California regulator decries cannabis delivery suit as ‘bizarre’ in court filing a month before trial
John Schroyer~Marijuana Business Daily
In a preview of a hotly anticipated trial set to take place in July, a key California marijuana regulator blasted a lawsuit aimed at overturning a policy allowing statewide marijuana deliveries as "bizarre" in a new court filing.
The brief, filed June 8, outlines the state's arguments in favor of allowing marijuana companies to deliver products into any locality regardless of city or county bans on MJ businesses.
Much of the industry favors the statewide-delivery option as a way to bolster sales and access for customers, while roughly two dozen localities have formally opposed the policy.
The California Attorney General's office filed the brief in Fresno County Superior Court on behalf of the state Bureau of Cannabis Control (BCC).
The brief was written in response to a lawsuit brought last year by 25 local governments that are arguing the delivery policy violates state law by overriding their ability to regulate cannabis commerce at the local level.
The brief contends that the policy – set by the BCC in July 2018 – aligns with state law, including Proposition 64, passed by voters in 2016, and the Medicinal and Adult Use Cannabis and Regulation Safety Act (MAUCRSA), which was approved by lawmakers in 2017.
"Plaintiffs are able to challenge the delivery regulation only by ignoring the structure, purpose, and history of MAUCRSA and urging this 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 brief states.
The brief contains various legal arguments, including:
- The lawsuit is based on hypothetical conflicts between state and local laws.
- Local police powers do not currently extend to the point of preventing private individuals from ordering any legal product for delivery.
- Both Proposition 64 and MAUCRSA explicitly condone delivery anywhere in the state.
- If the court were to side with the cities, the legal marijuana market in California could collapse.
"Permitting local jurisdictions to ban all deliveries of cannabis also would undermine the stated objectives of Proposition 64," the brief argues.
"If legal transactions were not allowed in those jurisdictions, only illicit sales would occur there, the illicit market would be perpetuated, and the goal of creating a legally regulated, statewide commercial cannabis market would be sabotaged."
The trial, which originally had been set for April 20, was rescheduled for July 16 because of the coronavirus outbreak.
The BCC declined to comment beyond the brief, citing the pending litigation.
A request for comment to the attorneys for the plaintiffs was not immediately returned Wednesday.
However, Steven Churchwell, the lead attorney for the 25 localities suing the state, told Law360 that his clients "agreed not to oppose the legalization of recreational cannabis in 2016 after being promised that they could continue to regulate the industry at the local level."
"But then the (BCC) decided, with zero statutory authority, to adopt a regulation that would allow a delivery van – filled with millions of dollars of marijuana – to show up at night in any jurisdiction in the state, and hand it out door to door."
The suit has the potential to upend the legal marijuana market in California if the plaintiffs win, and many delivery operators see the case as "critical," because roughly two-thirds of cities and counties across the state maintain MJ business bans.
The ability to deliver into localities with bans has vastly expanded the customer base for many of the state's licensed delivery operators and has guaranteed access to legal cannabis products in regions where MJ shops are prohibited.
Mixed analysis from industry attorneys
Two California cannabis industry attorneys, based on their readings of the brief, had very different takes on the strengths and weaknesses of the BCC's case.
Los Angeles-based lawyer Hilary Bricken said she was "not impressed" with the brief and predicted a win by the cities unless the presiding judge engages in "judicial activism."
"I'm worried, because I do not think they made any good or realistic arguments, either on the legal side or the procedural side," Bricken said. "I think the cities are going to prevail here without having to do very much."
Bricken said that though she wishes the state had "knocked it out of the park," the brief failed in her view to dispel the fact that performing deliveries is "100% commercial cannabis activities" that are within the power of local governments to prohibit.
But Sacramento-based Khurshid Khoja, also a longtime cannabis lawyer, said he believes the BCC has a solid shot to win at trial next month, even though he agreed with Bricken that the brief had some weak arguments based on the text of state law.
That's because he believes the police-powers argument is strong enough to sway the judge.
"You can't stop Amazon or any other companies delivering lawful goods because consumers have a fundamental constitutional right to receive those deliveries at their private residence, irrespective of the individual rights Proposition 64 established," Khoja said, referring to one of the state's legal arguments.
"Local police power and land-use authority cannot impinge upon those rights. That's established in precedent, and on that basis, the arguments on the limits of local police power are very persuasive."
Regardless, both Bricken and Khoja agreed the case won't be fully resolved anytime soon because an appeal is almost guaranteed and the case could go all the way to the state Supreme Court.
That could take years, both attorneys said.
Delivery operators cheered the brief and the BCC for fighting the lawsuit.
"This case will essentially decide whether legal operators will continue to exist in broad numbers or not," Zach Pitts, a board member of the California Cannabis Couriers Association and CEO of delivery company Ganja Goddess, wrote in an email to Marijuana Business Daily.
"Make no mistake, there is no operator that does not deliver outside their city and rely on that income.
"An outcome from this case that restricts delivery to the city you're licensed in will cause a huge contraction in sales, multitudes of licensed delivery businesses to fail and a boom in black-market delivery."
Elizabeth Ashford, a spokeswoman for Eaze, one of the largest delivery companies in California, wrote in an email to MJBizDaily that it's happy the BCC is defending the rights of consumers to access legal cannabis.
"It is stunning that there is still an effort to ban legal delivery when it has proven to be an invaluable, essential service in recent months," she wrote.
"Bottom line, if the plaintiffs win, patients' and consumers' access to legal cannabis will be reduced."
Ashford also noted that Churchwell was incorrect in asserting that marijuana delivery drivers can carry around "millions" of dollars worth of cannabis products in vehicles: The state cap for any marijuana delivery vehicle is $5,000 worth of goods at any point in time.
John Schroyer can be reached at firstname.lastname@example.org