Scottsdale Research Institute v. DEA ( 2022 )

United States Court of Appeals
For the First Circuit
No. 21-1055
DR. LYLE E. CRAKER,
Petitioner,
v.
UNITED STATES DRUG ENFORCEMENT ADMINISTRATION; ANNE MILGRAM,* in
her official capacity as Administrator of the Drug Enforcement
Administration,
Respondents.
No. 21-1323
SCOTTSDALE RESEARCH INSTITUTE,
Petitioner,
v.
UNITED STATES DRUG ENFORCEMENT ADMINISTRATION; ANNE MILGRAM,* in
her official capacity as Administrator of the Drug Enforcement
Administration; MERRICK B. GARLAND, Attorney General,
Respondents.
PETITIONS FOR REVIEW OF A FINAL RULE OF THE DRUG ENFORCEMENT
ADMINISTRATION
* Pursuant to Fed. R. App. P. 43(c)(2), Administrator Anne
Milgram has been substituted for former Acting Administrator
D. Christopher Evans in both petitions for review.
Before
Barron, Chief Judge,
Lynch and Kayatta, Circuit Judges.
Shane Pennington, with whom Vicente Sederberg LLP, Michael
Perez, Perez Law, Alexandra H. Deal, Paik, Brewington & Deal, LLP,
Matthew C. Zorn, and Yetter Coleman LLP were on brief, for
petitioners.
Daniel Aguilar, Attorney, Appellate Staff, Civil Division,
with whom Brian M. Boynton, Acting Assistant Attorney General, and
Mark B. Stern, Attorney, Appellate Staff, Civil Division, were on
brief, for respondents.
August 9, 2022
KAYATTA, Circuit Judge. Petitioners -- botany professor
Dr. Lyle Craker and clinical research company Scottsdale Research
Institute (SRI) -- challenge a rule promulgated by the Drug
Enforcement Administration (DEA) that sets the framework through
which applicants may register to lawfully manufacture and
cultivate cannabis for research purposes. For the following
reasons, we deny their petitions for review.
I.
A.
We begin by laying out the statutory and administrative
scheme that governs the registration of prospective cannabis
growers. The Controlled Substances Act (CSA), 21 U.S.C. § 801 et
seq., requires "[e]very person who manufactures . . . any
controlled substance" to first register with the federal
government. 21 U.S.C. § 822(a)(1). This mandate applies to anyone
seeking to "produc[e]" or "cultivat[e]" marijuana, a schedule I
substance. Id. § 802(15), (22) (defining "manufacture" to include
production and cultivation); see also id. § 812, sched. I(c)(10)
(designating "[m]arihuana" as a schedule I controlled substance).1
Congress granted the Attorney General the authority to
register prospective manufacturers of controlled substances, see
id. §§ 822(a), 823(a), and the authority "to promulgate rules and
1 We use the terms marijuana (or marihuana as the CSA calls
it) and cannabis interchangeably throughout this opinion.
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regulations . . . relating to the registration and control of the
manufacture, distribution, and dispensing of controlled
substances," id. § 821. The Attorney General in turn delegated
those powers to the Administrator of the DEA. See 28 C.F.R.
§ 0.100.
Pursuant to this delegated authority, the DEA "shall
register an applicant to manufacture controlled substances in
schedule I or II if [the agency] determines that such registration
is consistent with the public interest and with United States
obligations under international treaties, conventions, or
protocols in effect on May 1, 1971." 21 U.S.C. § 823(a). To
determine whether registration is consistent with the public
interest, the statute enumerates six factors that must be
considered, including the "maintenance of effective controls
against diversion" of the substance, "compliance with applicable
State and local law," the "prior conviction record of [the]
applicant," and "such other factors as may be relevant to and
consistent with the public health and safety." Id. The statute
does not specify how the DEA is to determine that a registration
is consistent with the United States' international treaty
obligations.
The pertinent treaty obligations to which the parties
direct us are those set forth in the Single Convention on Narcotic
Drugs, Mar. 30, 1961, 18 U.S.T. 1407, 520 U.N.T.S. 204 (the "Single
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Convention"). As relevant here, the Single Convention requires
signatories to "prohibit the production, manufacture, export and
import of, trade in, possession or use of [substances including
cannabis] except for amounts which may be necessary for medical
and scientific research only." Id. art. 2.5(b). With respect to
cannabis specifically, the treaty adopts the "system of controls
as provided in article 23 [of the Single Convention] respecting
the control of the opium poppy." Id. art. 28.1. Those controls
require that a signatory's designated government agency (here, the
DEA): (1) "designate the areas in which . . . cultivation . . .
shall be permitted"; (2) authorize only "licensed" cultivators to
"engage in such cultivation"; (3) "specify the extent of the land
on which the cultivation is permitted"; (4) "purchase and take
physical possession of" the cultivated crops; and (5) "have the
exclusive right of importing, exporting, wholesale trading and
maintaining stocks other than those held by manufacturers of . . .
medicinal [cannabis] or [cannabis] preparations." Id. art. 23.2.
Article 23 also makes clear that the functions described above
must be "discharged by a single government agency if the
constitution of the [signatory nation] permits it." Id. art. 23.3.
