[Federal Register Volume 68, Number 60 (Friday, March 28, 2003)]
[Notices]
[Pages 15225-15226]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7389]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 02-15]


Genesis 1:29 Corporation; Denial of Application

    On December 13, 2001, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Genesis 1:29 Corporation (Respondent) of 
Petaluma, California, proposing to deny its application for DEA 
Certificate of Registration as a manufacturer of marijuana and 
tetrahydrocannaboinois (``THC''), both Schedule I controlled 
substances. The statutory basis for the Order to Show Cause was 
Respondent's lack of state authorization to manufacture controlled 
substances in the State of California. 21 U.S.C. 824(a)(3). In 
addition, the Order to Show Cause alleged that Respondent's 
registration would be inconsistent with the public interest, as the 
term is used in 21 U.S.C. 823(a) and 824(a)(4).
    By letter dated January 9, 2002, the Respondent, acting pro se 
through its CEO Robert G. Schmidt (Mr. Schmidt), requested a hearing on 
the issues raised by the Order to Show Cause. The matter was then 
docketed before Administrative Law Judge Gail A. Randall (Judge 
Randall). In its request for hearing, Mr. Schmidt on behalf of the 
Respondent indicated that with respect to medical grade cannabis, the 
Respondent's interest in the instant proceeding was ``to develop a 
federally approved and federally regulated dispensary model and 
research facility.'' The Respondent further indicated that its position 
on the pending DEA application was ``flexible since there are no 
federally established guidelines for dispensing medical cannabis to 
patients other than for research purposes.''
    On January 25, 2002, Judge Randall issued an Order for Prehearing 
Statements. Following the filing of Prehearing Statements by the 
respective parties, on April 30, 2002, the Government filed its Request 
for Stay of Proceedings and Motion for Summary Judgment (``motion''). 
On May 23, 2002, Respondent filed its response to the Government's 
motion. On June 26, 2002, Judge Randall issued her Opinion and 
Recommended Ruling, granting the Government's motion, and recommending 
that Respondent's application for registration as a manufacturer be 
denied. Neither party filed exceptions to Judge Randall's Opinion and 
Recommended Ruling and on August 8, 2002, Judge Randall transmitted the 
record of these proceedings to the Deputy Administrator. The Deputy 
Administrator has considered the record in its entirety, and pursuant 
to 21 CFR 1316.67, hereby issues his final order based upon findings of 
fact and conclusions of law as hereinafter set forth.
    In its motion, the Government asserted that on November 11, 2001, 
DEA transmitted a series of written questions to the Respondent 
regarding its method of operations and intended customers. The 
Government attached to its motion a copy of the Respondent's November 
26, 2001 response letter to DEA's questionnaire. In the attached 
response letter, Respondent indicated that the intended purpose of its 
bulk manufacture of marijuana was to ``supply clinical cannabis to 
physician's patients operating within California state laws and 
guidelines established by California Public Health and Safety Code 
11362.5 including 11362.7 and 11362.9 * * *'' The letter further

[[Page 15226]]

