Page 18 —
COLORADO REAL ESTATE JOURNAL
— February 4-February 17, 2015
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Law & Accounting
I
f you are a college foot-
ball fan, you know there
is not much Oklahoma
and Nebraska agree on when
it comes to the gridiron. How-
ever, on the topic of Colorado’s
retail marijuana laws, these
two neighbors have banded
together and sued Colorado in
the U.S. Supreme Court, claim-
ing they have been damaged
by Colorado’s marijuana laws
and the federal government’s
failure to enforce its own laws.
The state of Kansas has indicat-
ed through its attorney general
that it is considering joining in
the action.
In what is termed as “original
jurisdiction,” conflicts between
states are heard by the Supreme
Court, as opposed to most
other matters that begin at the
federal District Court level and
then proceed to the Supreme
Court (if at all) through the
appellate process. The origi-
nal jurisdiction of the Supreme
Court is described in Article
III, Section 2, of the U.S. Con-
stitution and applies to certain
topics affecting, among others,
ambassadors, admiralty and
maritime claims. Included and
invoked in this instance are
“controversies between two
or more states.” As an aside,
Colorado has experience in this
venue, having been torched a
few years ago by Kansas and
then Nebraska over depletion
of ground and surface waters
of the Arkansas River basin
and the Platte and Republican
river basins, respectively, as
each entered the adjacent state.
Lawsuits between states
seeking redress before the
Supreme Court are quite rare.
According to the Federal Judi-
cial Center, since 1960, the
court has received less than 140
motions for leave to file state-
versus-state actions and nearly
half of those applications were
denied.
The pending marijuana case
will not be an easy victory for
the neighboring states. The
essence of the complaint is
that each of the plaintiff states
alleges it has been unduly bur-
dened by Colorado’s laws and
the resulting effect of marijua-
na making its way back across
state borders,
which
has
resulted in
increased law
enforcement
responsibil-
ity and activ-
ity. Colorado
has two key
a r g ume n t s
in response
to the com-
plaint: first
that
each
state had its
own share
of marijuana and other drug
activity prior to Amendment
64, and as a result, Colorado
cannot be blamed for an incre-
mental increase in that activ-
ity now. Second, and equally
important, for years, individu-
als have taken advantage of
their state’s laws relative to
neighboring states’ laws and
set up businesses to address
product demand in the neigh-
boring state knowing com-
merce (i.e., sales) would extend
beyond their state’s borders.
Fireworks, firearms, liquor and
tobacco products are just a few
items that come to mind.
The difference in the present
case is that these other prod-
ucts are legal in some or most
respects at the federal level,
while marijuana is not. In the
same manner in which it has
dealt with other issues, the cur-
rent administration has either,
through executive order, memo
or declared policy, announced
how it intends to enforce or not
enforce certain federal laws. In
the case of retail marijuana and
federal law, as most readers are
aware, under the broad defini-
tion of conspiracy, anyone who
“aids, abets, counsels, com-
mands, induces” the produc-
tion, sales, cultivation, trans-
portation, financing, banking,
etc., of a prohibited substance
is subject to federal prosecu-
tion. Only the current admin-
istration’s publicly announced
detente gives any solace to
the many Colorado business-
es either directly or indirectly
associated with retail marijua-
na. Now comes the specter of
a Supreme Court decision on
the same issue, and the pros-
pect of a decision that focuses
on the 10th Amendment and,
perhaps, recognizing greater
state rights. Add to that the
prospect of regime change in
the 2016 election such that the
Republicans hold one or both
houses of Congress and the
White House. It is not incon-
ceivable that there could be a
crackdown on retail marijuana.
Both of these scenarios (judi-
cial or executive change) are
antithetical to the fundamen-
tals upon which decisions are
made relative to real estate and
business investments. Rarely
are long-term investments
made with the knowledge that
the underlying business may,
in the short term, be deemed
illegal. In this example, both
the political and legal chal-
lenges are not likely, but pos-
sible and affect the economics
of a particular deal and the
industry in general. Industry
proponents remain optimistic
that the longer the retail busi-
ness is conducted and adapts
to public safety and health
concerns, it is less likely there
will be a return to prohibition.
And in the contest of Nebraska
v. Colorado and Oklahoma v.
Colorado, the Centennial state
may get a win.
s
Kent Karber
Partner, Holland
& Hart, Colorado
Springs
Both of
these scenarios
(judicial or
executive
change) are
antithetical to
the fundamentals
upon which
decisions are
made relative
to real estate
and business
investments.
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