The Texas Supreme Court recently found that the Texas Constitution does not protect a person’s right to process and manufacture smokable hemp in Texas.  [Read Opinion here.]

Photo by Thiago Patriota on Unsplash

Background

The 2018 Farm Bill removed hemp from the federal Controlled Substances Act and defined it as an agricultural product. The bill allowed each state to determine whether hemp would be allowed and how it would be regulated within its own borders. States electing to create a hemp-regulation plan were required to submit it to the USDA for approval.  The Texas Legislature adopted a hemp plan in 2019 generally permitting and regulating the cultivating, handling, manufacturing, processing, distribution, and sale of hemp within the state.  However, as an exception to this authorization, the plan expressly prohibits the “processing” or “manufacturing” of consumable hemp products for smoking. See Texas Health and Safety Code Section 443.204(4) (“…the processing or manufacturing of a consumable hemp product for smoking is prohibited”).

The Legislature authorized the Texas Department of State Health Services (DSHS) to regulate the manufacture and sale of consumable hemp products.  As part of this authority, DSHS adopted a rule prohibiting the “manufacture, processing, distribution, or retail sale of consumable hemp products for smoking.”  See Texas Administrative Code 300.104.

Litigation Background

Plaintiffs are Texas based companies that manufacture, process, distribute, and sell hemp products, including smokable hemp products, in Texas.  They filed suit against DSHS seeking a declaration that Texas Health and Safety Code 433.204(4) and Texas Administrative Code Section 300.104 violate the Texas Constitution’s due-course clause and seeking an injunction prohibiting their enforcement.

The trial court sided with the companies, finding that Section 443.204(4) violated the Texas Constitution and that Rule 300.104 is invalid.  The trial court issued an injunction prohibiting DSHS from enforcing either the statute or the rule.  Thus, the manufacturing, processing, distribution, and retail sale of consumable hemp products in Texas were permitted while the injunction was in place.

DSHS filed an appeal to the Texas Supreme Court.  (Note that in a situation where a trial court grants an injunction on the ground of the constitutionality of a state statute, an appeal may be taken directly to the Texas Supreme Court, rather than to the court of appeals as would generally be the proper procedure.)

Texas Supreme Court Opinion

The hemp companies argue that the statute and rule violate the Texas Constitution’s due course clause because the ban has no rational basis to any governmental interest and its effect is so burdensome as to be oppressive in light of any governmental interest.  Before reaching these questions, the Court noted, it first had to determine whether the hemp companies have alleged the deprivation of an interest protected by the due-course clause.

The companies argue the state’s ban on manufacturing and processing smokable hemp products infringes on their liberty and property rights to “work and earn a living.”

Both the Texas Supreme Court and US Supreme Court have led that the due-course and due-process clauses can protect work-related economic interests in certain situations.  This protection, however, is not absolute. “The due-course clause is not so broad as to protect every form and method in which one may choose to work or earn a living, and some work-related interests do not enjoy any constitutional protection at all.”  Cases have previously narrowed the constitutional protection to the right “to engage in any of the common occupations of life” or “the right to pursue a lawful calling, business or profession.”

The Court noted that to decide this case, it need not determine precisely what constitutes a “common occupation” or “lawful calling.”  Nor must it determine whether the Texas Constitution protects all occupations or callings. “It is enough to observe that the due-course clause, like its federal counterpart, has never been interpreted to protect a right to work in fields our society has long deemed “inherently vicious and harmful.”  For example, historically gambling and racetrack ownership were not one of life’s common occupations, and these occupations are not protected by the due-course clause.

Further, in order to be protected, a property interest must be vested.  When an interest is “predicated upon the anticipated continuance of an existing law and is subordinate to the legislature’s right to change the law and abolish the interest, the interest is not vested.

Applying the law to this case, the court found that the plaintiffs’ interest here does not reflect the type of “common occupation” or “lawful calling ” protected by the due-course clause.   The Court then offered a detailed history of the regulation of hemp and marijuana in the United States and in Texas for over a century. Given the fact that any products made from the flowers, buds, or leaves of a cannabis plant were considered marijuana and deemed illegal for decades weights against the companies’ arguments.  “The law has long prohibited the manufacturing or processing of any smokable (or other) product using or containing the flower of the [cannabis] plant.”   Further, the fact that the companies may have legally manufactured the smokable hemp products prior to Section 443.204(4) going into effect was not sufficient to confer a constitutional protection.  As the Court noted, “…this brief window would have existed only by a temporary administrative quirk in the process of the substances’ partial decriminalization.  Such a fleeting ‘right’ was in no sense ‘vested’ in the companies, which had, at most, a mere anticipation that the government would allow a right it created to continue in existence. Nor would the uncertain state of the law for a few months transform the long-prohibited manufacture of smokable cannabis flower into the kind of ‘lawful calling’ to which courts have afforded constitutional protection.”

Thus, “considering the long history of the state’s extensive efforts to prohibit and regulate the production, possession, and the use of the [cannabis] plant, we conclude that the manufacture and processing of smokable hemp products is neither a liberty interest nor a vested property interest the due-course clause protects.  It is, instead, purely a personal privilege that the people’s elected representatives in the legislature may grant or withdraw as they see fit.  In light of this, the trial court decision is reversed and the injunction lifted with regard to processing and manufacturing smokable hemp products in Texas.  Thus, the statute and rule prohibiting the processing and manufacturing of smokable hemp products in Texas is now in effect.

Concurring Opinion

Justice Young filed a concurring opinion, which was joined by Chief Justice Hecht, Justice Devine, and Justice Blacklock. [Read Opinion here.]

The concurring opinion agrees that the interest the companies assert is not protected by the due-course clause of the Texas Constitution.  The concurring justices, however, would have gone farther and set forth a framework more broadly about what the due-course clause does, and does not, protect. “I do not believe that we will have the luxury of kicking the can down the road much longer,” Justice Young wrote.  In light of that, he wrote this concurrence to describe the analytical process that he believes is necessary when analyzing the due-course clause.

Key Takeaways

It is important to note the portion of the statute and rule that was before the Texas Supreme Court.  Section 443.204(4) prohibits the “processing” or “manufacturing” of consumable hemp products for smoking.  The rule passed by DSHS, however, prohibited the “manufacture, processing, distribution, or retail sale” of consumable hemp products for smoking.  Initially, the plaintiffs challenged the rule on the additional grounds that its prohibition on “distribution” and “retail sale” exceed DSHS’ authority, which only allowed rules related to the “processing” or “manufacturing” of consumable hemp products for smoking.  DSHS initially opposed this argument, but then withdrew that opposition before the Texas Supreme Court and no longer defends that portion of the rule.  Thus, the trial court’s injunction remains in place and enjoins the “distribution” and “retail sale” of consumable hemp products for smoking.  This means that currently in Texas, it is illegal to process or manufacture consumable hemp products for smoking, but distribution and retail sale are currently allowed pursuant to the injunction.

It is critical for anyone involved with consumable hemp products for smoking to understand the definitions of “processing,” “manufacturing,” “distribution,” and “retail sale” to understand what actions are currently allowed versus those now prohibited.

Lastly, I think it is good to keep in mind that the hemp industry is still relatively new, and there are many legal questions that remain unanswered.  This is a changing industry and those involved should take care to keep themselves informed of the various new statutes, regulations, court cases, and other policies that may impact their operation.