by Sarah Lee Gossett Parrish, Cannabis Lawyer
The first major piece of legislation concerning medical marijuana was signed into law by Oklahoma Governor Kevin Stitt on March 14, 2019, and became effective on August 29, 2019. The bill was known as the Oklahoma Medical Marijuana and Patient Protection Act, nicknamed the Unity Bill (“UNITY”), and I have written about UNITY on numerous occasions. It is time to address what arguably has become one of the most controversial aspects of Oklahoma’s medical marijuana landscape—residency requirements for OMMA licensees.
UNITY changed the residency requirements for OMMA licensees from the simple, easily-met standard in SQ 788, which required applicants to “show residency in the State of Oklahoma” by producing an Oklahoma state driver’s license, identification card, residential lease, mortgage, deed, or similar document, to a strict, two-year residency requirement or five years of continuous Oklahoma residency during the preceding 25 years immediately prior to the application date. Additional, substantial, documentary evidence is now required as proof.
For nonresidents eager to enter Oklahoma’s medical marijuana industry, UNITY marked the end of an era. Post UNITY, it has become more important than ever for those who are not Oklahoma residents to cultivate strong relationships with Oklahoma partners if they hope to obtain one of OMMA’s coveted licenses. It is important to note that UNITY did not alter the ownership percentage requirements—a minimum of 75% ownership by Oklahoma residents. However, exactly who would qualify as an Oklahoma resident changed significantly.
Recently, federal district courts across the country have started to invalidate residency requirements for cannabis business licensees on the basis that such protectionist statutes violate the dormant Commerce Clause of the United States Constitution (U.S. CONST. ART. I, § 8, cl. 3.), by explicitly and purposefully favoring state residents over non-residents. Indeed, this would seem to be the intended purpose of Oklahoma’s residency requirements set forth in UNITY, as well as the preexisting 75% Oklahoma ownership requirement.
Now, such an action has been filed here, in the United States District Court for the Western District of Oklahoma (where I served as a federal law clerk just after I first finished law school), by a Washington limited liability company, Original Investments, LLC d/b/a Dank’s Wonder Emporium.
The Washington company’s declaratory judgment action contends that Oklahoma’s residency requirement for OMMA-licensed businesses “unconstitutionally prohibits non-residents from receiving an Oklahoma medical marijuana business license and from owning more than twenty-five percent (25%) of any Oklahoma company that holds an Oklahoma medical marijuana business license.” The action also asserts that the residency requirement violates the dormant Commerce Clause of the U.S. Constitution “by explicitly and purposefully favoring Oklahoma residents over non-residents.”
It certainly would seem so.
Notably, the allegations in this federal court complaint are supported by the June 26, 2019, decision of the United States Supreme Court in Tennessee Wine and Spirits Retailers Association v. Thomas, where the Court struck down a two-year residency requirement as to initial applicants for retail liquor store licenses and a ten consecutive year residency requirement for renewal applicants, in the State of Tennessee. In pertinent part, our nation’s highest court relied on the dormant Commerce Clause, which provides, “if a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to advance a legitimate local purpose.”
In the Thomas case, the Supreme Court reasoned that, since the residency requirement for liquor retail sales licensees had little, if any, relationship to public health and safety, and blatantly favored Tennessee residents, it violated the dormant Commerce Clause and was unconstitutional.
The same can be said for UNITY’s two-year residency requirement for OMMA licensees and for OMMA’s requirement of 75% Oklahoma ownership in any OMMA-licensed commercial business. Neither has any relationship to public health and safety, and both blatantly favor Oklahoma residents. Thus, it seems that these residency requirements for OMMA licensees violate the dormant Commerce Clause and are unconstitutional.
Of course, marijuana remains illegal under federal law, so reliance on the dormant Commerce Clause could be problematic for cannabis businesses. In fact, a federal district court could decline to even exercise jurisdiction over such a case, on that basis. However, given the recent decisions of several federal district courts that have invalidated similar residency requirements for cannabis businesses, I like the Washington company’s chances here.
What’s the take-away?
Stay tuned. Oklahoma’s Wild, Wild, West may get a little bit wilder in the near future.
Information contained herein provides general information related to the law and does not provide legal advice. It is recommended that readers consult their personal lawyer if they want legal advice. No attorney-client or confidential relationship exists or is formed between you and Ms. Parrish as a result of this article.
