As the country moves legalization Even to legalize marijuana, federal courts still largely do not defend illegally in commercial disputes involving marijuana.We have written articles about defense many times, please refer to Here with HereIn short, an illegal defense is an affirmative defense that the defendant is sued for breach of contract or other related commercial torts. To be sure, it applies to situations other than marijuana, but it is usually raised by defendants seeking to dismiss federal court cases on the grounds that the contract is invalid because the subject matter is illegal under the Controlled Substances Act.
The fact that more and more marijuana is involved does not in itself preclude seeking relief in federal courts. For example, the Tenth Circuit ruled that the Fair Labor Standards Act applies to employers in the cannabis industry. Other federal courts allow cases where contracts are enforced in ways that do not condone or require illegal behavior to continue, such as requiring cannabis company borrowers to repay loans they receive.
A recent decision in the Colorado region indicated that federal courts remain vigilant in civil disputes involving marijuana and will ignore the surface allegations of complaints when assessing the applicability of illegal defenses.
in Sensoria, LLC, etc. v. Kaweske et al. (D. Colo. No. 20-cv-00942-MEH), the plaintiffs tried to recover their investment in a cannabis company named Clover Top Holdings, and violated contract, civil theft, fraud, breach of fiduciary duty and so on. In the early ruling, the court rejected most of the claims because Clover Top Holdings was directly involved in the cultivation and sale of cannabis. But the court allowed the plaintiff to refute the claim because the plaintiff may be able to seek “potential” for relief that does not involve federal marijuana laws.
The plaintiffs refuted their claims and tried to avoid illegal problems by restructuring their relationship with Clover Top Holdings. The revised petition defines their involvement in Clover Top as passive investors who intend to invest in legitimate business. Although it was originally told that Clover Top involved marijuana, certain aspects of marijuana and marijuana did not violate federal law, so the investment was originally legal. The defendant filed a dismissal of the lawsuit.
The court pointed out that the intention to invest in a legal enterprise did not make the issue of illegality meaningless, so restructuring the relationship itself does not preclude dismissal. The plaintiff emphasized that certain Clover Top assets, such as land and buildings, were not illegal in nature, and advocated seeking relief for these types of assets. But the court was not persuaded on the grounds that these assets were used for marijuana and could become the subject of criminal confiscation. Therefore, the court rejected the plaintiff’s attempt to recover these assets as a form of compensation. In the end, the court concluded that marijuana “is the core of the business, and therefore the core of the litigation.” Therefore, the court found that it was unable to grant any form of relief, as long as it did not involve the illegal activities of federal cultivation, processing, and sale of marijuana.
Although this is an unfortunate ruling for the plaintiffs, they may try to continue their claims in state courts because illegal defense—at least in states where recreational marijuana is legal—will not work. For various reasons, many cannabis companies, especially large multi-state operators, prefer to file lawsuits in federal courts rather than state courts. Unfortunately, until the federal government enacts legislation to allow federal courts to enforce cannabis contracts like any other subject, cannabis commercial disputes will still be blamed on state courts.This Senses The case shows that although some commercial disputes involving marijuana may be prosecuted by the federal court, the plaintiff cannot only rely on clever petitions to evade illegal defenses.