51
35
35
8 2018 WL 4682318 at *5, 9 See id, 10 See id.
The Bart Street court applied the doctrine of severance to avoid providing any “remedy that permits Defendants to directly use Plaintiff’s funds for cannabis cultivation or to gain ownership in Defendant’s cannabis business.”8 This required the court to sever portions of the agreement that gave the plaintiff the right-of-first refusal for an ownership interest in defendants’ cannabis business or otherwise required defendants to use plaintiff’s loan as “operating capital” for the business.9 But the court also explained that several portions of the agreement required the defendants to use the loaned funds “for solely legal acts,” including paying off prior lenders and purchasing land, and thus these provisions were enforceable despite the illegal contract defense.10 Ultimately, the court declined to dismiss the case at an early stage and instead allowed it to proceed towards trial.
Still, the Bart Street case is problematic in several respects. First, at the federal level, it stands alone in taking a decidedly sharp tone toward the recreational cannabis business. Though Nevada has legalized recreational cannabis, the court accepted the defendants’ argument that the industry was illegal without much resistance.
Second, the court did not grapple with the fundamental question at the heart of the tension between state and federal law regarding recreational cannabis: is an activity truly “illegal” at the federal level for purposes of the illegal contract defense when the federal government has refused to enforce its own law? The court avoided that question altogether. Before deciding whether recreational cannabis is “illegal” at the federal level, at least some thought should be given to the federal government’s decision to avoid enforcing the Controlled Substance Act with respect to states that have legalized recreational cannabis. Moreover, with Congress in session and presidential campaigns in full swing, it appears legalization, or at least decriminalization, at the federal level is supported by a substantial number of Congresspeople. This too should influence whether recreational cannabis is truly “illegal” when considering the illegal contract defense.