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With 2020 unleashing horrible twists and turns upon America every day, it’s de rigueur to expect the unexpected. A worldwide pandemic? Raging wild fires? Locusts? Sure, why the hell not? But amidst all the bad news, 2020 has apparently brought us an unexpected return worth welcoming. Blue Cross Blue Shield has agreed to a $2.7 billion settlement that will, more importantly, bring injunctive relief that should trigger big changes to the health insurance market around the country. It’s 2020 and the Sherman Antitrust Act lives!

Technically the Act never went away, but surveying the landscape of American business one would be hard pressed to know it. Whether it’s a function of apathy or complicity, the government doesn’t bring antitrust cases with anywhere near the frequency that John Sherman would’ve envisioned.

And that’s a problem since mounting a viable private antitrust action is a mammoth undertaking. It’s a brutal, document intensive uphill slog. Once in a while a private action will pique the interest of the government who can come in and perform some heavy lifting, but if the government is going to look the other way it’s immensely difficult to keep a case going. Thankfully, some folks are willing to go out there and invest the time and effort to get the ball rolling.

The last big ticket antitrust case most of us can remember was the Microsoft case in the late-90s. So it brings us full circle to find David Boies, who prosecuted the Microsoft case as hired counsel for the government, at the heart of the BCBS case as well.

Over 30 defendants, some 50 firms, and over 1000 lawyers got into this. David Boies recounts that the first mediation on the settlement agreement required finding a room big enough to fit 100 lawyers and capable of providing everyone a microphone. He told me that some meetings in hotel ballrooms required abandoning the big table and placing all the lawyers in rows like a standard seminar. It’s been a wild seven years for this case.

“It was like a soap opera,” I said. “It was! It was,” Boies replied. “But also very high stakes. The amount of money is obviously substantial — and probably what the headlines will focus on — but the injunctive relief was even more important…. If we’d only gotten the money it would’ve been historic — one of largest antitrust awards and probably the largest without government involvement — but it would not have made nearly as much difference for our clients.”

The lawsuit began over seven years ago when Boies Schiller brought claims on behalf of insureds arguing that BCBS acted as a cartel in requiring insurance carriers within its network to agree to geographic non-compete clauses and cap the share of revenue they can make from selling non-BCBS products. In a nutshell, BSBS said one of its member carriers would act as, say, “BCBS of Alabama” and no other BCBS carrier was allowed to compete for businesses headquartered in Alabama. And there’s a certain logic to that from a trademark perspective, but the plaintiffs noted that the insurance agreements went further to say that a BCBS member from outside the jurisdiction couldn’t enter the Alabama market even to sell non-BCBS plans. The proposition was basically “if you want to sell the BCBS brand anywhere, you have to agree to never enter the market of any other BCBS brand… oh and on top of all that you can’t have more than a third of your revenue from other brands.”

The implications of something like this should be obvious. The market power of BCBS — which provides health insurance to almost a third of the country — would convince players to steer clear of competing in defined markets for fear of losing BCBS plans in their own territories and consequently driving up prices for consumers. When Boies first brought the case, BCBS responded by noting that they’ve been doing this for 30 years and the DOJ has never complained, deploying the classic “it can’t be illegal if I’ve never been caught” defense. But, as Boies said, “that’s not a legal defense, but it’s a powerful atmospheric: ‘If experts from the Justice Department didn’t bring this, then why would you believe these plaintiffs?’” It’s a mindset that makes pursuing these cases that much harder, especially for private actors, but the stakes in the health insurance market are too high to keep letting it slide. “This shouldn’t have been left to us to do. The government should have done this,” Boies said.

For whatever reason, the government didn’t. One reason might be the fact that the BCBS system covers many underserved communities around the country, allowing them to claim that their business model is necessary to provide health care to many. “We said, ‘we’re not trying to break you up, we’re just saying you can’t use this as excuse not to compete,’” Boies told me. BCBS is made up of a number of separate companies forming a network to provide a unified product. “That’s obviously a good thing. But they said they wouldn’t compete with even different trademarks. In our view, that’s a per se unlawful restraint.” It’s also an argument that doesn’t make much sense. If competing in that area with a non-BCBS product wasn’t profitable then they wouldn’t compete there and nothing would change.

