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Last week, the Sixth Circuit issued a published a decision that invalidated a supply contract for Michigan operators on the basis that cannabis is illegal and carries criminal penalties under the Controlled Substances Act (CSA). Michigan is a medical and adult use jurisdiction. At issue was whether the buyer, who is licensed to sell both medical and adult use cannabis, could void a supply contract on the basis that cannabis is illegal and subjects violators to criminal penalties. The Court reasoned that the contract did not specify that the cannabis being supplied to the buyer was for medical cannabis only. Thus, the Court found that the supplied cannabis could have been sold into the adult use market which remains a criminal offense under the CSA. Accordingly, the Court reversed the trial court’s decision and held that Federal Courts cannot be used as tool to enforce – as the court put it – an agreement to commit felonies. Moving forward, at least for now, parties would be well-advised to take a hard look at pursuing claims in state courts as opposed to the federal system.