B.
Prior to the initiation of the present petitions for
review, the DEA had licensed only a single grower under the
registration scheme detailed above -- the National Center for
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Natural Products Research (the "National Center"), a division of
the University of Mississippi. See Lyle E. Craker; Denial of
Application, 74 Fed. Reg. 2101, 2104 (Jan. 14, 2009). The National
Center grows cannabis under a contract with the National Institute
on Drug Abuse, a component of the Department of Health and Human
Services. See id.In 2016, due in part to greater public interest in
research involving cannabis, the DEA announced a new policy
designed to increase the number of federally registered cannabis
growers. See Applications To Become Registered Under the
Controlled Substances Act To Manufacture Marijuana To Supply
Researchers in the United States, 81 Fed. Reg. 53,846, 53,847
(Aug. 12, 2016). Under the 2016 program, licensed growers would
be "permitted to operate independently, provided the grower
agrees . . . that it will only distribute marijuana with prior,
written approval from DEA." Id. at 53,848. A number of interested
parties, including the petitioners, submitted applications to grow
cannabis under this new policy.
Over the next few years, however, the DEA neither
approved nor denied any applications pursuant to the 2016 program.
Unbeknownst to the applicants, the Department of Justice's Office
of Legal Counsel (OLC) -- the entity charged with providing
authoritative legal advice to executive branch agencies -- was
asked to evaluate the lawfulness of the DEA's existing marijuana
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licensing practices, including the 2016 program. In June 2018,
the OLC issued a formal legal opinion to the acting chief counsel
of the DEA, concluding that the agency "must change its current
practices and the [2016 program] to comply with the Single
Convention." Licensing Marijuana Cultivation in Compliance with
the Single Convention on Narcotic Drugs at 2 (Off. Legal Couns.
Jun. 6, 2018), https://www.justice.gov/olc/file/1272131/download
(the "Marijuana Cultivation Opinion"). Specifically, the OLC
explained that to fulfill the United States' obligations under the
Single Convention, the "DEA must adopt a framework in which it
purchases and takes possession of the entire marijuana crop of
each licensee after the crop is harvested," and the agency "must
generally monopolize the import, export, wholesale trade, and
stock maintenance of lawfully grown marijuana." Id. The OLC's
Marijuana Cultivation Opinion was not released to the public at
the time.
To comply with the OLC's directive, the DEA announced in
March 2020 a notice of proposed rulemaking, indicating its intent
to adopt new rules that would supersede the 2016 program and
"ensure that DEA regulations comply with applicable law." Controls
To Enhance the Cultivation of Marihuana for Research in the United
States, 85 Fed. Reg. 16,292, 16,294 (proposed Mar. 23, 2020) (to
be codified at 21 C.F.R. pts. 1301, 1318) (the "Proposed Rule").
In apparent reference to the OLC's Marijuana Cultivation Opinion,
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the notice of proposed rulemaking indicated that the "DOJ advised
DEA that it must adjust its policies and practices to ensure
compliance with the CSA, including the CSA's requirement that
registrations be consistent with the Single Convention," but the
notice did not include or otherwise incorporate the OLC opinion.
Id. The notice identified the relevant provisions of the Single
Convention, see id. at 16,293–94, and indicated that the Proposed
Rule was needed to "ensure that DEA carries out all five functions
under Article 23 and Article 28 of the Single Convention pertaining
to marihuana," id. at 16,298. The notice of proposed rulemaking
invited comments from the public and interested parties through
May 22, 2020. See id. at 16,292.
Seeking to review the advice from the DOJ that was
referenced in the notice of proposed rulemaking, SRI sued the DEA
and the DOJ under the Freedom of Information Act's affirmative
disclosure provision. See 5 U.S.C. § 552(a)(2). That case
eventually settled, with the DOJ publishing the OLC's Marijuana
Cultivation Opinion to its electronic reading room on April 29,
2020, twenty-three days before the end of the comment period for
the Proposed Rule.
Ultimately, after considering public comments, the DEA
issued a final rule, adopting the Proposed Rule with one minor
modification not relevant to the present petitions. See Controls
to Enhance the Cultivation of Marihuana for Research in the United
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States, 85 Fed. Reg. 82,333 (Dec. 18, 2020) (codified at 21 C.F.R.
pts. 1301, 1318) (the "Final Rule"). The Final Rule addressed,
among other things, public comments the agency had received
regarding the DEA's obligations to control cannabis under federal
law and the Single Convention. See id. at 82,338–40. It also
responded to comments pertaining to the agency's proposed
definition of the term "medicinal cannabis," see id. at 82,340,
which the Final Rule defined to mean "a drug product made from the
cannabis plant, or derivatives thereof, that can be legally
marketed under the Federal Food, Drug, and Cosmetic Act [(FDCA)],"
see 21 C.F.R. § 1318.02(b); see also Final Rule, 85 Fed. Reg. at
82,344.
The Final Rule does not preclude the DEA from registering
more cultivators of cannabis. Indeed, the DEA explained that one
of the purposes of the rule was "to increase the number and variety
of marihuana growers in order to diversify the supply available to
researchers." Final Rule, 85 Fed. Reg. at 82,337. The agency in
fact approved SRI's application to manufacture cannabis last fall.
