One of the intriguing things about cases decided by a jurisdiction’s highest court is that pronouncements by such courts can often have far-reaching implications. Sometimes they pan out, as the application of the First Amendment to the FDA’s ban on off-label promotion seems to be doing following Sorrell v. IMS Health, Inc., 564 U.S. 552 (2011). With some, the results are conflicting, as with the “independence principle” in PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011). And sometimes they don’t pan out. Anyway, thinking outside of the box is always fun. So that’s what we’re doing today.
In our first case, the United States Supreme Court recently held that the Federal Trade Commission couldn’t seek the “monetary relief” of “restitution and engorgement” based on language in the Federal Trade Commission Act, 15 U.S.C. §53(b) (§13b of the FTCA), allowing the FTC to “grant mandatory injunctions and such other and further equitable relief as they deem appropriate in the enforcement of such final orders of the Commission.” See AMG Capital Management, LLC v. FTC, 141 S.Ct. 1341 (U.S. 2021) (answering “no” to the question “Did Congress, by enacting §13(b)’s words, ‘permanent injunction,’ grant the [FTC] authority to obtain monetary relief directly from courts, thereby effectively bypassing the process set forth in [other parts of the FTCA]?”).
As one would expect, a lot of the AMG decision turned on the specific context of the FTCA. 141 S.Ct. 1348-50 (explaining how “[t]he language and structure of §13(b), taken as a whole, indicate that the words “permanent injunction” have a limited purpose − a purpose that does not extend to the grant of monetary relief”). These include:
- The “permanent injunction” phrase appears in a separate “provision that focuses upon purely injunctive, not monetary, relief.” Id. at 1348.
- “[T]he structure of the Act” – that other sections of the FTCA “gave district courts the authority to impose limited monetary penalties and to award monetary relief.” Id. at 1349.
- The provision of the FTCA that explicitly governs when “monetary relief” may be sought “comes with certain important limitations that are absent in §13(b).” Id.
All together AMG concluded that “to read §13(b) to mean what it says, as authorizing injunctive but not monetary relief, produces a coherent enforcement scheme.” Id.
So that takes us back to the first “consideration” the Court addressed in AMG – what the statutory language actually provided − and, more specifically the disconnect between the FTC’s demands for “monetary relief” with the language of the FTCA limited to “injunctive” relief:
For one thing, the language refers only to injunctions. It says, “in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.” An “injunction” is not the same as an award of equitable monetary relief.
141 S.Ct. 1347 (citations omitted) (emphasis added).
That got us thinking about Fed. R. Civ. P. 23, and in particular comparing AMG to Rule 23(b)(2), which permits class actions for “final injunctive relief.” By analogy, can the discussion of injunctive versus monetary relief in AMG be used to prevent the courts from claiming “authority” (the word used in AMG) to order the payment of money (such as funding “medical monitoring”) in a Rule 23(b)(2) class? After all “what it says,” AMG, 141 S.Ct. 1349, is limited to “injunctive . . . or declaratory relief”:
the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or
Fed. R. Civ. P. 23(b)(2).
Taking the AMG analogy further, Rule 23: (1) addresses solely “injunctive” relief in 23(b)(2); (2) is structured so that a separate provision, Rule 23(b)(3), governs monetary relief; and (3) class actions for money “come with certain important limitations that are absent in” Rule 23(b)(2) – such as predominance, superiority, and manageability.
Thus, we invite our defense-minded audience to consider whether it is now appropriate to argue, based on the Supreme Court’s reasoning in AMG, that as to monetary relief, Rule 23(b)(2) did not “g[i]ve that remedy in the first place.” 141 S.Ct. 1351. Are we off the wall?
