Fourth Circuit clears Maryland social equity mandate for retail weed market

RICHMOND, Va. (CN) — A Fourth Circuit panel ruled Tuesday against a California resident who argued that a social equity requirement for Maryland’s retail cannabis market discriminates against out-of-state residents.

California resident Justyna Jensen challenged a requirement aimed at achieving social equity in Maryland’s retail cannabis market through a licensing process that favored those from communities disproportionately impacted by the war on drugs. Jensen specifically challenged a licensing criterion for applicants who have attended a four-year university in Maryland for at least two years, where at least 40% of the students are eligible for the Pell Grant.

Jensen claims her attendance at California State University, Long Beach, should qualify her for the license despite it not being one of the six Maryland colleges outlined as eligible by the state.

The three-judge panel affirmed the lower court’s denial of Jensen’s request for injunctive relief, which would have enjoined the state from issuing final licenses to the 1,700 applicants it had already processed. Jensen argued the requirement favors Maryland residents in violation of the dormant commerce clause of the U.S. Constitution, which prohibits state or local laws specifically purposed for economic protectionism.

The panel declined to rule on the state’s argument that the dormant commerce clause does not apply to the cannabis industry because cannabis is federally illegal.

“Assuming without deciding, for the sake of argument, that the dormant commerce clause did govern the recreational marijuana market, Jensen’s claim would still fail for one glaring reason: the challenged in-state institution of higher education criterion is not discriminatory,” U.S. Circuit Court Judge DeAndrea Gist Benjamin wrote for the panel.

The Joe Biden appointee agreed with the state that the criteria are not limited to Maryland residents but rather to those who attended the Maryland institutions. The state asserted during oral arguments that an applicant never needed to set foot in Maryland as long as they attended one of the universities online.

“That the qualifying universities are in Maryland does not require Maryland residency,” Benjamin wrote. “On the contrary, an applicant who did not attend a qualifying university would not become eligible under this criterion by becoming a Maryland resident.”

Jensen argued that although the mandate doesn’t explicitly prohibit those from outside Maryland from applying, it does favor Maryland residents when considering the bulk of the student populations for the six universities, as the majority of the students are in-state residents.

“Jensen’s speculations about the demographics of the qualifying institutions and the trajectories of non-resident students also fail,” Benjamin wrote for the panel. “Finding this criterion discriminatory would first require us to assume that students at qualifying universities in the last two years, and as far back as can be reasonably assessed, consist primarily of Maryland residents. We would then have to assume that non-resident students are more likely to become Maryland residents by virtue of having attended one of the qualifying institutions. And finally, we would have to assume that these speculations, taken together, render the in-state institution criterion, either on its face, or in practice, discriminatory. We make no such assumptions.”

In addition to finding Jensen unlikely to succeed on the merits, the lower court ruled that the balance of equities and the public interest weighed against injunctive relief because Jensen waited almost two months after submitting her application and four months after becoming aware of Maryland’s cannabis licensing process before seeking an injunction.

Maryland voters enshrined the right for those at least 21 years old to possess and use cannabis in the state’s constitution in 2022. State lawmakers took the matter of social equity into account when creating the criteria for applicants hoping to sell cannabis.

To qualify as a social equity applicant, the majority owner must either meet the Pell Grant requirement, live in a disproportionately impacted area for at least five of the 10 years immediately preceding the submission of the application, or attend a public school in a disproportionately impacted area for at least five years. The state has granted 205 applicants conditional licenses, 16 of which qualified through the Pell Grant criteria.

The eligible Maryland colleges include Bowie State University, Coppin State University, Morgan State University, the University of Baltimore, the University of Maryland Eastern Shore and Washington Adventist University.

U.S. Circuit Court Judges Paul Niemeyer, a George H. W. Bush appointee, and Nicole Berner, also a Biden appointee, joined the opinion. Attorneys representing the state and Jensen did not respond to a request for comment.