The petitioners nonetheless challenge the rule as procedurally
deficient, in excess of the DEA's rulemaking authority, and
arbitrary and capricious, while Craker (arguing only for himself)
also claims the rule is impermissibly retroactive as applied to
his still pending application. We address each of these
contentions in detail below.
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II.
Under the Administrative Procedures Act (APA), we set
aside agency action that is "arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." 5 U.S.C.
§ 706(2)(A). When an agency seeks to promulgate a legislative
rule (like the Final Rule), the APA generally requires the agency
to first publish a notice of proposed rulemaking and provide
interested parties with a meaningful opportunity to comment on the
proposal. See id. § 553. An agency's failure to comply with these
procedural requirements renders a rule invalid. See N.H. Hosp.
Ass'n v. Azar, 887 F.3d 62, 70 (1st Cir. 2018).
III.
The petitioners begin by raising two perceived
procedural defects with the DEA's notice of proposed rulemaking
that would demand the Final Rule be set aside. First, they argue
that the DEA failed to provide the public with a meaningful
opportunity to engage in the notice-and-comment process by
declining to disclose the legal basis for the Proposed Rule --
namely, the full reasoning in the then-undisclosed OLC opinion
advising the DEA that it must change its registration policies to
comply with federal law and the Single Convention. Second, the
petitioners assert that the DEA never offered its own reasoned
explanation for the rule and instead erroneously characterized
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itself as bound to follow the directives of the OLC's Marijuana
Cultivation Opinion. We address each contention in turn.
A.
We first consider whether the DEA complied with its
procedural obligations under the APA to adequately explain the
legal basis of its rulemaking in its March notice. Unless an
exception applies, the APA requires federal agencies, when
promulgating new legislative rules, to first publish a notice of
proposed rulemaking in the Federal Register. 5 U.S.C. § 553(b).
This notice must include "reference to the legal authority under
which the rule is proposed." Id. § 553(b)(2).
The petitioners argue that the DEA's notice of proposed
rulemaking violated the APA's procedural requirements by failing
to disclose the agency's legal basis for its new rule. They take
aim at the DEA's reference to the OLC's then-unpublished Marijuana
Cultivation Opinion advising the DEA that it must adjust its
registration practices to ensure compliance with federal law and
the Single Convention. This reference, without actual disclosure
of the full OLC opinion, the petitioners argue, deprived the public
of a meaningful opportunity to participate in the rulemaking
process.
The petitioners' reliance on section 553(b)(2) is
misplaced. We have explained that section 553(b)(2) primarily
"functions to ensure that the agency considers whether it actually
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has the authority to make the rule it is proposing, and to give
interested parties a chance to comment on that question." United
States v. Whitlow, 714 F.3d 41, 46 (1st Cir. 2013). That is, it
is designed to make clear to the public the "ostensible basis and
scope of the agency's authority." Id.; see also Telesat Can. v.
FCC, 999 F.3d 707, 713 (D.C. Cir. 2021) (explaining that the agency
met its obligation under section 553(b)(2) by "referencing the
relevant legal authority" and "clearly identif[ying] the basic
governing statute").
The DEA's notice of proposed rulemaking did just that.
It indicated that the Proposed Rule was
being issued pursuant to the [DEA]
Administrator's authority under the CSA "to
promulgate rules and regulations and to charge
reasonable fees relating to the registration
and control of the manufacture, distribution,
and dispensing of controlled substances," and
to "promulgate and enforce any rules,
regulations, and procedures which he may deem
necessary and appropriate for the efficient
execution of his functions under [the CSA]."
85 Fed. Reg. at 16,293 (citations omitted and second alteration in
original) (first quoting 21 U.S.C. § 821 and then quoting 21 U.S.C.
§ 871(b)). The notice cited to the relevant provisions of the CSA
and described both the registration requirement under
section 822(a)(1) and the conditions of registration explicated in
section 823(a). See Proposed Rule, 85 Fed. Reg. at 16,293.
Indeed, the petitioners concede in reply that they "have never
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disputed DEA's legal authority to promulgate the rules at issue
here." Accordingly, the public was properly on notice of the
provenance of the DEA's rulemaking authority.
Relying primarily on D.C. Circuit law, the petitioners
nonetheless contend that section 553(b)(2) requires agencies to
make available to the public the "data the agency used to develop
the proposed rule." Am. Med. Ass'n v. Reno, 57 F.3d 1129, 1133
(D.C. Cir. 1995) (quoting Engine Mfrs. Ass'n v. EPA, 20 F.3d 1177,
1181 (D.C. Cir. 1994)). But it is unclear how this bears on the
present question. A requirement to disclose relevant data sounds
more in section 553(b)(3)'s directive that a notice include
"either the terms or substance of the proposed rule or a
description of the subjects and issues involved," than in
section 553(b)(2)'s requirement to include "reference to the legal
authority under which the rule is proposed." Cf. Conn. Light &
Power Co. v. Nuclear Reg. Comm'n, 673 F.2d 525, 530–31 (D.C. Cir.
1982) (explaining that section 553(b)(3) requires agencies to
disclose "the technical basis for a proposed rule").