Our second case comes not from the United States Supreme Court, but rather from the New Jersey Supreme Court − Hager v. M&K Construction, ___ A.3d ___, 2021 WL 1380984 (N.J. April 13, 2021). Hager held that New Jersey employers are obligated to reimburse now-legal medical marijuana prescriptions on the same basis that they pay for any other employee benefit required under that state’s Workers’ Compensation statute. We don’t deal with medical marijuana much on this blog, but it is a prescription drug of sorts, so when we find something useful in this area, we’ve discussed it.
The interesting thing to us about Hager is its treatment of federal preemption – the employer in Hager argued that, regardless of what New Jersey law might require, it could not be forced to pay for something that remained illegal under supreme federal law. 2021 WL 1380984, at *16. The New Jersey Supreme Court found no preemptive conflict, given how both Congress and the Executive Branch had treated the illegality of cannabis in recent years. Congress has passed a number of legislative “riders” that “deprioritized prosecution for possession of medical marijuana.” Id. at *15-16. The Department of Justice, under both Democratic and Republican administrations, has similarly “deprioritized − but not prohibited − federal prosecution of marijuana activities that are legal under state law.” Id. at *15. Hager went into great detail about these actions, so we won’t.
Based on these executive and legislative actions, Hager added the imprimatur of the judicial branch, finding that there was no longer any conflict between federal law (marijuana being illegal under the Controlled Substances Act) and New Jersey state law under which medical marijuana (and as of 2021, recreational as well) is legal. Hager determined that, based on congressional and DoJ actions, the illegal status of marijuana has been repealed “by implication.” Id. at *17.
Congress has, for seven consecutive fiscal years, prohibited the DOJ from using funds to interfere with state medical marijuana laws through appropriations riders. The present rider and its predecessors have changed federal law. . . . The rider language leaves “no doubt” as to its effect by “forbidding the use of funds to interfere with state medical marijuana schemes. . . . Congress is empowered to amend the CSA [Controlled Substances Act] via an appropriations action provided it does so clearly, and the most recent appropriations rider, in our view, clearly is intended as a substitute” to the CSA . . . . Therefore, we find that Congress has spoken through the most recent appropriations rider and give it the final say.
We thus conclude that the CSA . . . is effectively suspended . . . and that it would be inappropriate for this Court to give any legal effect whatsoever to the earlier statutory enactment. The earlier statute cannot coexist with the enacted appropriation and, consequently, must be deemed to be suspended by adoption of the later appropriation act. We repeat that the case for federal pre-emption is particularly weak where Congress has indicated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to tolerate whatever tension there is between them . . . .
[W]e find here that this clear, volitional act in the form of appropriations law takes precedence over the earlier legislation. Because DOJ enforcement of the CSA may not, by congressional action, interfere with activities compliant with [New Jersey state law], we find that there is no positive conflict and that the CSA and the Act may coexist.
Id. at *19-20 (lots of citations and quotation marks omitted) (emphasis added).
So according to the unanimous New Jersey Supreme Court, the illegality of marijuana under the federal Controlled Substances Act has been impliedly repealed and suspended by the appropriations riders passed by Congress that forbid federal enforcement against marijuana-related activity that is legal under state law. The Hager court recognizes that its holding “departs from the holdings of other state supreme courts.” Id. at *20 (citations omitted). However, in New Jersey, anyway, Hager is the law unless and until it is overturned by the United States Supreme Court.
Treating recent congressional and DoJ actions as “implied suspension as opposed to implied repeal,” 2021 WL 1380984, at *18, of the illegality of marijuana under federal law – at least in New Jersey – opens up a number of possibilities. The one that intrigues us the most has to do with an area we don’t know much about – banking. Perhaps the most significant way that federal illegality continues to hassle the cannabis industry is by forbidding banks to enter into normal depository relationships with this industry due to the purported federal illegality of marijuana − the very thing that Hager now rejects.
Thus, as with AMG, we invite any cannabis-oriented readers of ours to consider whether it can now be considered legal – at least in New Jersey – for New Jersey state-chartered banks to treat cannabis-related businesses in the same fashion that they would treat any other sellers of legal products. Off the wall? Time will tell.