Virginia Hemp Industry Suffers Major Loss in Court Ruling
On October 30, 2023, Judge Leonie Brinkema in the United States District Court for the Eastern District of Virginia issued a memorandum opinion in the case Northern Virginia Hemp and Agriculture LLC, et al, (Plaintiffs) v. the Commonwealth of Virginia et al., (Defendants). The Court issued its opinion on the plaintiff’s Motion for Preliminary Injunction asking for an order enjoining the Defendants from enforcing provisions of Virginia law that impose a limit on substances containing tetrahydrocannabinol (THC) according to their concentration of “total THC” or a “synthetic derivative of THC” instead of the concentration of delta-9 THC as defined in the Agricultural Improvement Act of 2018, 7 U.S.C. § 1639o(1) (the “Farm Act”); and from implementing or enforcing provisions of Virginia law that restrict the interstate commerce of hemp. The Plaintiff’s Motion was denied, and as a result, Virginia is free to enforce its new prohibitions on hemp and hemp-derived products containing THC. (To read more on Virginia’s new law, click here.)
The basis of this Motion was to challenge a recently enacted senate bill, which was brought in the Virginia legislature by lawmakers in response to children getting ill from consuming hemp products containing delta-8 THC. Lawmakers sought to “curb access to such products”. Specifically, “the Virginia legislature wrote and passed Senate Bill 903 (SB 903) in response to the growing concerns regarding delta-8 and other adulterated hemp products on the market.”
The changes brought about by SB 903 stipulated that hemp-derived products offered for sale in Virginia “not exceed a “total THC” standard that assesses the combined concentration of all forms of THC.” Specifically, “the “total THC” standard requires the hemp products, industrial hemp extracts, or any other consumable substance “(a) contain [ ] a total [THC] concentration of no greater than 0.3 percent and (b) contain [ ] either no more than two milligrams of total [THC] per package or an amount of cannabidiol that is no less than 25 times greater than the amount of total [THC] per package.” In short, under SB 903, a seller of hemp products can no longer claim that a product is compliant for sale in Virginia simply because it contains less than 0.3 percent delta-9, if it also contains heightened levels of delta-8 or some other THC variant. Readers of this blog (and the Plaintiffs) know that this results in hundreds of hemp products meeting the federal standard (less than 0.3% delta-9 THC on a dry weight basis) but failing the Virginia standard.
In addition to the prohibition against selling these products, SB 903 also prohibits “processor[s] [from] sell[ing] industrial hemp or a substance containing an industrial hemp extract … to a person if the processor knows or has reason to know that such person will use the industrial hemp or substance containing an industrial hemp extract in a substance that [exceeds the ‘total THC’ standard in SB 903].”
One of the Plaintiffs manufactures hemp products, bulk cannabinoids, and hemp fiber; another produces and sells hemp-derived products, operating various franchises in Virginia. Another Plaintiff lives in Virginia and uses hemp-derived products to treat her arthritis symptoms. All Plaintiffs allege that SB 903 negatively impacts their businesses and in the case of the individual, prevents them from accessing the products that treat their symptoms.
Plaintiffs argued that SB 903 was preempted by federal law, namely the 2018 Farm Act. The first preemption argument was based on the federal and state definitions of hemp, and the second was related to the ability of Virginia hemp processors to ship or transport hemp through the Commonwealth. The court found these arguments failed for several reasons. First, the language of the 2018 Farm Act specifically states:
“No preemption. Nothing in this subsection preempts or limits any law of a State or Indian tribe that – (i) regulates the production of hemp; and (ii) is more stringent than this subchapter.” 7 U.S.C. § 1639p.
Despite the Plaintiff’s contention that the word “production” applies solely to cultivation, the Court disagreed and ruled that Virginia can regulate “production” to mean regulation of hemp manufacturing, purchase, and sale of hemp products such as delta-8 THC within the Commonwealth, taking it a step further by restating: “the Farm Act expressly permits states to retain “primary regulatory authority over the production of hemp””. In taking this position, the Court cited a decision from Indiana in the Seventh Circuit which stated that: “the Farm Act’s express preemption clause – standing alone – also does not preclude a state from prohibiting the possession and sale of industrial hemp or hemp products within the state.”
Plaintiffs also sought to challenge SB 903 by stating that its sales restrictions were preempted by the Farm Act, specifically the provisions related to processors. Virginia Code states:
“a processor shall not sell industrial hemp or a substance containing an industrial hemp extract, as defined in § 3.2-5145.1, to a person if the processor knows or has reason to know that such person will use the industrial hemp or substance containing and industrial hemp extract in a substance that (i) contains a total [THC] concentration that is greater than 0.3 percent or (ii) contains more than two milligrams of total [THC] per package and does not contain an amount of cannabidiol that is at least 25 times greater than the total [THC] per package.”
For reference, SB 903 defines “processor” as a person registered to process industrial hemp under Virginia law. The Court found that none of the Plaintiffs in the case were registered “processors” under Virginia law and thus did not adequately allege they were regulated by the sales restrictions set forth in SB 903. As a result, this preemption argument failed before the Court. Taken further, the Court found that because of not being “processors” under Virginia law, the Plaintiffs do not have standing to raise this issue.
In addition to not accepting the Plaintiff’s arguments regarding preemption of SB 903 based on federal law, the Court was unable to find “Irreparable Injury” to the Plaintiff’s should the enforcement of SB 903 continue. As a bit of legal background, in order to issue a preliminary injunction, “Plaintiffs must face an injury with sufficient immediacy and reality” (requiring that the threat of injury be “real and immediate”, not “conjectural” or “hypothetical”).
The Court reasoned that Plaintiff’s allegations of harm were undercut by the delay with which they took filing the civil action to enjoin enforcement of SB 903. The Court pointed out the fact that SB 903 was passed on February 7, 2023, signed by Governor Youngkin on March 29, 2023. The enforcement provisions of SB 903 went into effect on July 1, 2023, and the civil action was not filed until September 1, 2023. In its ruling, the Court cited a case which stated: “this inordinate delay in initiating a preliminary injunction proceeding … ‘indicate[s] an absence of the kind of irreparable harm required to support a preliminary injunction.” In sum, the Court found that the Plaintiffs delay in filing for this preliminary injunction did not show any immediacy of injury, and that action should have been filed sooner.
As a result of this ruling, the Virginia hemp industry has taken a massive step backward after many positive steps forward after the passage of the 2018 Farm Act. Notably absent from the Court’s ruling was any reference to the recently issued positive decision in Arkansas. It is worth noting, however, that this decision in Virginia presently carries the same legal weight as the Arkansas’ decision. It remains unclear as to whether the Virginia decision will be appealed, but for the time being, Virginia clearly is not for (hemp) lovers.
Here is the ruling:
November 1, 2023
This article was written by attorney Philip Snow. Kight Law represents hemp businesses in the US and throughout the world. To schedule a consultation please click here and mention this article.