In any event, the DEA's notice of proposed rulemaking
did disclose the legal reasoning behind the Proposed Rule, albeit
not at the same fulsome level of detail as in the OLC's Marijuana
Cultivation Opinion. For instance, the notice of proposed
rulemaking describes the five requirements in article 23(2) of the
Single Convention for the supervision, licensing, and distribution
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of marijuana. See Proposed Rule, 85 Fed. Reg. at 16,294. And it
explains that while the DEA "already directly performs [three of
the listed] functions," "[i]n order to ensure that DEA complies
with the CSA and grants registrations that are consistent
with . . . articles 23 and 28 of the Single Convention," the
"proposed rule would amend DEA's regulations so that DEA directly
carries out [the] remaining two functions." Id. This fairly gave
notice to the public, including the petitioners, that issuing the
Proposed Rule was motivated by the conclusion that the DEA's
current marijuana registration scheme did not fully comply with
the relevant articles of the Single Convention as required by the
CSA.
Even if we were to agree with the petitioners that the
APA requires the DEA to have disclosed the OLC's Marijuana
Cultivation Opinion in its notice of proposed rulemaking, the
petitioners can point to no prejudice resulting from this supposed
failure to include more detail about the legal basis of the
Proposed Rule. See 5 U.S.C. § 706 ("[D]ue account shall be taken
of the rule of prejudicial error."); see also Am. Radio Relay
League, Inc. v. FCC, 524 F.3d 227, 237 (D.C. Cir. 2008) (noting
that the failure to disclose information for public comment is
subject to the rule of prejudicial error). The OLC's opinion was
publicly disclosed during the comment period, and various
commenters -- including SRI and an entity affiliated with Craker
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-- had an opportunity to raise issues relating to the document.
See, e.g., Final Rule, 85 Fed. Reg. at 82,340–41 (responding to
"some commenters['s] suggest[ion] that DEA and DOJ misinterpreted
the Single Convention"). The petitioners do not explain what
additional, concrete commentary they would have introduced had the
OLC's opinion been disclosed sooner.
B.
The petitioners also argue that the DEA's rule must be
set aside because the agency failed to provide its own reasoned
explanation for the rule by impermissibly substituting the OLC's
interpretation for its own. The petitioners, however, point to no
authority supporting their view that an agency cannot justify an
action based on its adoption of the OLC's controlling legal advice.
The OLC's purpose, after all, is to provide such authoritative
guidance to executive branch agencies. And bound or not, there is
no indication that the DEA did not itself agree with the OLC's
view on the interpretation of the CSA in the Final Rule. See,
e.g., Final Rule, 85 Fed. Reg. at 82,340 (noting that the "DEA is
bound by the law as DOJ and DEA understand it" (emphasis added)).
Accordingly, there is no merit to the petitioners' argument that
this dooms the DEA's rule.
IV.
The petitioners next contend that the Final Rule exceeds
the DEA's rulemaking authority. First, they argue that the Final
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Rule contravenes the CSA by imposing requirements that are
different from the six enumerated "public interest" factors. See
21 U.S.C. § 823(a). Second, they assert that the Final Rule
impermissibly limits the DEA's statutory authority to waive
section 823(a)'s registration requirements. See id. § 822(d).
And, third, they argue that the DEA's definition of "medicinal
cannabis" in the Final Rule is unduly narrow because it requires
cannabis products be legally marketable under the FDCA to qualify.
The petitioners instead contend that the term "medicinal" must be
given a broader meaning. We consider each argument in turn.
A.
The petitioners argue that the Final Rule exceeds the
DEA's rulemaking authority because it is contrary to Congress's
express instruction to register applicants to manufacture cannabis
if doing so is "consistent with the public interest." 21 U.S.C.
§ 823(a). Section 823(a) lists six factors that the DEA must
consider when determining the public interest:
(1) maintenance of effective controls against
diversion of particular controlled
substances . . . by limiting the importation
and bulk manufacture of such controlled
substances to a number of establishments which
can produce an adequate and uninterrupted
supply of these substances under adequately
competitive conditions for legitimate
medical, scientific, research, and industrial
purposes;
(2) compliance with applicable State and local
law;
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(3) promotion of technical advances in the art
of manufacturing these substances and the
development of new substances;
(4) prior conviction record of applicant under
Federal and State laws relating to the
manufacture, distribution, or dispensing of
such substances;
(5) past experience in the manufacture of
controlled substances, and the existence in
the establishment of effective control against
diversion; and
(6) such other factors as may be relevant to
and consistent with the public health and
safety.
Id. § 823(a).2 The Final Rule references these six factors
verbatim. It also identifies considerations of "particular
emphasis" for determining the public interest. See 21 C.F.R.
§ 1318.05(b); see also Final Rule, 85 Fed. Reg. 82,353–54. These
considerations include "[w]hether the applicant has demonstrated
prior compliance with [the CSA] and this chapter [of the DEA's
regulations]." 21 C.F.R. § 1318.05(b)(1).
The petitioners assert that the Final Rule nevertheless
contravenes section 823(a) for two main reasons.
1.
