KaB, LLC v USPS, MLB 18-39
For first time in history the Judicial Officer and the Federal Court for the U.S. Postal Service has cleared the way for the shipment of agricultural pilot program industrial hemp, specifically CBD derived from pilot program industrial hemp, through the U.S. Postal Service.
The Issue
In KaB, LLC v. USPS, MLB 18-39 (2018), the Postal Service seized a package of agricultural pilot program hemp derived CBD isolate shipped by KaB, LLC, a Colorado Department of Agricultural Pilot Program Registrant. The Postal Service detained the parcel based on “the parcel emitting an odor of a controlled substance”.
The issue specifically addressed in the Initial Decision, was “whether CBD grown or cultivated from industrial hemp pursuant to a pilot program established by Congress under the Agriculture Act of 2014 is nonmailable as a Schedule I controlled substance.”
A Case Against the USPS
Courtney N. Moran, LL.M. founding principal of EARTH Law, LLC filed the appeal on behalf of her client KaB, LLC who shipped agricultural pilot program compliant hemp derived CBD isolate through the U.S. Postal Service. In addition to ensuring her client’s clear rights under Federal Law, Moran filed this case (and other successful cases) with the intent of establishing federal judicial precedent defining what the clear letter of the law provides for the transportation and sale of agricultural pilot program industrial hemp, to clarify the intent of Congress, and to stop the misinformation and misinterpretations by the Department of Justice and the Drug Enforcement Administration (DEA) of the Agricultural Act of 2014, Section 7606.
The Argument For Hemp
Moran argued that industrial hemp grown in compliance with an agricultural pilot program established under the 2014 Farm Bill, Agricultural Pilot Program Industrial Hemp, is preempted from control under the Controlled Substances Act (CSA), is not a controlled substance, and is mailable.
She argued that the language of the 2014 Farm Bill, namely the definition of industrial hemp and the language providing for the marketing of industrial hemp; the Consolidated Appropriations Act of 2018 provisions that prohibit federal agencies from using funding “to prohibit the transportation, processing, sale, or use of industrial hemp, or seeds of such plant, that is grown or cultivated in accordance with subsection section 7606 of the Agricultural Act of 2014, within or outside the State in which the industrial hemp is grown or cultivated”; the clear intent of Congress as reiterated in numerous letters to the USDA and DEA and an amicus brief in the HIA v. DEA (2018) case; and the holding of the HIA v. DEA (2018) case all provide the legal authority for the legality and mailability of the agricultural pilot program industrial hemp derived CBD isolate at issue.
In ruling in the unprecedented Initial Decision, Chief Administrative Law Judge James G. Gilbert found that,
“Congress clearly ‘swept aside’ the provisions of the CSA, at least in so much as they otherwise restrict the growth, cultivation, and marketing of industrial hemp. In doing so, Congress removed this specific definition of industrial hemp from the restrictions of the CSA, and along with it, the licensing and regulatory authority of the DEA as it applies to the narrowly defined industrial hemp at issue here, and it gave that authority to the various states. In other words, industrial hemp that meets the narrow restrictions of 7 U.S.C. § 5904 is not a Schedule I controlled substance, and its growth and cultivation does not require DEA licensing for cultivation nor is it subject to DEA oversight. See Hemp Indus. Ass’n v. U.S. Drug Enf’t Admin., 720 F. App’x 886, 887 (9th Cir. 2018)(“The Agricultural Act contemplates potential conflict between the Controlled Substances Act and preempts it.”). Industrial hemp grown or cultivated under 7 U.S.C. § 5940, although part of the same plant Cannabis sativa L, is not marijuana as defined by the CSA.”
In analyzing the language of the 2014 Farm Bill with the more expansive language adopted by Congress in the subsequent Appropriations Acts Chief Administrative Law Judge Gilbert concluded, “as Congress currently permits the interstate sale, transportation, and distribution of exempt industrial hemp pursuant to the most recent appropriations act, I find that exempt industrial hemp and products derived from exempt industrial hemp are mailable“.
The Appeal
The Postal Service appealed the Initial Decision. On appeal, the Postal Service maintained the argument that “the sale of CBD, regardless of the source of the product, is not legal and not mailable.” USPS specifically argued that the “Agricultural Act of 2014 does not provide for the commercial sale of industrial hemp products as defined in the statute”, that the
“Appropriations Act of 2018 also does not allow for the commercial sale of industrial hemp” and that ‘according to a position statement from the DEA Office of Public Affairs, CBD from any source is a schedule I substance’ and therefore that the product and package in question was nonmailable.
On appeal, the issue of the mailability of “non-psychoactive CBD derived from industrial hemp grown in compliance with § 7606 of the Agricultural Act of 2014, Legitimacy of Industrial Hemp Research, Pub. L. No. 113-79, § 7606, 128 Stat. 649, 912 (2014) (codified at 7 U.S.C. § 5940, hereafter the Hemp Research Act)” was addressed.