Even assuming the settlement is approved by all the defendant member companies and Judge David Proctor — who you may remember scolded the parties to the case via GIF in one of this saga’s lighter moments — the case goes on for BCBS. The Boies clients were the insureds arguing that the BCBS model artificially drove up prices, but the other half of the consolidated case came from health providers arguing that the model allowed BCBS to exert improperly inflated leverage in negotiations with providers. It made for a weird marriage at times with both groups working in concert to prove the existence of antitrust behavior, while fundamentally conflicting on the recovery. After all, the existence of a national BCBS product created by the network actually helps the insureds keep premiums down. Basically one side said the behavior kept prices too high and the other said it kept them too low — an unusual spot for cooperating counsel to find themselves in. The provider claims are ongoing.

Working on one case for over seven years can be a serious grind. We overuse the Bleak House reference sometimes but when you’re in a room discussing settlement with over 100 attorneys it’s hard not to jump to the Dickens classic. But for the insureds represented by Boies Schiller, this case may soon be over and the impact that the injunctive relief will have on the health insurance market should be monumental.

Blue Health Insurers Reach Tentative Antitrust Settlement for $2.7 Billion [Wall Street Journal]

Earlier: Federal Judge Vents Frustration In GIF Form

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

ASG LegalTech, the company that owns cloud practice management platforms PracticePanther, Bill4Time and MerusCase, has acquired Headnote, the online payments platform that provides e-payments and accounts-receivable management for law firms.

At the same time, ASG LegalTech is announcing the first fruit of this acquisition — a fully integrated, all-in-one payment system within the PracticePanther platform called PantherPayments.

In an exclusive interview for my LawNext podcast, the CEO of ASG LegalTech, Soumya Nettimi, and the cofounder and CEO of Headnote, Sarah Schaaf, sat down with me to discuss the acquisition and what it means for the two companies and their customers. You can listen to our conversation above.

The acquisition is the fourth in three years for ASG LegalTech and the 28th for its parent company Alpine SG (ASG), a portfolio company of the San Francisco private equity firm Alpine Investors. ASG acquired Bill4Time in 2017 and PracticePanther in March 2018.

In February 2019, it merged the two companies to create a unified legal technology business, ASG LegalTech, and a month later, it acquired another practice management company, Merus Inc., developer of MerusCase. Today, the company says, it serves more than 30,000 lawyers and law firms across the world.

Schaaf, a former practicing attorney, founded Headnote in 2016 together with Thornton Schaaf, who is head of product at Headnote, and Matt Crampton, Headnote’s chief technology officer.

She will join ASG LegalTech as general manager of payments, where she will lead payments-related initiatives across the company’s portfolio. The other two founders will also remain, along with all other Headnote employees.

Headnote sought to distinguish itself from other payment products for lawyers through a mix of features that ensured compliance with bar and IOLTA requirements while charging the lowest fees in the legal industry.

For more on Headnote, see: LawNext Episode 17: Headnote Founder Sarah Schaaf on Simplifying How Lawyers Get Paid.

One-Stop Shop

In our LawNext interview, Nettimi said that two factors drove her company to want to acquire a payments platform. One is that their philosophy is to serve as a one-stop shop so customers do not have to find different products for the various functions and tasks they need to do to manage their firms.

The other is that they try to listen to their customers about what they need, and in this year of the pandemic, “where getting paid is synonymous with staying in business for many of our firms,” customers wanted a solution that would help them increase both collection rates and speed of collection.

As they considered whether to build a payments platform or acquire an existing technology, they decided to buy Headnote after concluding it was the “best payment offering” in the legal market, Nettimi said. Headnote is “the most modern and compliant technology available” and is “a disruptor in the market and has features that no one else has, like cutting-edge analytics, instant e-check, and a seamless onboarding experience.”

What she is most excited about, Nettimi said, is that they plan to use Headnote’s technology to build a fully native payment solution within each of their practice management platforms. “So what this means is customers will have a seamless experience already built into their current workflows, so they never have to leave their practice management system in order to manage their payments.”