First, the petitioners contend that the Final Rule
impermissibly allows the DEA to consider factors not expressly
2 The petitioners make no argument that section 823(a) is
itself beyond Congress's legislative authority.
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enumerated in section 823(a) -- namely, an applicant's past
compliance with state and local laws (as opposed to its current
compliance) and an applicant's compliance with federal law (as
opposed to, more narrowly, its "prior conviction record"). In
support of this narrow reading, the petitioners point out that
section 823(a)(2) only lists "compliance with applicable State and
local law" as a factor to be considered, without any express
mention of past compliance. And they contrast the more specific
reference to an applicant's "prior conviction record under Federal
and State laws" in section 823(a)(4) with more general references
to "compliance . . . with applicable Federal, State, and local
law" elsewhere in the section, see 21 U.S.C. § 823(h)(2); see also
id. § 823(f)(4). These language choices, the petitioners argue,
demonstrate that Congress did not intend for the DEA to consider
these other factors.
But the petitioners' reading of the CSA finds limited
support in the text of the statute. The CSA expressly vests the
DEA with the authority to register an applicant to cultivate
cannabis "if [the agency] determines that such registration is
consistent with the public interest," listing six factors the
agency must consider. 21 U.S.C. § 823(a). While Congress required
the DEA to assess specific factors such as "compliance with
applicable State and local law" and the "prior conviction record
of [an] applicant under Federal and State laws," id. § 823(a)(2),
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(4), the statute also directs the DEA to consider "such other
factors as may be relevant to and consistent with the public health
and safety," id. § 823(a)(6). The question then is whether
considerations like the applicant's past compliance with state and
local laws and compliance with federal law are "such other
factors."
The DEA thought so, and so do we, even without the
benefit of any deference to the DEA's interpretation that might be
called for. The statute expressly authorizes the DEA to consider
"other factors as may be relevant to and consistent with the public
health and safety." Id. Congress itself has concluded that "[t]he
illegal . . . distribution[] and possession and improper use of
controlled substances have a substantial and detrimental effect on
the health and general welfare of the American people." Id.
§ 801(2). Given these considerations, the petitioners make no
serious argument that past compliance with federal, state, or local
laws is not "relevant to and consistent with the public health and
safety." Id. § 823(a)(6). And, indeed, the Final Rule explained
that, among other things, prior compliance is "relevant to past
experience in the manufacture of a schedule I controlled
substance, past experience in preventing diversion of a controlled
substance from other than DEA-authorized sources, and the
promotion and protection of public health and safety," as well as
"determining whether the applicant can be entrusted with the
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responsibilities associated with being a DEA registrant." 85 Fed.
Reg. at 82,335. We see nothing in the DEA's explanation that
conflicts with section 823(a) or would lead us to part company
with the agency's reading of the statute.
2.
The petitioners next complain that the Final Rule
misconstrues section 823(a)(1), which directs the DEA to
"consider[]" the "maintenance of effective controls against
diversion of [cannabis] by limiting the importation and bulk
manufacture of [cannabis] to a number of establishments which can
produce an adequate and uninterrupted supply of these substances
under adequately competitive conditions for legitimate medical,
scientific, research, and industrial purposes." 21 U.S.C.
§ 823(a)(1). They contend that the DEA impermissibly reads the
provision to require the agency to limit the number of
manufacturers to only the number of establishments that can produce
an adequate and uninterrupted supply of cannabis under adequately
competitive conditions. See Final Rule, 85 Fed. Reg. at 82,336–
37. And they argue that the DEA's interpretation of that provision
to mandate (rather than merely "consider") an upper limit to the
number of registrants conflicts with both the CSA and the DEA's
prior interpretation of the relevant provision.
Contrary to the petitioners' contentions, however, the
Final Rule does not purport to apply a specific cap on the number
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registrants. First, with respect to the CSA, the regulation as
codified simply restates the statutory language verbatim. Compare
21 C.F.R. § 1318.05(a)(1), with 21 U.S.C. § 823(a)(1). To the
extent the petitioners find fault with the DEA's further
explanation that it is "not allowed to register an unlimited amount
of manufacturers" and "must perform an analysis of each application
to determine whether the addition of the applicant is necessary to
provide the adequate and uninterrupted supply of marihuana for
research needs or whether the legitimate need will be met by the
registration of others," Final Rule, 85 Fed. Reg. at 82,336, those
statements are consistent with both the CSA and the DEA's prior
rulemakings.
In particular, the petitioners fasten attention to a
footnote in a past DEA action that acknowledged that "the CSA . . .
does not unambiguously impose an absolute ceiling on the number of
registered manufacturers." Lyle E. Craker; Denial of Application,
74 Fed. Reg. at 2128 n.105. But that same footnote also explained
that "[n]onetheless," section 823(a)(1) "can be construed to mean
that DEA . . . must consider keeping as the upper boundary on the
number of manufacturers that which can produce an adequate and
uninterrupted supply under adequately competitive conditions."
Id. That is, the DEA interpreted the CSA in its earlier action as
"retain[ing] the concept of an upper limit on the number of
manufacturers as a factor to be considered when evaluating an
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application for registration under § 823(a)." Id. The Final
Rule neatly follows the DEA's prior interpretation as well as the
text of section 823(a)(1) -- which, again, the Final Rule
incorporates verbatim. We therefore do not read this portion of
the Final Rule as contrary to either the CSA or the DEA's own
interpretive precedent.
