In the portions of the 2018 Farm Bill legalizing hemp, Congress created a framework for regulation that reflects a specific and intricate compromise between federal and state authority. On the one hand, the Farm Bill removes hemp from the Controlled Substances Act and provides federal protection for transportation of the plant and its derivatives. See §§ 12619, 10114(b) (“No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products . . . through the State or the territory of the Indian Tribe.”). But the Bill also allows states to act as the primary regulators of hemp production within their borders. See § 297B(a)(1). State hemp regulations, in turn, must comply with federal requirements governing those state regulations. That is, hemp production in each state will be subject to federally-regulated state regulations.
To ensure that their regulatory programs will be federally compliant, states must submit “plans” for approval to the U.S. Department of Agriculture. The plans must outline how states will implement aspects of their hemp regulatory programs, such as (1) keeping records regarding land where hemp is grown, (2) testing protocols, (3) disposal procedures for non-compliant plants, and (4) enforcement. § 297B(a)(2)(A). States may also implement additional regulations as long as those rules are “more stringent” than, and “consistent with,” those required by Farm Bill. § 297B(a)(3).
A careful reader may have observed that, while the Farm Bill contains specific federal requirements for what states must do with respect to hemp regulation, the statute contains few limitations on what state hemp regulators may do. Essentially, states may not “prohibit the transportation or shipment of hemp or hemp products,” but states are otherwise free to enact regulations as long as they are “more stringent” than the federal statute. Needless to say, there are any number of potential hemp regulations a state could enact that are more stringent than the federal baseline while falling short of a complete transportation ban.
Like any area in which state and federal law and rule makers have overlapping jurisdiction, hemp regulation will be fertile ground for preemption litigation. Preemption is a doctrine based on the Supremacy Clause of the Constitution, which provides that federal law “shall be the supreme Law of the Land,” the “Laws of any State to the Contrary notwithstanding.” U.S. Const., Art. VI, cl. 2. Thus, state laws which contradict or interfere with federal law are “preempted” by federal law.
Litigants use preemption in a variety of ways. For example, preemption is sometimes used by business or industry groups, who directly challenge state laws they dislike by arguing that federal law preempts the state law, rendering it unenforceable. See, e.g., Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88 (1992) (waste management industry group sued Illinois state agency, arguing that state worker training rules were preempted by OSHA regulations). Defendants also make preemption arguments to defeat state law claims. See, e.g., PLIVA, Inc. v. Mensing, 564 U.S. 604, 608 (2011) (holding that state law claims based on alleged inadequacy of drug warning labels were preempted by FDA regulations).
The Supreme Court has recognized three specific types of preemption: (1) “field preemption,” in which “state law is pre-empted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively,” (2) “express preemption,” where “Congress can define explicitly the extent to which its enactments pre-empt state law,” and (3) “conflict preemption,” in which compliance with both state and federal law is impossible, or state law presents an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” English v. General Elec. Co., 496 U.S. 72, 78-79 (1990).
While the Farm Bill’s clear provision for overlapping state and federal authority to regulate hemp will make it hard for hemp litigants to invoke a field preemption theory, it is easy to imagine a wide variety of other preemption issues being litigated as the hemp industry takes off in America. For example, Congress has made clear that states may not “prohibit” the transportation and shipment of hemp, but a state regulation could indirectly effect a ban on transporting hemp by severely limiting the routes or modes of transportation. (Indeed, effecting prohibitions by surreptitious means is a time-honored legislative tradition.) Such a state regulation could be attacked as inconsistent with the “express” limitations on state authority contained in section 10114(b), supra.
Another issue likely to be litigated is whether a state law is “more stringent” than, or “consistent with” the directives of the Farm Bill. The forthcoming USDA hemp regulations may shed more light on what those terms mean, but they would seem to be solid footholds for challenges to qualitative state hemp regulations. Finally, it seems all but inevitable that the classic preemption clashes which have often arisen between state tort law and federal regulation will play out in the hemp industry—particularly with respect to CBD—as well.
Having grown up with the conflict between state and federal law, the legal cannabis industry is no stranger to navigating the challenges of our federalist system. As hemp companies continue to grow in the new era ushered in by the 2018 Farm Bill, it seems likely that we will see sophisticated companies using preemption in litigation against plaintiffs, each other, and state regulators.
Andrew Orr is a litigator who follows the cannabis industry, and has represented agricultural companies in a variety of commercial and other complex cases.