Source: http://iowamedicalmarijuana.org/Legal/HIA_2004
Timestamp: 2019-03-19 21:14:19
Document Index: 667617921

Matched Legal Cases: ['§ 1308', '§ 802', '§ 320', '§ 320', '§ 1308', '§ 1308', '§ 1308', '§ 811', '§ 556', '§ 1308', '§ 1308', '§ 802', '§ 811', '§ 1308']

Hemp Industries Association v. DEA (9th Cir. 2004) - Iowans for Medical Marijuana
Hemp Industries Association v. DEA (9th Cir. 2004)
HEMP INDUSTRIES ASSOCIATION; ALL-ONE-GOD-FAITH, INC., dba Dr. Bronner's Magic Soaps;
ATLAS CORPORATION; NATURE'S PATH FOODS USA INC.; HEMP OIL CANADA, INC.;
HEMPZELS, INC.; KENEX LTD.; TIERRA MADRE, LLC; RUTH'S HEMP FOODS, INC.;
ORGANIC CONSUMERS ASSOCIATION, Petitioners, v. DRUG ENFORCEMENT ADMINISTRATION, Respondent.
No. 03-71366, No. 03-71603
September 17, 2003, Argued and Submitted, San Francisco, California
February 6, 2004, Filed
PRIOR HISTORY: Petition for Review of an Order of the Drug Enforcement Agency. DEA No. Fed. Reg. DEA-205F, DEA No. Fed. Reg. DEA-206F.
COUNSEL: Joseph E. Sandler, Sandler Reiff & Young, Washington, D.C. and Patrick Goggin, San Francisco, California, for the petitioners-appellants.
JUDGES: Before: Mary M. Schroeder, Chief Judge, Betty B. Fletcher, and Alex Kozinski, Circuit Judges. Opinion by Judge B. Fletcher.
OPINION BY: Betty B. Fletcher
[*1013] B. FLETCHER, Circuit Judge:
Appellants manufacture, distribute, or sell comestible items containing oil or sterilized seeds from "hemp" -- a species of plant within the genus Cannabis. They challenge two Drug Enforcement Administration ("DEA") regulations that, taken together, would ban the sale or possession of such items even if they contain only non-psychoactive trace amounts of tetrahydrocannabinols ("THC"). The DEA asserts that natural, as well as synthetic, THC is included in Schedule I of the Controlled Substances Act ("CSA"). We have previously held that the definition of "THC" in Schedule I refers only to synthetic THC, and that any THC occurring naturally within Cannabis is banned only if it falls within the Schedule I definition of "marijuana." [Footnote 1] We reiterate that ruling here: in accordance with Schedule I, the DEA's relevant rules and regulations may be enforced only insofar as they ban the presence of marijuana or synthetic THC.
Footnote 1: The Act spells this as "marihuana." We employ the modern spelling here.
Appellants' business activities include importing and distributing sterilized hemp seed and oil and cake derived from hemp seed, and manufacturing and selling food and cosmetic products made from hemp seed and oil. [Footnote 2] On October 9, 2001, the [*1014] DEA published what it labeled an "Interpretive Rule" stating that "any product that contains any amount of THC is a schedule I controlled substance . . . ." Interpretation of Listing of THC in Schedule I, 66 Fed. Reg. 51530, 51533 (Oct. 9, 2001). This rule would have banned the possession and sale of Appellants' products. On the same day, the DEA proposed two rules that subsequently became final on publication in the Federal Register on March 21, 2003. Clarification of Listing of THC in Schedule I, 68 Fed. Reg. 14114 (March 21, 2003). These rules ("Final Rules") are the subject of the instant appeal. DEA-205F amends the DEA's regulations at 21 C.F.R. § 1308.11(d)(27) so that the listing of THC in Schedule I includes natural as well as synthetic THC. DEA-206F exempts from control non-psychoactive hemp products that contain trace amounts of THC not intended to enter the human body. We stayed enforcement of the Final Rules pending disposition of this appeal.
Footnote 2: We refer to hemp stalks, fiber, oil and cake made from hemp seed, and sterilized hemp seed itself -- i.e., those substances excluded from the definition of marijuana under 21 U.S.C. § 802(16) -- as "non-psychoactive hemp." A "psychoactive" substance is one "affecting the mind or behavior." Merriam-Webster Dictionary.