B.
The petitioners argue next that the Final Rule
impermissibly circumscribes the DEA's authority under the CSA to
waive registration requirements in certain circumstances. The
statute permits the DEA to, "by regulation, waive the requirement
for registration of certain manufacturers, distributors, or
dispensers if [the agency] finds it consistent with the public
health and safety." 21 U.S.C. § 822(d). During the public comment
period, various commentors urged the DEA to exercise its authority
under section 822(d) to waive registration requirements for
growers who supply cannabis to researchers. In the Final Rule,
the DEA explained why it declined to do so. See 85 Fed. Reg. at
82,335–36.
The petitioners' primary argument appears to be that the
DEA erred by refusing to even consider the possibility that it
could grant waivers of the registration requirement for cannabis
growers who supply researchers. This characterization, however,
is belied by the fact that the agency did consider the issue in
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its rulemaking; it simply decided not to exercise its authority in
the way that the petitioners hoped it would. See id. And while
the petitioners suggest that the DEA's justifications in the Final
Rule for declining to so waive the registration requirements are
insufficient, they never explain how section 822(d) in any way
compels the DEA to exercise its waiver authority in this instance.
Take, for example, the petitioners' dissatisfaction with
the DEA's explanation that "waiving the requirement of
registration for marihuana growers who supply researchers would be
inconsistent with U.S. obligations under the Single Convention."
Id. at 82,336. To be sure, the petitioners are correct that it is
only section 823(a) -- the provision laying out the registration
requirements -- that instructs the DEA to consider compliance with
the Single Convention. But that does not mean the DEA was off-
base in determining that it would nonetheless be unwise to grant
a waiver of registration that would violate the United States'
treaty obligations. The petitioners' rejoinders at best establish
that the agency was not obliged to decline to so exercise its
authority; they do not demonstrate that the agency erred in making
a discretionary decision to not waive registration.
C.
The petitioners next argue that the DEA's definition of
the term "medicinal cannabis" in the Final Rule should be set
aside. To recap, the DEA's rule defines "medicinal cannabis" as
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"a drug product made from the cannabis plant, or derivatives
thereof, that can be legally marketed under the Federal Food, Drug,
and Cosmetic Act." 21 C.F.R. § 1318.02(b); see also Final Rule,
Fed. Reg. at 82,340. The petitioners contend that the agency's
definition is inconsistent with the plain meaning of "medicinal"
and contrary to both the structure and scheme of the Single
Convention and federal law.
To explain why the petitioners miss the mark, we begin
by tracing how the DEA arrived at its definition of medicinal
cannabis. In the Final Rule, the agency observed that "the Single
Convention does not define medicinal cannabis." 85 Fed. Reg. at
82,340. At the same time, the DEA did not reject the petitioners'
view that the Single Convention's understanding of "medicinal
cannabis" is informed by its definition of "medicinal opium." See,
e.g., id. at 82,344 n.17 (noting that the definition for "medicinal
opium" in the Single Convention "appl[ies] to cannabis through
Article 28"). Because the Single Convention defines "medicinal
opium" to mean "opium which has undergone the processes necessary
to adapt it for medicinal use," Single Convention, art. 1, § 1(o),
there is support for the petitioners' position that the Single
Convention would embrace a broader definition of "medicinal
cannabis" than what the DEA put forward.
However, rather than borrowing verbatim whatever
definition of "medicinal cannabis" could be gleaned from the Single
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Convention, the DEA chose instead to "adapt[] the Single
Convention's definition[] to reflect federal law, including the
[FDCA] and the CSA." Final Rule, 85 Fed. Reg. at 82,344 n.17.
That is, while the agency's definition of medicinal cannabis
"track[ed]" the Single Convention's definition, the DEA also
"adapted" that definition "to account for Federal law." Id. at
82,344. The question then is whether the DEA's decision to "adapt"
the definition in the Single Convention to include only products
approved for marketing under the FDCA was a reasonable exercise of
its rulemaking authority.
As an initial matter, there is no question that the DEA
has the authority to establish its own definition of "medicinal
cannabis" in the context of the federal registration scheme. The
CSA grants the DEA the power to "promulgate rules and
regulations . . . relating to the registration and control of the
manufacture, distribution, and dispensing of [cannabis]." 21
U.S.C. § 821. And it specifies that the DEA shall register
applicants to manufacture cannabis if the agency "determines that
such registration is consistent with the public interest and with
United States obligations under international treaties," including
the Single Convention. Id. § 823(a). Accordingly, it is well
within the DEA's statutory mandate to define a term that implicates
its control over stocks of cannabis and that relates to both the
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public interest and the United States' obligations under the Single
Convention.
As for whether the definition the DEA arrived at is
arbitrary or capricious, the petitioners point us to nothing that
demonstrates that the agency's understanding of "medicinal
cannabis" contravenes the CSA, violates the United States'
obligations under the Single Convention, or is otherwise contrary
to law. Beginning with the CSA, we observe that the statute has
no definition of "medicinal cannabis" of its own and never even
uses the term. The CSA classifies cannabis as a schedule I drug.
