The viability of California’s cannabis delivery businesses continues to hang in the balance as trial in the landmark litigation between the Bureau of Cannabis Control (BCC) and over two dozen local municipalities was postponed at the eleventh hour. In her tentative ruling, issued the afternoon before the much-anticipated bench trial in County of Santa Cruz v. BCC (County of Fresno Super Court, Case No. 19CECG01224), Judge Rosemary McGuire questioned the ripeness of certain municipalities claims challenging implementation of California Code of Regulations, Title 16, section 5416(d) (Regulation 5416(d)), which allows delivery of cannabis to any jurisdiction within the state.
In delaying the trial, Judge McGuire found that “the issues are not yet appropriate for judicial resolution due to the hypothetical nature of the plaintiffs alleged injury…because some of the plaintiffs either do not have an ordinance regarding commercial cannabis delivery…or do not ban such delivery.” The parties were then ordered to brief the issue of ripeness as to each and every plaintiff. Municipalities that determine they do not have standing are required to withdraw; whereas, municipalities with standing must demonstrate that they have an ordinance in place contrary to Regulation 5416(d). This demonstration must be based upon evidence in the record (i.e., a municipality cannot rely on an ordinance passed subsequent to the initial litigation).
The trial was originally – fittingly – scheduled for April 20, 2020, but postponed to July 16th and then to August 6th. Following Judge McGuire’s most recent tentative, the trial has been rescheduled for November 16, 2020. The ultimate decision in this case could handicap the mobilization of legalized cannabis businesses in the Golden State, which recognizes both medical and adult cannabis as lawful.
In April 2019, the County of Santa Cruz and 24 California cities sued BCC and its Chief, Lori Ajax, to overturn Regulation 5416(d) – a BCC policy permitting statewide delivery of cannabis products. Plaintiffs allege the regulation clashes with state law, which authorizes individual municipalities to determine whether commercial cannabis activity is permitted within their jurisdictional boundaries.
Specifically, plaintiffs allege that Regulation 5416(d) is inconsistent with Medicinal and Adult-Use Cannabis Regulation and Safety Act (Bus. & Prof. Code § 26000 et seq.) (MAUCRSA), which provides 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)).
According to plaintiffs, Regulation 5416(d) is invalid and unenforceable because it conflicts with existing municipal laws. Additionally, plaintiffs contend the BCC is tasked with creating regulations focused on safety, and Regulation 5416(d) oversteps this limitation: “This enabling authority to adopt safety regulations does not authorize the BCC to override local control in jurisdictions that have restricted or completely prohibited the operations of such businesses.”
In response, defendants BCC and Chief Lori Ajax assert that local control is not absolute and California’s cannabis laws put an emphasis on state control, rather than local, especially when it comes to delivery. (See Bus. & Prof. Code § 26090(e) [“local jurisdiction shall not prevent delivery of cannabis or cannabis products on public roads by a licensee acting in compliance with local law”].) To this end, defendants argue that Regulation 5416(d) is, in fact, consistent with MAUCRSA and, to this end, statewide cannabis delivery policy is reasonably necessary to effectuate the purpose of MAUCRSA.
Implications of County of Santa Cruz Decision
While the case is focused on delivery, it illustrates the tension between the state and municipalities when it comes to cannabis. The outcome of County of Santa Cruz will likely significantly impact the number of legal cannabis delivery companies in California. In the short term, should plaintiffs prevail, delivery operations in jurisdictions where cannabis sales are prohibited would be subject to similar prohibition, which could have disastrous financial impacts to delivery companies due to a contracted consumer base. In the long term, many fear that as legal and licensed businesses leave the market, black market cannabis delivery operators will expand exponentially, placing a burden on local municipalities enforcement resources.
While the case remains pending, statewide cannabis delivery remains legal under Regulation 5146(d). This is good news for delivery companies as it is anticipated that, regardless of the trial court decision, the County of Santa Cruz ruling will certainly be appealed and the appellate process may continue for the foreseeable future.
 Plaintiffs include: County of Santa Cruz, and the cities of Agoura Hills, Angels Camp, Arcadia, Atwater, Beverly Hills, Ceres, Clovis, Covina, Dixon, Downey, McFarland, Newman, Oakdale, Palmdale, Patterson, Riverbank, Riverside, San Pablo, Sonora, Tehachapi, Temecula, Tracy, Turlock and Vacaville.