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Court enlists U.S. views on Colorado marijuana case

The Supreme Court, taking quick action on two states’ constitutional challenge to Colorado’s new marijuana sales policy, asked the federal government on Monday for its reaction to that case (144 Original, Nebraska and Oklahoma v. Colorado).  Colorado has argued that the case — filed directly in the Court rather than in a lower court first — should not go forward at all without the federal government taking part as a crucial party.

The order on that case came as the Justices granted review of one new controversy: the Federal Energy Regulatory Commission’s plea to revive its policy — adopted in 2011 but struck down since by a federal appeals court — of arranging payments to users of electricity to induce them to cut their consumption, especially during peak demand periods.  The Court c0nsolidated two cases for an hour of hearing next Term: FERC v. Electric Power Supply Association, and EnerNOC Inc. v. Electric Power Supply Association. Justice Samuel A. Alito, Jr., is not taking part, probably because he has an investment in the energy industry.

The invitation for the views of the U.S. Solicitor General on the Colorado case does not necessarily mean that, after those views are filed, the Court will allow the two neighboring states’ challenge to move forward.  The government’s response — especially on the critical question whether a state may challenge another state for taking advantage of a gap left by federal government enforcement policy — could be a key factor in the Justices’ handling of the challenge.  Nothing is likely to happen, though, until the Court’s next Term, starting this fall.  There is no deadline for the Solicitor General’s response.

In 2012, the voters of Colorado added Amendment 64 to their state constitution, legalizing the use of marijuana for personal recreation and for medical use.  The Nebraska and Oklahoma challenge does not target the legalization, but focuses on the system of marketing and taxing of marijuana that Colorado set up to keep the new policy under some control.

The neighbors contend that this marketing system directly conflicts with federal laws making it a crime to distribute marijuana and that, in actual operation, the Colorado program has led to the movement of illegal marijuana across the border into their states, adding to their law enforcement burden.  The two states sued directly in the Supreme Court, contending that they would have no legal right to sue Colorado anywhere else.

Colorado urged the Supreme Court not to allow the two states to sue it, contending that they actually have no grievance with Colorado, but only with the federal government for the hands-off policy that it has adopted in recent years toward medical and recreational use of marijuana.   The states should have opted to sue the federal government directly, in lower courts, Colorado argued.

But Colorado also told the Court in replying to the challenge that the federal government’s policy is what is actually at stake, so it should be a party in the controversy.  The Court’s order seeking the government’s views is at least a temporary concession on that point.

The Court’s agreement to review the FERC policy on payments for cutting back on electricity use will put before the Justices a broad new program that seeks to recognize fundamental changes in the nation’s energy markets, by managing demand on a broad scale.   Instead of just raising the wholesale price of electricity as a way to reduce demand, the new policy allows wholesale power supply companies to make payments to sources of demand — the ultimate users of electricity — to induce them to cut back.  The wholesale companies then recoup the funds they have paid out by adjusting their wholesale prices.

The U.S. Court of Appeals for the D.C. Circuit struck down the new payments scheme.  Federal and state law divide up the regulation of the energy pricing system, with FERC regulating prices at wholesale and state agencies regulating at the retail level, the court of appeals noted.  FERC’s policy, that court ruled, crosses the line and seeks to regulate retail pricing.

In other action on Monday, the Court refused to interfere with the efforts of the investment arm of the British financial giant, Barclays Bank, to collect some $4 billion in cash for its takeover of the bankrupt U.S. investment banking firm, Lehman Brothers.

The Justices were urged to block that cash recovery by James W. Giddens, who is serving as trustee under the Securities Investor Protection Act or liquidation of Lehman Brothers.  Giddens’s petition argued that, after a federal bankruptcy judge had approved the sale of Lehman’s investment business to Barclays Capital, Inc., with no cash to change hands in the deal, a lawyer for Barclays slyly altered the terms of the deal to allow it to receive about $4 billion in cash or cash equivalents, which Lehman had set aside in reserves to cover its trading decision in so-called derivatives.

While the bankruptcy judge ruled that Barclays was not entitled to any cash, including the $4 billion it sought, that result was overturned, first by a federal district court and then by the U.S. Court of Appeals for the Second Circuit.   The Second Circuit said the dispute was only about honoring the terms of a business contract, governed by New York state contract law, not by the bankruptcy code.

Trustee Giddens’s petition to the Court was supported by the Securities Investor Protection Corp., a federally chartered corporation that seeks to protect investors when a brokerage firm or investment banker becomes insolvent — as Lehman Brothers did, in the largest bankruptcy case ever filed.

Lehman Brothers was a major player in the market for pools of investment devices backed up by home mortgages.   The collapse of the market for those devices, due to inadequate credit risk by many home buyers, was a leading initial cause of the global financial markets collapse in 2008.

The Supreme Court made no comment as it turned down the trustee’s challenge to Barclays’ cash claim.






Recommended Citation: Lyle Denniston, Court enlists U.S. views on Colorado marijuana case, SCOTUSblog (May. 4, 2015, 11:51 AM),