See 21 U.S.C. § 812, sched. I(c)(10); see also Gonzales v. Raich,
545 U.S. 1, 14 (2005). And it mandates that the DEA in registering
cultivators consider the "maintenance of effective controls
against diversion." 21 U.S.C. § 823(a)(1). Given this regulatory
scheme, it is hardly arbitrary or capricious for the DEA to define
"medicinal cannabis" -- as that term is used by the DEA in its own
rule -- in a way that keeps stocks of cannabis produced by
registered growers within the agency's exclusive control, at least
until any such cannabis intended for medicinal use can be legally
marketed under federal law.
As for the Single Convention, all parties agree that the
DEA's definition of "medicinal cannabis" is no broader than the
treaty's definition of the term. For that reason, we see no
conflict between the DEA's chosen definition and the United States'
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obligations under the Single Convention. The Single Convention
allows the United States to forego asserting exclusive control
over "medicinal cannabis" as that term is used in the treaty. See
Single Convention, art. 23, § 2(e) ("Parties need not extend this
exclusive right to medicinal [cannabis]."). But nothing in the
Single Convention requires a signatory to forego that control over
any stock of cannabis, including medicinal cannabis. And for the
reasons already explained, the DEA's justification for retaining
its exclusive rights over a broader stock of cannabis than the
Single Convention arguably requires -- "to ensure compliance with
the CSA," Final Rule, 85 Fed. Reg. at 82,340 -- is neither
arbitrary nor capricious.
Trying an alternative approach, the petitioners also
argue that the DEA's definition of "medicinal cannabis" is contrary
to our prior decision in Grinspoon v. DEA, 828 F.2d 881 (1st. Cir.
1987). In Grinspoon, we had occasion to examine the CSA's
statutory requirements for classification of schedule I
substances, specifically the condition that the substance "has no
currently accepted medical use in treatment in the United States,"
21 U.S.C. § 812(b)(1)(B). The DEA promulgated a rule that
essentially sought to interpret the statutory phrase "accepted
medical use in treatment in the United States" in the CSA to mean
"approved for interstate marketing by the [Food and Drug
Administration (FDA)] under the FDCA." See Grinspoon, 828 F.2d at
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884. We concluded that the DEA's limiting construction was
contrary to congressional intent because it was "plainly possible
that a substance may fail to obtain interstate marketing approval
even if it has an accepted medical use." Id. at 887–88.
Here, though, the DEA was not engaged with defining a
statutory term. And the statutory direction was simply to register
prospective cannabis cultivators based on the public interest and
the need to comply with the nation's treaty obligations, see 21
U.S.C. § 823(a), and to promulgate rules "relating to the
registration and control of [cannabis]," id. § 821. And as we
have discussed, nothing in the definition exceeded the agency's
statutory authority or put the United States in breach of its
treaty obligations.
The petitioners also assert that the DEA's definition of
"medicinal cannabis" conflicts with various FDA regulations
indicating the FDA's endorsement of research and medical
treatments involving federally regulated substances that have not
been approved for interstate marketing under the FDCA. This
supposedly demonstrates that the FDA understands that such
substances may be "medicinal" even if they have not undergone the
relevant approval process. But here we are not weighing the wisdom
of competing interpretations by different federal agencies over
the same statutory provisions. Just because the FDA might
reasonably construe the statutes it administers to provide for a
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broader definition of "medicinal cannabis" does not mean that the
DEA acts arbitrarily or capriciously when it defines "medicinal
cannabis" more narrowly for its own purposes. It is no surprise
-- and no mark of unreasonableness -- that the FDA might have a
different definition of "medicinal cannabis" in one context than
the DEA does for its work in other contexts.3
In sum, the DEA has for its purposes crafted its own
definition of medicinal cannabis that is based on, but not wholly
equivalent to, that in the Single Convention. That definition
neither breaches any treaty obligation of the United States nor
violates federal law. And the DEA did not act arbitrarily or
capriciously in concluding that it must maintain exclusive control
over stocks of a schedule I drug produced under federal law until
medicinal products containing that substance are approved for
marketing by the FDA. For these simple reasons, we reject the
petitioners' challenge to the DEA's definition of "medicinal
cannabis."
3 The above reasoning also explains why the petitioners are
incorrect to assert that the DEA's definition of "medicinal
cannabis" in the context of interpreting its authority under the
CSA impermissibly regulates medical practice. The DEA's
definition relates to what subset of cannabis must be exclusively
controlled by the DEA -- something the CSA and the Single
Convention requires the agency to consider. It does not concern
what activities are or are not permissible aspects of medical
practice. Accordingly, we do not view the agency's actions as
exceeding its congressionally delegated authority in this way.
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V.
Finally, the petitioners argue that the DEA's new
regulatory framework for registrations, even if it is within the
agency's rulemaking authority, must be set aside as arbitrary,
capricious, or otherwise contrary to law. The petitioners begin
by contending that the DEA failed to consider relevant
alternatives. When promulgating new regulations, an agency must
consider alternatives "within the ambit of the existing [policy],"
but it need not "consider all policy alternatives in reaching [its]
decision." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm
Mut. Auto. Ins. Co., 463 U.S. 29, 51 (1983); see also DHS v.
