)] speaks without authority or common sense. If this aspect of the relief it seeks were to be (erroneously) granted, the results would be: (1) certain (correct), swift reversal by the Agency or the courts; and (2) a conversion of the proceedings from a timely, legally-correct hearing to a circus that would add nothing to the rescheduling cause the Movants purportedly espouse. The Movants are not entitled to a perpetual cheerleader-proponent who is forbidden from maintaining or evolving her position, and the public would arguably be ill-served by having one. Even to the extent that the (current) Administrator holds some reservations as to whether the proposed rescheduling adequately discharges her responsibilities under the CSA, the APA is unequivocal that “the proponent of a rule … has the burden of proof.” 5 U.S.C. § 556(d). The Movants can (and should) avail themselves of the opportunity to present their best case to shoulder that burden. Even if the Agency has not noticed (and does not present) the quality and quantum of evidence the Movants subjectively believe it should, there is nothing preventing the Movants from doing so, compiling an unimpeachable record of proceedings, and prevailing. It is not the number of Designated Participants (DPs) that will carry the day, but the strength of the arguments and evidence presented.”
…
“[A]s discussed in the EPO, the true issue is … whether the quality of the prior conduct of one or more of the Agency’s functionaries will affect the outcome of the proceedings. I am certainly not influenced in any way helpful to the Government by these allegations, and the DPs have not been inhibited in their ability to produce the most persuasive evidence at their disposal (even including written materials or testimony from those whom the Administrator did not designate). Even beyond that, as discussed, infra, the appointment of a new DEA Administrator is imminent. In short, there is practically zero chance that the allegations, even if established by the requisite standard, would affect the fairness of the adjudication of the NPRM (whether that decision is ultimately for or against its promulgation).”
Counsel for the moving parties, not content to take yet another firm and well-reasoned “NO” for an answer, asked the ALJ to effectively cancel the hearings indefinitely until they get DEA to admit to wrong-doing.
But why? And for what purpose? So that they can appeal to the same DEA administrator (whose integrity they seek to impugn) for an admission that she and her staff coordinated with prohibitionists to stop reform? Even when the ALJ has already said that any such findings would have “zero chance” of affecting the proceedings in any way that would be helpful to the proponents of rescheduling?
“In its MTR, the Movants have requested that in the event the relief they seek is denied, that they be granted leave to file an interlocutory appeal.”
…
“Notwithstanding the pleas of the Designated Participants that they are anxious for action on the proposed rescheduling of marijuana, the Movants (a subset of the pro-rescheduling DPs) are apparently eager to trade a timely disposition and recommended decision for the dubious advantage of piling on more DPs.”
Restating once again that he is legally bound to act in accordance with federal regulations, the ALJ granted the stay to stop these DPs from repeatedly sucking the oxygen out of the proceedings with their sideshow:
“Under the DEA regulations, in most circumstances, an interlocutory appeal requires … my certification that such an interlocutory review ‘is clearly necessary to prevent exceptional delay, expense or prejudice to any party, or substantial detriment to the public interest.’
Even factoring in the reality that sometimes litigants and their representatives should be mindful of what they wish for, to the extent my analysis is found to be in error on review, I am willing to certify that the allowance of this interlocutory appeal could potentially avoid exceptional delay, expense or prejudice to the DPs and the Government by injecting appellate certainty into the equation at this stage of proceedings.
Accordingly, that aspect of the Movants’ Motion to Reconsider that seeks leave to file an interlocutory appeal is GRANTED, the hearing on the merits that was scheduled to commence on January 21, 2025 is CANCELLED, and proceedings in this matter are STAYED, pending a resolution of the interlocutory appeal to the DEA Administrator.”
Whether the ALJ was legally correct in granting the stay and interlocutory appeal (which could well result in the termination of the rescheduling action altogether) to designated participants who didn’t even have legal standing to participate in these hearings (especially at the expense of long-suffering NCIA member businesses who unequivocally proved their standing to participate) is a question that NCIA’s legal team is exploring.
We owe our members that, and hope to identify any possible grounds NCIA might have for pressing the ALJ to reverse course if possible—ideally before these DPs cause any further irreparable damage.
