Business

California’s Pot Delivery Wars Go to Court

By Hilary Corrigan Aug 7, 2020
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A judge this week questioned whether some California municipalities should even be plaintiffs in their bid to block cannabis delivery.

The Thursday ruling at California Superior Court bumped the start of a highly-anticipated trial to November. (Read the ruling.)

In 2019, Santa Cruz County and about two dozen other municipalities sued the state’s Bureau of Cannabis Control (BCC) to block delivery services from operating within their borders. The plaintiffs argued that while new rules allowed delivery of commercial cannabis to physical addresses anywhere in the state, those rules conflict with state law that allows cannabis delivery only if such operations comply with local law. (Read the complaint.)

They argue that BCC’s allowance of statewide delivery violates their rights “to regulate or completely prohibit deliveries of commercial cannabis within their jurisdictions,” according to the complaint. California code, they say, already guarantees local jurisdictions that ability.

The BCC rules took effect in 2019, specifying that delivery is permissible to any jurisdiction in the state. Those regulations followed the state legislature’s 2017 enactment of Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). A single regulatory structure for both MED and REC in California, MAUCRSA gives BCC authority to set rules consistent with REC ballot initiative Proposition 64, which voters approved in 2016.

“Proposition 64 promised the voters local control,” the plaintiffs state in a June 2020 brief, pointing to the official voter information guide. Voters approved REC “based on that guarantee of continued local control and local accountability.”

Standing?

But the Thursday ruling from Superior Court Judge Rosemary McGuire points out that some of the municipalities don’t have delivery ordinances in place. For the court to hear their complaint, it found, they need to have an actual dispute, not an abstract one.

McGuire calls for the plaintiffs to each show standing—evidence of their ordinances. The ones without them are “invited to withdraw.” She also reminds them that their complaint claims they have adopted ordinances on commercial cannabis delivery—without evidence.

BCC had raised the issue in a June brief, where it also defended its delivery rules. (Read the brief.)

MAUCRSA states that local jurisdictions shall not prevent delivery of cannabis by licensees that comply with state and local law, BCC argued. The plaintiffs can only challenge that by urging the court “to reach the bizarre conclusion that a statute stating that local jurisdictions ‘shall not prevent delivery of cannabis or cannabis products’ actually gives local jurisdictions unfettered power to ban such deliveries.”

The bureau warned that letting local jurisdictions ban cannabis delivery would “severely undercut” the right of individuals in that jurisdiction to buy cannabis. “This is especially true in large counties such as Inyo or San Bernardino,” BCC said. 

Letting local jurisdictions “unilaterally impede statewide commercial activity” would obstruct Prop 64’s various goals, the agency said. Those include creating a commercial market, generating revenue and ensuring adults’ rights to use cannabis.

‘The stakes are immense’

Earlier this week, Roseville, Calif.-based law firm Huguenin Kahn LLP filed a brief supporting BCC. It argues that state law gives local jurisdictions only limited authority in prohibiting cannabis activity that does not extend to delivery of cannabis to individuals. (Read the brief.)

In an interview, founding partner Robert Kahn stressed that the court should stick to the language of Prop 64. “Focus on the words” that voters approved, Kahn said. The official 2016 voter guide for Prop 64 says adults can buy marijuana “at state-licensed businesses or through their delivery services.” It does not qualify that with local government conditions, he said.

Cannabis insiders are watching the case closely. 

Griffen Thorne, an attorney at cannabis law firm Harris Bricken, says the judge’s Thursday ruling raises a “pretty significant” point—that some of the plaintiffs lack a delivery-related ordinance.

While the cities had said they might adopt such ordinances, “[Judge McGuire] just knocked that argument out of the park,” Thorne said.

However, he called the ruling only a small victory for BCC. The municipalities that do have laws blocking delivery, he said, will likely have a strong argument since state law gives them the ability to control and ban cannabis completely.

“The stakes are immense,” he said. No matter how the case goes, he expects appeals which could eventually reach the state’s Supreme Court. 

A victory for plaintiffs means delivery companies could only deliver within their borders or areas that allow it. “They’re few and far between,” he said of those areas. Such an outcome would help the illicit market grow, and hurdles for delivery services would impact the entire supply chain, he said.

Thorne expects the case could produce a decision by the end of the year or early 2021. “The entire industry’s holding its breath,” he said.

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