Regents of the Univ. of Cal., 140 S. Ct. 1891, 1914–15 (2020)
("Agencies are not compelled to explore 'every alternative device
and thought conceivable by the mind of man.'" (quoting Vt. Yankee
Nuclear Power Corp. v. NRDC, 435 U.S. 519, 551 (1978)). The key
question is whether the agency "entirely failed to consider an
important aspect of the problem." State Farm, 463 U.S. at 43.
The petitioners devote all of three sentences in their
opening brief to this argument. They do not identify any specific
aspect of the problem that the DEA missed and make no argument for
why the DEA's supposed failure to consider the alternatives the
petitioners point to should doom the entire rule. Instead, the
petitioners vaguely gesture towards two documents -- the OLC's
Marijuana Cultivation Opinion and SRI's comments to the agency
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during the notice-and-comment period -- as sources for the
purported alternatives the DEA declined to consider. And in so
doing, the petitioners make no attempt to explain why these records
indicate that the agency "entirely failed to consider an important
aspect of the problem." Id. We therefore treat this argument as
waived. United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)
("[I]ssues adverted to in a perfunctory manner, unaccompanied by
some effort at developed argumentation, are deemed waived.").
The petitioners also argue that the Final Rule
arbitrarily discriminates between cannabis supplied by the
National Center -- the only federally registered cannabis grower
at the time the rule was promulgated -- and cannabis supplied from
other sources, including cannabis grown in states that allow it
under their laws. During the notice-and-comment period, various
commentors suggested that federally registered researchers should
be allowed to obtain cannabis from state-authorized dispensaries.
See Final Rule, 85 Fed. Reg. at 82,338. The DEA rejected this
proposal, explaining that "[s]tate licenses to manufacture
marijuana do not satisfy the requirements of Federal law," and,
therefore, allowing researchers to use state-authorized cannabis
would violate the CSA. Id. The petitioners assert that this
decision is arbitrary and capricious because it fails to treat
"like cases alike." Namely, it permits researchers to obtain
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cannabis from the National Center but not from state-permitted
dispensaries.
But this argument misses a crucial detail: the National
Center and state dispensaries are not "like cases." As the DEA
explains, the National Center is a federally registered grower
under the CSA, while state dispensaries are not. And federal law
requires that "[e]very person who manufactures or distributes
[cannabis] . . . shall obtain annually a registration issued by
the [DEA]." 21 U.S.C. § 822(a)(1). It is hardly arbitrary and
capricious for the DEA to allow federally registered growers to
supply cannabis while precluding non-federally registered growers
from doing the same.
The petitioners point out that, under the OLC's and the
DEA's reading of the CSA, all of the National Center's historic
growing activity was also in violation of federal law and the
Single Convention. But the petitioners never explain why that
makes the National Center somehow equivalent to the proposed state
dispensaries. Nor do they establish that, after the Final Rule's
implementation, the National Center's activities would continue to
be contrary to federal law.
Lastly, Craker, not joined by fellow petitioner SRI,
argues that the Final Rule is impermissibly retroactive because it
applies to pending applications before the DEA. He explains that
because he (and 30-some-odd others) had already sent in
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applications in response to the DEA's call for applications for
the 2016 program, it is unfair to pull the rug out from under him
by applying the new rule to the application he prepared in reliance
on the prior regime.
While we have acknowledged generally that "the
retroactive application of an agency rule is disfavored," we have
also explained that "the mere filing of an application is not the
kind of completed transaction in which a party could fairly expect
stability of the relevant laws as of the transaction date." Pine
Tree Med. Assocs. v. Sec'y of Health and Hum. Servs., 127 F.3d
118, 121 (1st Cir. 1997). Particularly where a change involves
"the substantive standards for granting the application on the
merits," it does not typically raise the kind of "fair notice and
retroactivity concerns" that Craker complains of. Id. at 122.
Previously, we found "no support . . . for the proposition that
filing an application with an agency essentially fixes an
entitlement to the application of those substantive regulations in
force on the filing date." Id. (emphasis omitted). Craker musters
up no such support now. And while Craker points to factual
differences between his case and Pine Tree, he makes no argument
as to why those distinctions demand a different legal rule be
applied. Thus, Craker has not identified any notice or
retroactivity problem that would render the application of the
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Final Rule to his application arbitrary, capricious, or otherwise
contrary to law.4
VI.
For the foregoing reasons, we deny the petitioners'
petitions for review.
4 Craker also argues that the rule suddenly changed the
status of pending applications from "complete" to "incomplete"
because of a requirement to submit a new form. But this too does
not render the rule impermissibly retroactive. Although we have
noted that "rejecting an application because it fails to meet a
new regulation governing the proper format or preparation of
applications that was promulgated after that application was
filed" could raise notice and retroactivity concerns, Pine Tree,
127 F.3d at 122, changing an application's status to "incomplete"
to account for a new filing requirement is not equivalent to a
denial, at least without some evidence that the new filing
requirement essentially effects a rejection. Here, Craker has
raised no claim of prejudice from the requirement except that a
new form must be submitted.
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