That said, the ALJ was indeed correct to remind these parties of all they have jeopardized with their gambit to obtain a pyrrhic victory. Most critically, the ALJ noted that even if the movants’ factual allegations of bias by the DEA (alleged in their demand for relief that the ALJ could not legally grant in the first place) were true, they have nonetheless risked undermining decades of struggle to get marijuana off Schedule I of the Controlled Substances Act (CSA).
As the ALJ explained, DEA could now (during the course of the interlocutory appeal) bar any proponents of rescheduling (including NCIA) from participating in the proceedings going forward, or even scrap the proposed rule rescheduling marijuana altogether.
“An evidentiary hearing does not lend itself well to an academic experiment where intellectually novel and curious issues are created and tested, just for the sake of doing so. This is particularly true here, where the American public and the true proponents and antagonists have waited so long, prepared their cases, and cleared their calendars.”
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“As must have been anticipated by the Movants, an interlocutory appeal returns jurisdiction of the matter to the full control of DEA Agency leadership in all respects. 21 C.F.R. § 1316.62. The matter is on stay here, and the Administrator will issue a briefing schedule, entertain oral argument if he/she desires, and issue a binding, written decision on this tribunal. Id. It may be worth considering, however, that in this case, notwithstanding the plain language of the regulations, that the definition of an “interested person” includes only “any person adversely affected or aggrieved by any rule or proposed rule issuable pursuant to [21 U.S.C. § 811]” (21 C.F.R. § 1300.01 (emphasis supplied)), the Standing Order (currently law of the case) balanced a significant level of federal precedent to render a more nuanced, four-factor view that included persons who actually support the NPRM. That is, persons are currently included in the litigation that have alleged neither adverse affect nor aggrievement by NPRM. Stated differently, an interpretation that applies the plain language of the regulation and excludes supporters of the proposed rescheduling is certainly a perfectly defensible (and some might argue, advisable) legal position for the Agency to embrace or evolve to. Even now. Naturally, this would be likewise true about an Agency decision to restart or even withdraw the NPRM. Ironically, had the Administrator elected at the outset to narrow the scope of participants within the strict parameters of the regulations (that is, to limit inclusion to only those adversely affected or aggrieved), without any of the unpalatable noise associated with the alleged ex parte communications, it is likely that such decision would have been easily sustained on review and the Movants would not have the voice they currently enjoy in these proceedings. Thus, the Administrator’s election to extend a participation invitation beyond the parameters of the regulation (a decision which is not subject to my review) could conceivably be viewed as an act of administrative grace aimed at an increased level of inclusivity, but hardly an irreversible one.”
To be clear, NCIA, as the only participant recognized to have legal standing to represent the cannabis industry in these hearings, advised against this path in its own discussions with these parties and declined invitations to join their disastrous motion. Nonetheless, counsel for these parties fundamentally misunderstood how this proceeding, this tribunal and this judge are legally-bound to proceed—and in so doing have potentially set back the entire movement for cannabis reform.
As both pro bono legal counsel entering my 14th year of activism to advance cannabis reform, and a longtime NCIA Board member and former NCIA Chair, my goal in this proceeding has been to secure justice and tax equity for struggling Main Street cannabis businesses across the U.S.—even if it meant enduring some financial hardship to ensure that outcome.
I rationalized this sacrifice by reminding myself that I (along with so many countless other activists both inside and outside NCIA) have worked a very, very long time for this historic opportunity, that it may never come again, and that it must not be squandered.
But the termination of that precious opportunity at the hands of purported advocates for reform—who raised significant sums from the industry and consumers to fund their mercenary army of lawyers, lobbyists and consultants—has me now questioning whether I’ve simply given too much just to arrive at this point.
I can only hope that the industry operators and consumers who funded these self-anointed “industry champions” are asking themselves the same questions now, and are finally ready to change course.
Khurshid Khoja is the founder of Greenbridge Corporate Counsel, P.C. and currently serves on the board of directors of the National Cannabis Industry Association.
Photo courtesy of Mike Latimer.
“Counsel for the parties fundamentally misunderstood how this proceeding, this tribunal and this judge are legally-bound to proceed—and in so doing have potentially set back the entire movement for cannabis reform.” By Khurshid Khoja, Greenbridge Corporate Counsel P.C. As legal counsel representing the National Cannabis Industry Association (NCIA) during the Drug Enforcement Administration’s (DEA) marijuana Read More
