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Statewide Cannabis Delivery in California Faces Outrage from Certain Municipalities

Since the California Bureau of Cannabis Control’s (BCC) Permanent Regulations (Permanent Regulations) took effect on January 16, 2019 in California, one of the fiercely contested debates is over the new allowance for statewide delivery. The battle lines are being drawn with respect to local control.

The Debate Unfolds with Adoption of the Permanent Regulations

Specifically, whether the allowance of expanded statewide delivery violates and undermines the foundational dual-parallel licensing structure set forth first by the Medical Marijuana Regulation and Safety Act,  and preserved by the Adult Use Marijuana Act (AUMA or Prop 64) approved by the state’s voters in 2017 and currently reflected in the Medicinal Adult Use Cannabis Regulation and Safety Act (MAUCRSA).

Section5416 subsection (d) of the Permanent Regulations is the crux of the debate:

“(d) A delivery employee may deliver to any jurisdiction within the State of California provided that such delivery is conducted in compliance with all delivery provisions of this division.”

The inclusion of §5416(d) was celebrated by a majority of the cannabis industry as a monumental success. As reported in the media, large stretches of California where cannabis is banned locally has created cannabis “deserts” for residents in those areas.(See, Associated Press, 25 cities suing California over marijuana policy that allows unrestricted delivery statewide, April 5, 2019, available athttps://www.nbcnews.com/news/us-news/25-cities-suing-california-over-marijuana-policy-allows-unrestricted-delivery-n991621.)

Last year, it was reported that residents in about 40 percent of the state had to drive 60 miles or more to find a licensed dispensary to purchase legal cannabis, which includes medical patients.(See, Brad Branan and Nathaniel Levine, Weed is legal. But this map shows just how much of California is a ‘pot desert,’ March 22, 2018, available at https://www.sacbee.com/news/state/california/california-weed/article205524479.html.)

It was the BCC’s position that this section’s inclusion in the Permanent Regulations was merely a clarification of existing law. Proponents’ perspective is that the provision effectively ensures safe and direct access to cannabis to those qualified residents in areas where municipalities have banned delivery. Its inclusion is particularly noteworthy as the BCC undertook drafting of the Permanent Regulations after State Senator Ricardo Lara’s  SB 1302 (which aimed to preempt a local government from adopting or enforcing an ordinance that banned cannabis deliveries within its jurisdiction) failed to secure the required two-thirds vote necessary for enacting an amendment as required by Prop 64. Assemblyman Ken Cooley again made an attempt to overturn the BCC’s regulation supporting statewide delivery with AB 1530, however the bill with a deadlock vote of 7-7 failed to pass out of the Assembly Business and Professions Committee.

Municipalities are Not Pleased

The League of Cities (League) has been vocal in its opposition since the release of the draft Permanent Regulations in July 2018. The League on behalf of its members submitted public comments to the BCC:

“Section 5416(d), would drastically preempt local control and regulatory authority by authorizing cannabis delivery anywhere in the state regardless of conflicting local regulations or bans.”

The League has the support ofthe California Police Chiefs Association, the United Food and Commercial Workers Western States Council and even some cannabis industry groups.

The Importance of Local Decision-making in Proposition 64

Prop 64’s purpose and intent provisions expressly recognized the value of local control in regulating commercial cannabis activity. In short, Prop 64 provided that:

“. . .[i]t is the intent of the People in enacting this Act to … [a]llow local governments to ban nonmedical marijuana businesses …(Initiative Measure (Prop. 64), §3(d), approved Nov. 8, 2016, eff. Nov. 9, 2016) Therefore, an argument can be made that under existing law—as articulated in Prop 64 and now, the MAUCRSA—local governments can adopt and enforce local ordinances to ban or regulate some, all or no commercial cannabis activity. Would this include deliveries, within their borders”?