As for Schaaf, she said that she and her cofounders were attracted to the deal by the potential it offered to bring the value of their product to a wider audience. “We really feel like our technology makes a big difference [to lawyers] in how they practice and how their business can grow,” she said.

Partnering with ASG LegalTech, Schaaf believed, offered the best way to do that because of the exemplary platforms they already had and their vision of delivering to their customers a one-stop set of integrated solutions. By doing that, she said, they would be able to bring more value to users and also have the ability to layer on more features to help users with more of their back-end processes.

PantherPayments

With today’s announcement of its acquisition of Headnote, ASG LegalTech is also announcing the launch of PantherPayments, an all-in-one payment system that is fully integrated within the PracticePanther platform.

Eventually, the company will roll out similar integrations in its Bill4Time and MerusCase platforms, both of which remain separate, standalone products.

The company says that PantherPayment’s features include:

• Full compliance with IOLTA, ABA, and lawyers’ online payment rules in all 50 states, as well as with payment card industry standards.
• Low, simple and transparent pricing of 2.8% for all credit cards and 1% for same-day e-check payments, with no monthly membership fees or variable rates.
• Fast payments, with clients paying invoices up to 70% faster than average and with more payment options than other processors.
• Integration with the PracticePanther platform, eliminating the need for dealing with multiple systems or vendors and providing a single source for support questions.
• Strong security, with SHA-256 data encryption, cloud-based hosting, and tokenized payments.

“They’re never going to have to leave PracticePanther,” Nettimi said. “It’s not an integration, like many other integrations that exist out there for payments and for many other areas. They’re going to be able to do everything in their PracticePanther app — from request payments, to logging them, to analytics, to refunds if they need to do that, to tracking things. … Simplistically, that’s what makes it so different than what is already out there.”

Headnote Continues

Even as these integrations are rolled out, Headnote will remain a standalone product, continuing to serve its existing customers and welcoming new customers, Schaaf said.

Customers will benefit from even stronger support and further infrastructure development, she said.

Bottom Line

When many of the practice management platforms available today first came to market, electronic payments were an afterthought, as they were not yet in wide use among law firms. But today, that has changed, especially in the era of the coronavirus crisis. Firms and clients alike expect the convenience of paying invoices electronically.

Even so, some practice management products rely on third-party payment platforms rather than offer a fully integrated option within their own platform. That can be clumsy and inconvenient in some cases and result in incompatibility for some functions.

For customers of any of ASG LegalTech’s practice management products, bringing Headnote into the fold should be welcome news. It has developed a reputation as a trusted and easy-to-use payment platform with transparent and straightforward pricing. Having that technology directly integrated into a practice management platform will no doubt prove to be convenient and useful for customers.

As for customers of Headnote’s standalone product, they should benefit from the fact that ASG LegalTech is a larger company that will be able to provide ongoing support and development, with the resources to do so at even a higher level than before.

For these reasons, the acquisition appears to be a good move for all concerned. For the two companies they seem to be a good fit in terms of their products and cultures, and Headnote’s technology fills an important need for ASG LegalTech’s customers. For customers, whether of ASG LegalTech or Headnote, the acquisition should result in an overall better product for them.

It was said that Ruth wanted to be an opera virtuoso but became a rock star instead. But she chose the law. Subjected to discrimination in law school and the job market because she was a woman, Ruth would grow to become the leading advocate fighting such discrimination in court. She was not an opera star but she found her stage right behind me, in our courtroom. There, she won famous victories that helped move our nation closer to equal justice under law to the extent that women are now a majority in law schools, not simply a handful. Later, she became a star on the bench, where she sat for 27 years. Her 483 majority, concurring, and dissenting opinions will steer the court for decades.

— Chief Justice John Roberts, offering recognition to the pop-culture icon that the late Justice Ruth Bader Ginsburg had become in her elder years, as he eulogized the departed colleague at the Supreme Court. May her memory be a blessing.

Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

“We have to have trust in our elections process. It’s essential to a strong stable democracy,” Attorney General Ashley Moody told Fox and Friends’ Steve Doocy this morning. And so, to protect democracy, Moody is launching an investigation of billionaire philanthropist Michael Bloomberg for the dastardly crime of cutting a check to a non-profit that helps restore voting rights to Floridians who were convicted of crimes, served their sentences, and are now barred from voting simply because they cannot afford to pay fines or fees.

In a letter to the FBI and the Florida Department of Law Enforcement, Moody said that she was requesting an investigation at the behest of Republican Governor Ron DeSantis to see if Bloomberg had violated Florida’s ban on vote-buying. And then she hopped on television to tell the world all about it, as one does when one is launching a legitimate criminal inquiry and not a political hitjob.

(For comparison, the New York Attorney General, about whom the Trump administration has bellyached mightily, subpoenaed Eric Trump in May, and the public never heard about it until August when she sued to force him to comply.)

“When you hear words like ‘targeting’ certain voters, ‘investing and adding to a particular column,’ that doesn’t matter what party it is. That triggers Florida law,” Moody told Doocy. “Under Florida law, you cannot directly or indirectly give anything of value to persuade or entice a vote.”

Florida Rep. Matt Gaetz (William & Mary Law, 2007) was even more emphatic, telling Fox’s Sean Hannity, “It’s a third-degree felony for someone to either directly or indirectly provide something of value to impact whether or not someone votes. So the question is whether or not paying off someone’s fines and legal obligations counts as something of value, and it clearly does.”

“If Michael Bloomberg was offering to pay off people’s credit card debt, you would obviously see the value in that. [W]hen you improve someone’s net worth by eliminating their financial liabilities, that’s something of value,” he continued.

“Normally, it would be very difficult to prove that that was directly linked to impacting whether or not someone was going to vote. But they literally wrote their own admission.”

Really? Mike Bloomberg offered cash to voters if they agreed to show up at the polls? That seems … unlikely.

Probably because it never happened. Gaetz and Moody’s purported smoking gun is in internal memo reported by the Washington Post in which the Bloomberg team assessed that the most cost-effective way to increase Biden’s voting share in Florida was by paying the fines of formerly-incarcerated felons.

Prior to 2018, when 64 percent of voters attempted via referendum to restore voting rights to felons who had served their time, one in five Black Floridians was barred from casting a ballot due to a prior conviction. Which was exactly what Florida’s 150-year-old felon disenfranchisement law was designed to do.

Florida’s Republican legislature and governor, who had just squeaked into office on a 0.4 percent margin of victory, responded to the popular referendum by passing a law requiring the payment of all fines, fees, restitution, and court costs before a former felon could register to vote. Then they successfully argued in court that this did not constitute a poll tax, even if had the effect of barring poor and indigent people from the franchise.

And because African Americans are reliable Democratic voters, and because such a huge portion of Black voters in Florida fell into the category of persons barred from voting by inability to pay court costs, the Bloomberg team figured they could get the most bang for their election buck by just dumping cash into paying off those fines.

“We have identified a significant vote share that requires a nominal investment,” the memo said. “The data shows that in Florida, Black voters are a unique universe unlike any other voting bloc, where the Democratic support rate tends to be 90%-95%.”

And perhaps if Bloomberg had simply cut checks to Black Floridians to pay their court costs, Gaetz and Moody would have a point. Although it doesn’t entirely gibe with their assertion that those fines are part of the state’s obligation to punish offenders, and 100 percent, definitely, in no wise a poll tax designed to stop Black Flordians from casting a ballot.

But he didn’t. Instead, Bloomberg raised $16 million for the non-partisan Florida Rights Restoration Coalition, which helps all former felons regain their right to vote, regardless of race or party affiliation.

“Different people may give for different reasons, but we are in this for one reason, and that reason is to place people over politics,” the group’s president Desmond Meade told the Post. “We are concerned with people from all walks of life, from all sorts of politics.”

Bloomberg’s motive in making the donation is irrelevant. He simply calculated the odds that Black Democrats would be heavily overrepresented in the pool of disenfranchised ex-offenders and cut the check, knowing that some portion of it would likely pay off fines for Trump voters, too. The Post bizarrely claims that the donation would “pay the court fines and fees of nearly 32,000 Black and Hispanic Florida voters with felony convictions,” although there is no indication that white, MAGA-hatted Floridians are barred from accessing the fund.