outlined that Respondent's intended customers were ``Medical Patients'' 
referred under California's Compassionate Use Act of 1996.
    The Government argued, inter alia, that California law requires the 
Respondent to obtain state licenses to manufacture marijuana or THC for 
human consumption, pursuant to the Consumer Product Safety Section, 
California Department of Health Services, and from the State Board of 
Pharmacy. In support of its argument, the Government attached to its 
motion a declaration from Susan Bond, Section Chief of the Consumer 
Product Safety Section, Department of Health Services, Food and Drug 
Branch for the State of California. Ms. Bond stated that a state 
license to manufacture marijuana and THC was required under California 
Health and Safety Code Section 111615, and according to state records, 
the Respondent neither held such license, nor submitted an application 
to obtain such license. Ms. Bond concluded that the Respondent did not 
possess valid state authority in California to manufacture marijuana or 
THC for medical use in that state. The Government also attached eight 
Certifications of Non-Licensure, in which the Executive Officer for the 
California Board of Pharmacy certified that Respondent was not 
currently licensed with the California Board of Pharmacy.
    In response to the Government's motion, the Respondent highlight 
its participation in various research projects, specifically in the 
area of whole plant utilization. However, the Respondent did not 
dispute that it currently lacks state authorization to manufacture 
marijuana and THC. The Respondent further argued that the granting of 
the Government's motion would be premature, impede future research, 
deny the Respondent the right to a fair trial, and cause irreparable 
injury to the Respondent's patients and associates.
    Pursuant to 21 U.S.C. 823(a), DEA shall register an applicant to 
manufacture controlled substances in Schedule I or II if it determines 
that such registration is consistent with the public interest. Included 
among the six public interest factors is ``compliance with applicable 
State and local law.'' 21 U.S.C. 823(a)(2). In addition 21 CFR 1307.02 
provides that DEA will not authorize any person ``to do any act which 
such person is not authorized or permitted to do under * * * the law of 
the State in which he/she desires to do such act.''
    Section 823(a) contains no express threshold requirement of state 
authorization. Nonetheless, DEA has previously determined that where as 
here state law requires manufacturers of controlled substances to 
obtain a state license, it would be pointless to grant a Federal 
registration when the Respondent lacked state authority. Michael 
Schumacher, 60 FR 13171 (1995); see also Church of the Living Tree, 63 
FR 69,674 (1998).
    In her Opinion and Recommended Ruling, Judge Randall agreed with 
the Government that state licenses are required in California prior to 
manufacturing marijuana or THC. Judge Randall found that consistent 
with DEA regulations, as well as the agency's discussions in Michael 
Schumacher and Church of the Living Tree, DEA will not authorize the 
Respondent to engage in the manufacture of a Schedule I controlled 
substance in California since the Respondent lacks authority from that 
state to conduct such an activity. Therefore, Judge Randall concluded 
that summary disposition was proper.
    The Deputy Administrator concurs with the Administrative Law 
Judge's grant of the Government's Motion for Summary Judgement. It is 
well settled, that when no question of material fact is involved, or 
when the material facts are agreed upon, a plenary, adversary 
administrative proceeding involving evidence and cross-examination of 
witnesses is not obligatory. See Gilbert Ross, M.D., 61 FR 8664 (1996); 
Philip E. Kirk, M.D., 48 FR 32,887 (1983), aff'd sub nom Kirk v. 
Mullen, 749 F.2d 297 (6th Cir. 1984); NLRB v. International Association 
of Bridge, Structural and Ornamental Ironworkers, AFL-CIO, 549 F.2d 634 
(9th Cir. 1977).
    The Deputy Administrator also finds, and the parties do not 
dispute, that the State of California requires a manufacturer of 
marijuana or THC to obtain state licenses before engaging in such 
activity. It is clear from the record in this proceeding that the 
Respondent is not licensed as a manufacturer of Schedule I controlled 
substances in California. Thus, as Judge Randall noted, there is no 
material question of fact in dispute concerning this aspect of the 
case. Because the Respondent does not meet a necessary precondition for 
DEA registration, a hearing in this matter is unnecessary. Therefore, 
Respondent's pending application for DEA Certificate of Registration 
must be denied.
    In its motion, the Government further argued that the Respondent's 
application should be denied because marijuana and THC have no accepted 
medical use under the Controlled Substances Act. However, as noted 
above, DEA has indicated in previous final orders that an application 
to manufacture marijuana would be denied if the Respondent lacked state 
authority for such activity. Because the Respondent is not entitled to 
a DEA registration due to its lack of state authorization to 
manufacture Schedule I controlled substances in California, the Deputy 
Administrator concludes that it is unnecessary to address whether 
Respondent's application for DEA registration should be denied based 
upon the other grounds asserted in the Order to Show Cause and the 
Government's Motion for Summary Judgement. See Samuel Silas Jackson, 
D.D.S., 67 FR 65145 (2002); Nathaniel-Aikens-Afful, M.D., 62 FR 16871 
(1997).
    Accordingly, the Deputy Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
823 and 824 and 28 CFR 0.100(b) and 0.104, hereby orders that the 
application for DEA Certificate of Registration submitted by Genesis 
1:29 Corporation, be, and it hereby is, denied. This order is effective 
April 28, 2003.

    Dated: March 13, 2003.
John B. Brown III,
Deputy Administrator.
[FR Doc. 03-7389 Filed 3-27-03; 8:45 am]
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