“The Postal Service’s applicable mailability rules depend entirely on whether a package contains a controlled substance that is unlawful under federal law. Publication 52, § 453.31”
The Ruling
In the landmark Final Agency Decision, Judicial Officer Gary E. Shapiro analyzed the Agricultural Act of 2014, Section 7606, and found that “[t]he Hemp Research Act defines industrial hemp, in relevant part, as cannabis with a negligible THC concentration (of not more than 0.3%) if cultivated or grown for purposes of research conducted under a state agricultural pilot program to study its growth, cultivation, or marketing” and “created a clear exception to the Controlled Substances Act.”
Victory For Hemp
In analyzing the subsequent passage of the Appropriations Act provisions, Judicial Officer Shapiro found that the Appropriations Act, “establishes clear Congressional policy authorizing transportation of covered industrial hemp” and “essentially overrides the DEA’s contrary position, as it appears Congress intended to do” leading him “away from the DEA’s position” to make his final determination based on “the actual wording of the law and its plain meaning”. Judicial Officer Shapiro specifically provided,
“by virtue of the Appropriations Act, Congress manifested its intent to legalize transportation of industrial hemp which otherwise complies with the Hemp Research Act. I find any conflicting position by the DEA impossible to reconcile with the statute’s plain language. Therefore, I must conclude that the interpretation to the contrary by the DEA is inconsistent with the statutory mandate and would frustrate the policy that Congress sought to implement.“
Judicial Officer Shapiro continued,
“I interpret the wording of the relevant legislation to be plain, clear, unambiguous, and capable of only one reasonable interpretation. While the DEA may disagree, the drafters of the legislation do not. Therefore, I must enforce the law according to its terms so long as the text is not absurd, and it certainly is not.“
Final Agency Decision
The Final Agency Decision concluded that,
“the Hemp Research Act, as supplemented by the Appropriations Act, provides an exception to the Controlled Substances Act, allowing the interstate transportation of industrial hemp, including CBD derived from it, so long as it complies with the Hemp Research Act’s requirements.”
Case In Review
In KaB, LLC v. USPS (2018) Chief Administrative Law Judge James G. Gilbert and Judicial Officer Gary E. Shapiro listened to the facts, read the letter of the law in its truest form, and were not intimidated by the incorrect guidance DEA was giving the Postal Service Inspector Attorney. These judges have interpreted the law as it was intended. Just like all of us, it’s the DEA’s job to follow the law.
This case was different from another case, Nancy Sansouci v. USPS, MLB 18-9, 2018 WL 2045023 (April 13, 2018), decided earlier in 2018 by Chief Administrative Law Judge Gilbert. Nancy Sansouci v. USPS (2018) addressed the question of whether cannabidiols (CBD) produced from marijuana were nonmailable by virtue of the classification of marihuana under the CSA as a Schedule I controlled substance. It was held that cannabidiols that are a derivative of the marijuana plant and that do not fall under the exception created by Agricultural Act of 2014, are nonmailable. After finding “no evidence in the record that the product distributed by Wildflower Inc. falls within this very narrow exception” and the product was CBD produced from marijuana, the package was held to be nonmailable.
Where do we go from here?
While the ruling in KaB, LLC v. USPS only applies to the package at issue, we now have federal judicial precedent that binds the USPS Agency. Any attorney who has clients that are faced with agricultural pilot program hemp package seizures can point to this federal judicial precedent that reflects the letter of the law and the distinction between lawful agricultural pilot program hemp and its derivatives which are exempt and are not scheduled controlled substances, and marijuana and its derivatives which remain Schedule I controlled substances and are nonmailable.
Moran represents numerous clients legally growing hemp under agricultural pilot programs who are producing a variety of hemp derived products, including CBD products. Other clients she has appealed on behalf of are having packages returned from USPS. In light of the 2018 Farm Bill that provides for full federal hemp legalization, this case is still imperative. As Moran played a key role in the drafting and negotiations of the language with the offices of Senator Ron Wyden and Senate Majority Leader Mitch McConnell, she points to the fact that we have seen that Federal Agency interpretation has been inconsistent with the letter of the law and the intent of Congress in the 2014 Federal Farm Bill which has created legal grey areas, misinformation nation-wide, and unnecessary obstacles for agricultural pilot program participants. Further, during the time rulemaking occurs by the USDA for implementation of the new hemp legalization provisions, which could take years, and until the State/Tribal Plans for implementation of full hemp legalization within their jurisdictions are approved by USDA, states will still be operating under the agricultural pilot program authority provided in the 2014 Farm Bill. Further, Federal Agencies, such as USPS, will still need to continue to distinguish legal hemp from illegal marijuana.
This is a major step in the right direction for Cannabis law reform.