A federal appeals court has reversed a $31.8 million jury award to a Michigan marijuana cultivation business, ruling that federal courts cannot enforce a contract requiring conduct prohibited under federal marijuana law.
In a September 10 decision, the U.S. Court of Appeals for the Sixth Circuit sided with GR Vending MI and CURA MI, subsidiaries of Curaleaf Holdings, in their dispute with Hello Farms Licensing MI. The court concluded that the underlying marijuana supply agreement was federally illegal and therefore unenforceable.
Hello Farms entered into a contract with the companies in November 2020 under which GR Vending agreed to purchase all marijuana grown by Hello Farms during its 2020 and 2021 harvests. CURA MI served as guarantor.
The agreement anticipated between 12,000 and 15,000 pounds of marijuana from the 2020 harvest. Hello Farms ultimately produced about 16,300 pounds, all of which passed required testing. GR Vending accepted an initial shipment of approximately 2,000 pounds before marijuana prices began falling and the company declined further deliveries.
Hello Farms later sued for breach of contract. A jury found the defendants liable and awarded the grower $31.8 million in damages. The district court rejected arguments that the contract could not be enforced because marijuana remained illegal under federal law.
The Sixth Circuit disagreed.
The court found that the contract was not limited to Michigan’s medical marijuana market, noting that it specifically required the product to satisfy recreational marijuana testing requirements and that GR Vending held both medical and recreational licenses.
“On the face of the contract, the parties promised to commit felonies,” the court said, concluding that ordering the defendants to pay lost profits would amount to enforcing an agreement involving conduct prohibited by the federal Controlled Substances Act.
The court also rejected the argument that the result should be different for medical marijuana because of the longstanding federal appropriations rider preventing the Department of Justice from using certain funds to interfere with state medical marijuana programs.
The ruling says the rider restricts federal prosecution funding but does not legalize or decriminalize marijuana. The underlying conduct remains prohibited by federal law.
The judges also addressed the federal government’s April 2026 decision to move certain state-licensed medical marijuana to Schedule III.
According to the court, the change does not make the 2020 contract enforceable because the legality of a contract is generally determined when the agreement is made, and the Schedule III rule was not retroactive. The court added that even under the new rule, a similar medical marijuana transaction conducted today without required Drug Enforcement Administration registration would remain federally illegal.
The court acknowledged that the decision could result in a significant financial benefit for the companies that breached the agreement, but said judges cannot weigh those equities against federal law.
“Federal courts can’t enforce contract claims founded on an agreement to purchase marijuana illegally,” the court concluded.