“The right to vote is fundamental to our democracy and no American should be denied that right,” Bloomberg responded in a statement. “Working together with the Florida Rights Restoration Coalition, we are determined to end disenfranchisement and the discrimination that has always driven it.”

Gaetz calls for election bribery probe of Bloomberg over pledge to pay Florida felons’ fines [Fox News]
Mike Bloomberg raises $16 million to allow former felons to vote in Florida [WaPo]

Elizabeth Dye lives in Baltimore where she writes about law and politics.

Ed. note: This is the latest installment in a series of posts on motherhood in the legal profession, in partnership with our friends at MothersEsquire. Welcome Jean Marie Downing to our pages. Click here if you’d like to donate to MothersEsquire.

I found out that I was pregnant and accepted into law school within a few weeks of each other. Because my husband was in the military, I only had a limited window to attend law school before he would be gone to another duty station. So, that is how I was a new mom and a first-year law student.

It worked out well because my husband was also in school and took classes at night while I took classes during the day. He was in an enlisted to officer program.

Fast forward to my last semester and my husband was being moved to a duty station in Rhode Island. Do we go with Daddy or do I stay to finish law school as a single mom? It was too hard to see my almost 2-year-old saying goodbye to his daddy and choose to be separate when the military separates families so much as part of the lifestyle. So, we decided that my son and I would also move up to Rhode Island. Thankfully, after a great deal of effort, I was permitted to do my last semester at Roger Williams law school and still graduate with my class at Stetson. We got student housing for married couples and were lucky enough to find a spot in a daycare near school — the only day care option, but we got in! It was so lovely!

Then, one day I got the dreaded call! When I went to pick up my toddler at the daycare center, he was in the front office. He was 25 months old and he had bitten another child. I was horrified! He had been bitten before, and now he was the biter. Really, the anger that I felt when my child had been bitten was only topped by the horror I felt when my child was the biter! We talked through the issue with my child. Daddy talked to him about it. We read books about not biting.

And then it happened again. The daycare had a three strikes policy. I felt like I was trapped inside a building crumbling from all sides.

So, I will never forget sitting on the floor of our student housing apartment, crying, and telling my 25-month-old that if he didn’t stop biting his friends that mommy would have to drop out of law school because I would have to stay at home with him. “We don’t have any other options for childcare!” I sobbed. “You were potty trained at 22 months! I’m sure you can handle this!”

I don’t know, maybe it was because he attended all of those law school classes with me while he was in utero, but whatever it was, he didn’t bite anyone else after that.

At the time, it was an intensely stressful situation due to the limited childcare and support options available to my family. Now he is finishing up professional dive school (to work on oil rigs — hardhat surface-air-supply diving) and is enrolled at Gulf Coast State College to be an EMT and we laugh about this story.

To my fellow lawyer moms and dads, I hope you enjoyed my walk down memory lane and it helps you. I see you. I know this pandemic is switching your world into limited choices regarding childcare/school, and I hope you find the support you need — even if that support comes from a toddler finally not biting his friends!

Jean Marie Downing is a criminal trial attorney in Panama City, Florida, where she lives with her retired Navy diver husband, a dancing daughter in high school, and 5 cats. Her two adult sons are in school, one for diving and one for pre-law. She’s against racial disparity in our justice system.  She also supports anonymity for an accused unless charges are proven. Watch Just Mercy and 13th Movie to understand. She can be reached at jdowning@pcbeachlaw.com.

The National Football League Players Association has responded to a putative class action complaint filed by retired NFL players Aveion Cason and Donald Majkowski that attacks the union, the league, the retirement plan board, and the disability and neurocognitive benefit plan board based on the process of agreeing to a new 10-year collective bargaining agreement as well as the effects of the agreement on the benefits that former players will receive under its provisions. The 43-page memorandum of law in support of the filed motion to dismiss is based on lack of standing and failure to state a claim.

