The viability of many California cannabis delivery companies could also be at stake subsequent month as a landmark lawsuit introduced by native municipalities in opposition to the Bureau of Cannabis Control (“BCC”) heads to trial. Last 12 months, the County of Santa Cruz and 24 different California cities sued BCC and its Chief, Lori Ajax, to overturn a BCC coverage allowing statewide delivery of cannabis merchandise.

The plaintiff municipalities want to prohibit cannabis delivery to prospects positioned in jurisdictions which have banned the sale of such merchandise. With lower than one-third of California cities and counties at present allowing cannabis gross sales, the swimsuit’s final result is anticipated to considerably affect the cannabis delivery market within the State, significantly for the bigger delivery companies with operations all through the State, resembling Eaze, Speedweed, Goddess Delivers and Caliva.

The trial, initially scheduled for April 20, 2020, was postponed to July 16, 2020 as a result of COVID-19 pandemic. On June 8, 2020, the California Attorney General’s workplace filed, on behalf of BCC, a trial transient outlining its arguments in response to the claims. This submit gives background data on the case, particulars the arguments introduced by each events and discusses the lawsuit’s implications on cannabis delivery in California, which boasts the most important authorized cannabis market on the earth.


On November 8, 2016, California voters handed Proposition 64, the Control, Regulate and Tax Adult Use of Marijuana Act (“Proposition 64”), legalizing adult-use cannabis. The following 12 months, the State’s legislature enacted the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which authorizes delivery gross sales of cannabis merchandise beneath the regulatory area of BCC.

In January 2019, BCC promulgated rules for the delivery of cannabis (the “Delivery Regulations”). Section 5416(d) of the Delivery Regulations (“Regulation 5416(d)”) gives that licensed cannabis delivery corporations “may deliver to any jurisdiction within the State of California,” successfully authorizing the sale of cannabis statewide, together with in municipalities the place retail cannabis gross sales are prohibited.

Plaintiffs’ argument

The plaintiff municipalities (collectively, “Plaintiffs”), which embody the County of Santa Cruz, City of Beverly Hills, City of Riverside and City of Temecula, amongst others, have every adopted ordinances that regulate or prohibit industrial cannabis exercise inside their jurisdictions. The gravamen of Plaintiffs’ grievance is Regulation 5416(d) straight conflicts with Plaintiffs’ statutory proper to manage cannabis operations inside their respective cities and counties.

Plaintiffs allege that Regulation 5416(d) is inconsistent with MAUCRSA, which gives that MAUCRSA “shall not be interpreted to supersede or limit the authority of a local jurisdiction to…completely prohibit the…operation of one or more types of businesses licensed under [MAUCRSA] within the local jurisdiction.” (Bus. & Prof. Code, § 26200(a)(1)).

They argue that as a result of Plaintiffs have the statutory proper to ban the operation of cannabis delivery corporations inside their jurisdiction and Plaintiffs have exercised such proper by prohibiting the sale of cannabis of their jurisdictions, Regulation 5416(d) is invalid and unenforceable as a result of it conflicts with present municipal legal guidelines.

Plaintiffs additional contend that Regulation 5416(d) is inconsistent with statements made by proponents of Proposition 64. Proposition 64 supporters assured voters the act wouldn’t intrude with native municipalities’ rights to regulate cannabis-related actions.

Thus, Plaintiffs assert that whereas BCC has rulemaking authority over the distribution and delivery of nonmedical cannabis, this enabling authority doesn’t authorize it to override native management in jurisdictions which have restricted or fully banned the operations of such companies.

Defendants’ argument

In response, Defendants assert that Regulation 5416(d) is in step with MAUCRSA and that the statewide cannabis delivery coverage is fairly essential to effectuate the aim of MAUCRSA. They argue that native management is not absolute and whereas Plaintiffs can regulate and even ban cannabis delivery companies established inside their native borders, Plaintiffs can’t ban licensed companies which are established in different cities or counties from delivering into Plaintiffs’ jurisdictions.

Specifically, Defendants reference Bus. & Prof. Code § 26090(e) which states “a local jurisdiction shall not prevent delivery of cannabis or cannabis products on public roads by a licensee acting in compliance with local law.” Defendants argue that beneath this provision, if a licensed cannabis operator makes a delivery to a buyer in a jurisdiction that prohibits the sale of cannabis, the shopper’s jurisdiction doesn’t have the authority to forestall the delivery.

Plaintiffs counter that, beneath the textual content of §26090(e), jurisdictions are solely prohibited from stopping deliveries if the enterprise is working “in compliance with local laws.” Delivery corporations usually are not complying with native legal guidelines when delivering in jurisdictions that prohibit cannabis gross sales, Plaintiffs allege, and due to this fact §26090(e) doesn’t apply.

Defendants additionally argue that any native ordinance, whether or not predicated on expressly granted authority or upon the inherent police powers of native jurisdictions, is void if it violates the categorical limits on the train of native police energy or if it obstructs a coverage goal of the Proposition 64. Defendants contend that California’s cannabis legal guidelines impose limitations on the train of native energy.

For instance, MAUCRSA authorizes any particular person a minimum of 21 years of age to purchase cannabis from a licensed enterprise and states that such exercise shall not be illegal beneath native legislation regardless of the place the person resides. Defendants contend that statewide delivery is one other legitimate limitation on native police energy.

Defendants observe that an expressly said goal of Proposition 64 is to take the manufacturing and sale of cannabis out of the unlawful market and right into a regulatory construction, and to create a thriving industrial market that might generate tons of of thousands and thousands of {dollars} in State income. These goals, Defendants declare, could be fully subverted if native jurisdictions may unilaterally impede statewide industrial cannabis exercise. In addition, such native police energy would stop non-public people from ordering authorized product for delivery, undercutting the rights of people to buy lawful items.

Implications on California’s cannabis business

Industry consultants predict that the result of this case will considerably affect the variety of authorized cannabis delivery corporations conducting enterprise in California. A ruling in favor of Plaintiffs would prohibit such companies from working in jurisdictions the place cannabis gross sales are prohibited, shrinking their buyer base and probably inflicting many corporations to exit of enterprise. As licensed companies exit the market, the already vital presence of black market cannabis delivery operators is anticipated to extend, even in jurisdictions the place cannabis deliveries are authorized.

Delivery corporations might discover some solace in that, whereas the case stays pending, statewide cannabis delivery stays authorized beneath Regulation 5146(d). Regardless of the result, the County of Santa Cruz, et. al. v. BCC ruling will virtually definitely be appealed and the appellate course of might proceed for years.


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