The U.S. Court of Appeals for the Sixth Circuit ruled on September 10 that federal courts cannot enforce a contract to grow and sell marijuana, because carrying out the deal required the parties to commit federal crimes. The decision reverses a $31.8 million jury verdict a Michigan grower had won against two Curaleaf Holdings subsidiaries, and it shuts the federal courthouse door to marijuana contract disputes across the circuit's four states: Michigan, Ohio, Kentucky and Tennessee.
The Sixth Circuit reversed the $31.8 million verdict on September 10 in Hello Farms Licensing MI, LLC v. GR Vending MI, LLC. The court held the contract was federally illegal when signed and that April's rescheduling order does not retroactively make it enforceable.
What Happened
In November 2020, Michigan grower Hello Farms signed an output contract to sell its entire 2020 and 2021 marijuana harvests to GR Vending MI and CURA MI, both subsidiaries of Curaleaf Holdings. GR Vending, which held Michigan medical and recreational marijuana licenses, paid a $2.2 million deposit and accepted an initial shipment of roughly 2,000 pounds. As marijuana prices fell, GR Vending declined to accept further deliveries under the contract.
Hello Farms sued for breach of contract in federal court and won a $31.8 million jury verdict. GR Vending and CURA MI appealed, arguing the contract was unenforceable because it required conduct that remains a federal crime: cultivating, distributing and purchasing marijuana under the Controlled Substances Act.
The Sixth Circuit agreed. The panel held that awarding money damages for breach of a marijuana sale contract still amounts to judicial enforcement of an illegal bargain, even though no court order requires anyone to actually grow, sell or buy the drug. The court also rejected the argument that April's DOJ order moving certain marijuana to Schedule III changed the outcome, holding that a contract illegal when it was signed in 2020 does not become enforceable because the regulatory treatment of the underlying substance changed years later, absent a specific basis for retroactive effect.
Why It Matters
The ruling reinforces a doctrine cannabis businesses have long tried to work around: because marijuana remains federally illegal outside narrow rescheduled categories, federal courts have broad latitude to refuse to enforce contracts built around its cultivation and sale. That leaves companies operating under state licenses with less recourse than an ordinary business when a supply, distribution or licensing deal falls apart, at least when they try to sue in federal court within the Sixth Circuit's Michigan, Ohio, Kentucky and Tennessee jurisdiction.
It is also a reminder that April's Schedule III order for state-licensed marijuana does not retroactively rewrite older contracts or automatically resolve every legal complication tied to the plant's history under Schedule I. Businesses relying on that order to firm up existing agreements should not assume it settles disputes that arose, or contracts that were signed, before the rule took effect.
What This Means Going Forward
Companies operating in states covered by the Sixth Circuit may increasingly look to state courts, arbitration clauses or other dispute-resolution mechanisms rather than federal court when structuring marijuana supply and sale agreements, since federal illegality doctrine can leave a federal breach-of-contract claim unenforceable regardless of how clearly a defendant breached. The ruling does not, on its own, bind courts outside the Sixth Circuit, but similar illegality arguments have succeeded elsewhere and litigants elsewhere are likely to cite this decision.
What This Means for Texas
Texas sits outside the Sixth Circuit, so this ruling is not binding precedent for Texas-based disputes, but the underlying federal-illegality doctrine it applies is not circuit-specific. Texas hemp and cannabis businesses drafting supply contracts should assume federal courts anywhere may decline to enforce agreements tied to marijuana that remains federally prohibited, and should build dispute-resolution and forum-selection clauses accordingly. See our coverage of Cannabis Banking Costs for a related look at how federal illegality complicates ordinary business operations even for state-licensed companies.
The Bottom Line
The Sixth Circuit did not rule on whether GR Vending breached its contract with Hello Farms. It ruled that a federal court cannot award damages for that breach because the underlying deal required federally illegal conduct, and that the 2026 Schedule III order does not reach back to rescue a 2020 contract. The $31.8 million verdict is gone, and the decision narrows where cannabis operators in four states can realistically go to enforce a supply agreement.