Initially, the union addresses the fact that the plaintiffs are retired NFL players and that, under the Employee Retirement Income Security Act (ERISA), the union has no duty or responsibility to maintain any specific level of former player benefits and is prohibited from administering benefit plans. Furthermore, it has no duty to represent the interests of former NFL players in collective bargaining negotiations.

Setting that initial issue aside, the NFLPA argues that the plaintiffs failed to plead any facts to support a claim that a change to the Social Security disability offset would apply to them and that the second benefit change — the whole-person evaluation — will not take effect until 2024 and is thus speculative and not imminent. Additionally, the union says that changes to these benefits were necessary concessions.

“Although legally irrelevant, it bears mention that the NFLPA did not want the Social Security disability offset and whole-person evaluation process, but these were necessary concessions to obtain increases in other benefits as part of the give-and-take of collective bargaining,” states the memorandum in support of the NFLPA’s motion to dismiss. “This is precisely what the NLRA empowers a union to do, and pursuant to the LMRA, courts are prohibited from interfering in this bargaining process.”

The NFLPA also addresses the players’ claim that the union failed to disclose all material facts about the new collective bargaining agreement’s impact on retirement benefits and says the claim is far too speculative to proceed in litigation.

“Their theory — that if the NFLPA had disclosed all such pertinent information, then the retired players might have mobilized to lobby active players to vote against the CBA, and then the active players might have changed their votes in sufficient numbers to change the CBA outcome, and this might have led to the negotiation of a different CBA with the NFL that might have provided Plaintiffs greater benefit — is far too remote and speculative to confer standing,” the memorandum states.

The alleged failure to disclose pertinent information was a hot subject in March when former NFL defensive back Eric Reid tweeted about his lawyers sending a letter to the NFLPA demanding answers as to why language in the collective bargaining agreement was purportedly altered after a vote was submitted. He demanded a new vote and an investigation into the matter. Newly elected NFLPA president J.C. Tretter responded by indicating that the union would re-examine changes to the Total and Permanent Disability benefit, which could cause roughly 400 former players to see their Social Security disability benefits lowered as of January.

The plaintiffs have also claimed that the union breached the collective bargaining agreement, but the union points out that the underlying claim is a complaint about the changes that the new agreement creates relative to the old agreement and that there has not and could not have been an actual breach of the new provisions at this time.

Ultimately, the former players suing the NFLPA are likely to have their case against the union dismissed based primarily on the union’s argument that former players have no cognizable legal interest in the collective bargaining ratification process of a union that only represents current NFL players. While Reid wants answers, it would likely need to be current players who push the union for information surrounding the ratification process, not those who are no longer part of the bargaining unit.

Darren Heitner is the founder of Heitner Legal. He is the author of How to Play the Game: What Every Sports Attorney Needs to Know, published by the American Bar Association, and is an adjunct professor at the University of Florida Levin College of Law. You can reach him by email at heitner@gmail.com and follow him on Twitter at @DarrenHeitner.

The process of reopening Biglaw offices is bound to be a slow one filled with many stops and starts. Just ask Squire Patton Boggs. The international law firm had to shut down its Manchester office after lawyers tested positive for COVID-19.

According to RollOnFriday, the office was “evacuated after two separate outbreaks of Covid.” Apparently there were two separate attorneys who took COVID tests over the weekend, and were at the office when they got the positive results. Which led to closing the office ASAP:

“Neither individual experienced symptoms while in the office”, emphasised a spokesperson for SPB, adding that the lawyers have not returned to the office while they self-isolate.

The results let to the immediate closure of the office on Monday “out of an abundance of caution” and a deep clean. It re-opened on Wednesday.

Though the office is now reopened, according to a spokesperson it “remains, as it was previously, at limited capacity,” and employees at the office are “doing so on a managed, voluntary basis and in accordance with the health and safety protocols put in place by the firm.”

One of the attorneys who tested positive was reportedly working on a corporate deal when the test result came in. The entire team was immediately sent home, and, as RollOnFriday notes, they had to depend on the kindness of another Biglaw firm to get everything done:

An insider claimed the associates “had to rely on another law firm”, DLA Piper, “to help run the rest of the deal for them”, which “meant a couple of all nighters for the DLAP bods”. Clearly the Blitz Spirit is alive and well, brings a tear to the eye so it does.