The non-psychoactive hemp used in Appellants' products is derived from industrial hemp plants grown in Canada and in Europe, the flowers of which contain only a trace amount of the THC contained in marijuana varieties grown for psychoactive use. The hemp seed used in food products is an "achene," or small nut, that is either hulled for direct consumption or crushed for oil. It "contains 20 percent high-quality, digestible protein, which can be consumed by humans." U.S. Dept. of Agriculture, Industrial Hemp in the United States: Status and Market Potential 15 (Jan. 2000), available at Industrial Hemp in the United States: Status and Market Potential 15 (Jan. 2000) . Hemp seed oil "has a better profile of key nutrients, such as essential fatty acids and gamma-linolenic acid, than other oils . . . and a similar profile of other nutrients, such as sterols and tocopherols." Thompson, Berger & Allen, Univ. of Kentucky Center for Business and Economic Research, Economic Impact of Industrial Hemp in Kentucky 7-8 (July 1998), available at Economic Impact of Industrial Hemp in Kentucky 7-8 (July 1998) . Appellants list a wide range of current and planned commercial products that use hemp oil or seed, including roasted hulled seed, nutrition bars, tortilla chips, pretzels, beer, candy bars, margarine, sauces, dressings, and non-dairy versions of milk and cheese.
Synthetic equivalents of the substances contained in the plant, or in the resinous [*1015] extractives of Cannabis, sp. and/or synthetic substances, derivatives, and their isomers with similar chemical structure and pharmacological activity . . . .
21 C.F.R. § 320.3(c) (1970). [Footnote 3] We held that the imposition of a ban on THC occurring naturally within non-psychoactive hemp products amended the DEA's own regulations, and that doing so could be accomplished, if at all, only by a legislative rule. Hemp I, 333 F.3d at 1091. We explicitly reserved the question of the validity of the DEA's proposed legislative rules, which have become the Final Rules, until the instant case was before us. Id.
[Footnote 3] In 1971 the title "Tetrahydrocannabinols" and a code number were added. The regulations were later transferred from 21 C.F.R. § 320.3(c) to 21 C.F.R. § 1308.11(d)(27). The Final Rules amended 21 C.F.R. § 1308.11(d)(27) to insert the words "Meaning tetrahydrocannabinols naturally contained in a plant of the genus Cannabis (cannabis plant), as well as" immediately before "synthetic equivalents of the substances contained in the cannabis plant" in the section quoted above. In considering the propriety of the Final Rules, we necessarily consider the propriety of this amendment to § 1308.11(d)(27).
Appellants offer three arguments why the Final Rules may not be enforced with respect to THC naturally-occurring in non-psychoactive hemp products. First, they argue that DEA-205F is a scheduling action -- placing non-psychoactive hemp in Schedule I for the first time -- that fails to follow the procedures for such actions required by the Controlled Substances Act ("CSA"). Second, they argue that the adoption of DEA 206F is arbitrary and capricious in exempting non-psychoactive hemp products intended to be eaten by animals but not those intended to be eaten by humans, when humans seeking (in vain) any psychoactive effect from these substances could easily eat either. Third, they argue that in issuing DEA-205F, the DEA violated the Regulatory Flexibility Act ("RFA"). We need not reach the latter two arguments because we agree with appellants that the DEA scheduled non-psychoactive hemp without following the required procedures.
We review federal rules and regulations under Chevron U.S.A, Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984). Under Chevron's two-part test, "we must decide (1) whether the statute unambiguously forbids the Agency's interpretation, and, if not, (2) whether the interpretation, for other reasons, exceeds the bounds of the permissible." Barnhart v. Walton, 535 U.S. 212, 218, 152 L. Ed. 2d 330, 122 S. Ct. 1265 (2002) (citing Chevron, 467 U.S. at 843). While at step one we "must give effect to the unambiguously expressed intent of Congress," if "the statute is silent or ambiguous with respect to the specific issue," at step two we will "sustain the Agency's interpretation if it is based on a permissible construction" of a statute. Id. at 217-18 (internal quotation marks omitted).
Since under the Chevron standard we conclude that Congress did not regulate non-psychoactive hemp in Schedule I, we must consider whether the DEA followed the appropriate procedures to schedule it as a controlled substance. The DEA concedes [*1016] that it did not use the following procedures spelled out in the CSA to adopt the Final Rules.
the Attorney General may by rule--
(B) makes with respect to such drug or other substance the findings prescribed by sub-section (b) of section 812 of this title for the schedule in which such drug is to be placed.
21 U.S.C. § 811(a) calls for formal rulemaking procedures, as described in 5 U.S.C. §§ 556 and 557. Formal rulemaking requires hearings on the record, and section 557(c) invites parties to submit proposed findings and oppose the stated bases of tentative agency decisions, and requires the agency to issue formal rulings on each finding, conclusion, or exception on the record. We will not reproduce the entirety of the Administrative Procedure Act here; it suffices to say that the DEA did not and does not claim to have followed formal rule-making procedures.
