A supplier held up its end of a contract, sued after the other party breached, and won a $31.8 million jury verdict. What caused the U.S. Court of Appeals for the Sixth Circuit to reverse the award? It determined the entire contract was unenforceable under federal law.
The problems that can surface when federal and state laws aren’t in sync were on display on September 10, 2026, as a federal appeals court reversed a pair of Eastern District of Michigan District Court rulings in Hello Farms Licensing MI, LLC v. GR Vending MI, LLC et al. What first appeared to be a straightforward breach-of-contract lawsuit could instead set a precedent for how federal courts may treat future cases at the intersection of state-legal cannabis commerce and continuing federal marijuana restrictions. The three-judge panel of the Sixth Circuit ruled that the district court erred by denying the defendants’ request for summary judgment on an illegality defense.
The decision doesn’t mean that every cannabis contract dispute will end with the agreement declared null and void, but it does create a roadmap for future cases within the Sixth Circuit. The ruling is a reminder that following state cannabis laws may not be enough to make a contract enforceable in federal court.
Insert Your Own Joke Here About a Jury Award “Going Up in Smoke”
If you like your laws messy and confusing, cannabis regulations in the United States should delight you. In April 2026, the Justice Department and the Drug Enforcement Administration placed FDA-approved marijuana products and products regulated under qualifying state medical-marijuana licenses in Schedule III of the Controlled Substances Act (CSA). But that action did not broadly legalize marijuana or move all marijuana products out of Schedule I. A separate federal rulemaking process addressing broader rescheduling is ongoing.
Most states have either legalized or decriminalized medical marijuana use. Some permit and regulate adult-use marijuana for recreational purposes as well.
Marijuana has long been welcomed in Michigan, with medical use approved in 2008 and recreational use voted in by an initiative in 2018. This created an opportunity for a legal cannabis industry to grow and thrive, although problems like finding financial institutions willing to provide credit card services for retailers remain.
Hello Farms is a licensed Michigan marijuana grower that entered into a contract in 2020 with GR Vending and Cura MI, LLC, both subsidiaries of Curaleaf Holdings. GR Vending held licenses for marijuana sales of both adult-use and medical products. The agreement signed included strict testing requirements and the expectation that Hello Farms would harvest between 12,000 and 15,000 pounds of cannabis. Their product met all required standards, and GR Vending accepted about 2,000 pounds before market prices dropped. When GR Vending refused to accept additional deliveries, Hello Farms was forced to sell to another purchaser at a reduced price.
Hello Farms filed a breach-of-contract suit for lost profits and violation of the supply agreement in Michigan state court, but the defendants moved to federal court on grounds of diversity jurisdiction. The district court rejected the defendants’ illegality defense at summary judgment. After the jury returned a $31.8 million verdict for Hello Farms, the defendants renewed the defense in a motion for judgment as a matter of law and alternatively sought a new trial.
When Federal Law Gets the Final Say
As might be expected with such a sizeable award, the defendants appealed. The Sixth Circuit panel reversed the lower court’s decision, holding that federal illegality prevented it from enforcing an otherwise valid state contract. The court’s decision did not turn on the 2026 partial reclassification of certain medical-marijuana products because the 2020 agreement involved recreational marijuana as well, which remains federally illegal. The panel found that the Rohrabacher-Farr Amendment, which instructs the Department of Justice (DOJ) to not use funds to prevent states from implementing their own marijuana laws, is an appropriations rider, one that does not make marijuana legal under federal law. Put more simply, while the federal government may be unable to fund a prosecution in some circumstances, the underlying conduct can still remain federally illegal.
While the ruling does not have a direct effect on the laws of states where cannabis use is legal or decriminalized, it’s bound to cause a modicum of uncertainty for contracts involving cannabis growers and retailers in the Sixth Circuit’s jurisdiction. The panel’s reversal noted that the contract between Hello Farms and the defendants was drafted while cannabis still had a Schedule I classification, but until a final rule is issued on the new classification, the danger in entering cannabis contracts remains. The panel’s opinion included a statement that summed up its position succinctly: “Federal courts can’t enforce contract claims founded on an agreement to purchase marijuana illegally.”