We’d like to believe this is the last hiccup in the re-opening of Biglaw, but, it probably won’t be.

Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

Last Friday, the Hemp Industries Association (HIA) and RE Botanicals, a South Carolina hemp CBD manufacturer, sued the Drug Enforcement Agency regarding its recently published interim final rule (the Rule).

The petitioners claim the Rule is unlawful because it exceeds the DEA’s authority and violates the Agriculture Improvement Act of 2018 (the 2018 Farm Bill).

If you follow this column or keep your finger on the pulse of the hemp industry, you may recall that the Rule suggests, in part, that intermediary hemp shall be treated as a Schedule I controlled substance during any point at which its THC concentration exceeds 0.3 percent on a dry weight basis — even fleetingly during the processing phase and before the percentage is brought back into legal compliance for the finished product. This, the petitioners argue, is contrary to the plain language and the intent of the 2018 Farm Bill, which legalized hemp, its derivatives, extracts, and cannabinoids so they could be regulated as agricultural commodities, and thus, fall outside the DEA’s jurisdiction.

In addition, HIA and RE Botanicals argue that Timothy Shea, the DEA’s acting administrator, failed to observe certain administrative procedures imposed under the Administrative Procedure Act (the APA) by implementing the Rule without providing the public with notice and the opportunity to comment before the Rule went into effect — According to the DEA, the Rule “merely conforms DEA’s regulations to the statutory amendments to the [Controlled Substances Act] that have already taken effect, and it does not add additional requirements to the regulations.” (Emphasis added).

While the Rule clearly suggests that the DEA is exceeding its authority and is attempting an illegal power grab over lawful hemp activities, only time will tell whether the U.S. Court of Appeals for the District of Columbia will be receptive to the petitioners’ arguments. Yet, one thing is certain, the hemp industry is determined to protect the lawful production of hemp that Congress established when it enacted the 2018 Farm Bill.

Indeed, this industry-wide effort is not limited to challenging the DEA Rule. For months, hemp stakeholders have challenged state regulations with far-reaching consequences for the industry.

For example, last month, four hemp companies sued the State of Texas for imposing a ban on the manufacture, processing, distribution, and retail sale of smokable hemp products.

Although a 2019 state law tasked the Department of State Health Services (DSHS) with adopting rules prohibiting the manufacturing of smokable hemp products in the state, DSHS exceeded its authority by extending the ban to the distribution and retail sale of these products, despite thousands of comments objecting to the ban.

The Texas district court that heard the case first issued a temporary restraining order (TRO) that prevented the state from enforcing the ban for a few weeks. Then, last Thursday, the court granted a temporary injunction that voided the DSHS regulation prohibiting the production, distribution and retail sale of smokable hemp products until a trial is held in February 2021.

While the issuance of the TRO and the temporary injunction do not mean that the state overstepped its boundaries, these decisions by the Texas court are promising and encouraging for the industry.

Since the enactment of the 2018 Farm Bill, the hemp industry has had to continuously fight state and federal roadblocks to protect its interest and has had to overcome obstacles with which no other legal industry has been confronted. Yet, the industry’s tenacity along with these lawsuits should give federal and state regulators pause as they signal that these agencies cannot flat-out ignore the legality of hemp.

Nathalie practices out of Harris Bricken’s Portland office and focuses on the regulatory framework of hemp-derived CBD (“hemp CBD”) products. She is an authority on FDA enforcement, Food, Drug & Cosmetic Act and other laws and regulations surrounding hemp and hemp CBD products. She also advises domestic and international clients on the sale, distribution, marketing, labeling, importation and exportation of these products. Nathalie frequently speaks on these issues and has made national media appearances, including on NPR’s Marketplace. For two consecutive years, Nathalie has been selected as a “Rising Star” by Super Lawyers Magazine, an honor bestowed on only 2.5% of eligible Oregon attorneys.  Nathalie is also a regular contributor to her firm’s Canna Law Blog.