Two CSA provisions are relevant to determining whether Appellants' hemp products [*1017] were banned before the passage of the Final Rules: the definition of THC and the definition of marijuana. Both are unambiguous under Chevron step one: Appellants' products do not contain the "synthetic" "substances or derivatives" that are covered by the definition of THC, and non-psychoactive hemp is explicitly excluded from the definition of marijuana.
The DEA contends that Appellants' food products may be banned as "any material compound, mixture or preparation" that "contains any quantity of" THC. See 21 C.F.R. § 1308.11(d). However, the definition of THC under the CSA includes only synthetic THC. 21 C.F.R. § 1308.11(d)(27) (defining banned THC as "synthetic equivalents of the substances contained in the plant, or in the resinous extractives of Cannabis, sp. and/or synthetic substances, derivatives, and their isomers . . . ."). [Footnote 4] As we noted in Hemp I, with a more elaborate explanation than we will provide here:
[Footnote 4] The Final Rules at issue here amend the definition of THC to include naturally-occurring THC. Because we consider here the propriety of those amendments, we quote the previous definition, which had been in effect since 1970. See supra note 3.
As we did in Hemp I, we reject the DEA's contention that the Final Rules merely "clarify that the long-standing placement of THC in schedule I includes both natural and synthetic THC." 68 Fed. Reg. at 14116 (Mar. 21, 2003). The DEA's action is not a mere clarification of its THC regulations; it improperly renders naturally-occurring non-psychoactive hemp illegal for the first time.
[*1018] Congress was aware of the presence of trace amounts of psychoactive agents (later identified as THC) in the resin of non-psychoactive hemp when it passed the 1937 "Marihuana Tax Act," and when it adopted the Tax Act marijuana definition in the CSA. As a result, when Congress excluded from the definition of marijuana "mature stalks of such plant, fiber . . ., [and] oil or cake made from the seeds," it also made an exception to the exception, and included "resin extracted from" the excepted parts of the plant in the definition of marijuana, despite the stalks and seeds exception. [Footnote 5] 21 U.S.C. § 802(16). Congress knew what it was doing, and its intent to exclude non-psychoactive hemp from regulation is entirely clear. The DEA's Final Rules are inconsistent with the unambiguous meaning of the CSA definitions of marijuana and THC, and the DEA did not use the appropriate scheduling procedures to add non-psychoactive hemp to the list of controlled substances.
Footnote 5: The DEA argues that because hemp seeds contain some THC, we should allow it to include hemp seeds and its derivatives as within the "exception to the exception" for the extraction of resin. Neither we nor the DEA are in any position to ignore the express exception for hemp seeds in the CSA, nor can we construe "resin" broadly to mean "seeds" as well. As the DEA informs us, the "exception to the exception" for resin was apparently included out of concern that the "active principle" in marijuana, later understood to be THC, might be derived from non-psychoactive hemp and so be used for psychoactive purposes. We note that Congress' policy decision is still effective in prohibiting psychoactive drugs: the DEA makes no showing that extracts from parts of hemp seeds or stalks other than resin are used or could be used for psychoactive purposes.
We find unambiguous Congress' intent with regard to the regulation of non-psychoactive hemp. Therefore, we reject the Final Rules at step one of the Chevron test and need not reach Chevron step two. [Footnote 6]
[Footnote 6} Because our conclusion with respect to Chevron deference suffices to invalidate DEA-205F as applied to non-psychoactive hemp products, we need not address Appellants' Regulatory Flexibility Act arguments.
The DEA's Final Rules purport to regulate foodstuffs containing "natural and synthetic THC." And so they can: in keeping with the definitions of drugs controlled under Schedule I of the CSA, the Final Rules can regulate foodstuffs containing natural THC if it is contained within marijuana, and can regulate synthetic THC of any kind. But they cannot regulate naturally-occurring THC not contained within or derived from marijuana -- i.e., non-psychoactive hemp products -- because non-psychoactive hemp is not included in Schedule I. The DEA has no authority to regulate drugs that are not scheduled, and it has not followed procedures required to schedule a substance.
The DEA's definition of "THC" contravenes the unambiguously expressed intent of Congress in the CSA and cannot be upheld. DEA-205F and DEA-206F are thus scheduling actions that would place non-psychoactive hemp in Schedule I for the first time. In promulgating the Final Rules, the DEA did not follow the [*1019] procedures in §§ 811(a) and 812(b) of the CSA required for scheduling. The amendments to 21 C.F.R. § 1308.11(d)(27) that make THC applicable to all parts of the Cannabis plant are therefore void. We grant Appellants' petition and permanently enjoin enforcement of the Final Rules with respect to non-psychoactive hemp or products containing it.