The Position in San Francisco

Shortly after the release of the Permanent Regulations, San Francisco’s (City) City Attorney’s office issued a strongly-worded memorandum expressing the City’s position that the BCC’s actions via §5416(d) are in direct conflict with local regulation of commercial cannabis deliveries resulting in unlawful preemption of expressed local control. The City was so adamant in their position that it stated it was:

“. . .prepared to vigorously defend the [its] authority to enforce the City’s ordinances regulating cannabis deliveries.” (See, Deputy City Attorney, City of San Francisco Matthew Lee, (February 1, 2019) Memo to Nicole Elliot, Director Office of Cannabis “Validity of State Administrative Rule Purporting to Preempt Local Regulation of Cannabis Deliveries”)

The foundational argument elucidated by the City was that §5416(d) goes beyond the statutory limitations of Prop 64 and MAUCRSA exceeding the BCC’s authority. The City bolsters its position referring to California’s Business and Professions Code (B&P Code) §26013, which expressly limits the regulatory authority of the BCC to enacting rules and regulations that are “consistentwith the purposes and intent of [Prop 64].” The allowance of deliveries into every jurisdiction in California, without regard for the local municipalities’ own governance, the City argues is inconsistent with Prop 64 not simply clarifying existing law.

The City’s memo further highlighted the distinction between using roadways for “transportation” versus “delivery” as the B&P Code §26080 provides, in relevant part, that:

“[a] local jurisdiction shall not prevent transportation of cannabis or cannabis products on public roads by a licensee.” (Bus. & Prof. Code§ 26080(b))

The City’s interpretation of §26080 is to prohibit a local jurisdiction from obstructing cannabis shipments passing through a particular jurisdiction while in transit to destinations elsewhere (i.e.business to business transactions not “delivery” sales from businesses to consumers).

‘Customized’ Regulations for Health and Safety?

In connection with a locality’s right to ban deliveries altogether, the rationale supporting local control is the inclusion of customizedregulations to protect the health and safety within a municipality’sboarders with reasonable regulations. As in the case with San Francisco, the City imposes specifics delivery regulations for storage in secure lock-boxes; delivery in child-resistant containers; verification of customers’ ages and identities upon receipt, and confirm that each customer received the correct product; detailed records of each delivery; ensuring that deliveries are conducted by operators’ own employees, (See,S.F. Police Code § 1622(b)(9) and related sections).

A Lawsuit from Local Governments

In furtherance of such rationale, 25 local governments made good on their threats to the state and filed a lawsuit against the BCC and Chief Lori Ajax to overturn the delivery rule.(See, Complaint, County of Santa Cruz; City of Agoura Hills; City of Angels Camp; City of Arcadia; City of Atwater; City of Beverly Hills; City Of Ceres; City of Clovis; City of Covina; City of Dixon; City of Downey; City of Mcfarland; City of Newman; City of Oakdale; City of Palmdale; City of Patterson; City of Riverbank; City Of Riverside; City of San Pablo; City of Sonora; City of Tehachapi; City of Temecula; City of Tracy; City of Turlock; and City of Vacaville v. Bureau of Cannabis Control; Lori Ajax, in her official capacity as Chief of the Bureau of Cannabis Control; and DOES 1 through 10, inclusive(filed April 4, 2019), available at: https://static1.squarespace.com/static/5c895dff92441b9dea2ba362/t/5ca6abacf4e1fc9d47b784ea/1554426801954/SIMPL_complaint.pdf)

Though San Francisco is not a party to the lawsuit, the central legal argument articulated in the complaint is fundamentally the same as the City’s memo: The BCC’s regulation conflicts with the MAUCRSA, which grants local jurisdictions the authority to establish and enforce commercial cannabis regulations. The complaint, like the City’s memo, cites to the consistency requirement of B&P Code §26013. The lawsuit was filed shortly before Assembly Bill 1530, a bill aiming to overturn the BCC delivery rule sponsored by Assembly Member Ken Cooley, was defeated in committee.(AB-1530 Unauthorized cannabis activity reduction grants: local jurisdiction restrictions on cannabis delivery, Introduced by Assembly Member Cooley February 22, 2019, available at: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB1530)

Conclusion and Implications

The governments involved in the suit have all adopted ordinances related to commercial cannabis activity in their jurisdictions, with most prohibiting retail dispensaries. However, many of the governments in the lawsuit currently allow retail dispensaries such as Santa Cruz and have various concerns about the BCC rule, including disadvantaging the permitted dispensaries within their jurisdictions.

The lawsuit will have a precedent-setting impact on the playing field of municipal versus state control, generally. For the commercial cannabis rhetoric, the issue tests the strength of one of its core tenants—local contro.  How statewide delivery develops remains a quagmire with complex issues compounded by strong public policy concerns related to both consumer and patient protection and access. For those advising non-storefront retailers or storefront retailers with delivery operations it is wise to build in contingencies as this critical issue continues to develop.

(Pamela Epstein)

Cannabis Law & Regulation

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