Lawsuit Challenging California Cannabis Deliveries Dismissed, But Status Quo Remains

On November 17, 2020, the Fresno County Superior Court dismissed a lawsuit filed by 24 California cities seeking to invalidate state cannabis regulations that allow delivery of cannabis to customers in jurisdictions that have banned retail commercial cannabis activity. Many industry players and media are touting the dismissal as a “win” for California cannabis companies. We have a different take. That’s because after the dismissal, cities and counties are still allowed to ban delivery. It’s just that the state Bureau of Cannabis Control (BCC) will not be compelled to enforce those prohibitionist local ordinances.

As we explained last year, the plaintiffs in the action sought to invalidate and permanently enjoin enforcement of Title 16, section 5416(d) of the California Code of Regulations. According to plaintiffs, Regulation 5416(d) permits the delivery of commercial cannabis to a physical address anywhere in the state, which conflicts with the plain language of Business and Professions Code sections 26090 and 26200. Business and Professions Code section 26090(e) allows deliveries of cannabis, but only if such operations comply with local law. Section 26200(a) allows a local jurisdiction to regulate or completely prohibit the operation of commercial cannabis businesses within its boundaries. Plaintiffs contend that “Regulation 5416(d) is in direct conflict with the plain language of Business and Professions Code sections 26090 and 26200, which guarantee the right of local jurisdictions to regulate or prohibit commercial cannabis operations within their boundaries.”

However, the BCC contended that the issues were not ripe for adjudication, because “Regulation 5416(d) does not directly contradict or preempt plaintiffs’ local ordinances because the regulations does not command local jurisdictions to do anything, and does not prohibit them from doing anything.” The court agreed with the BCC, and stated that, “[s]pecifically, [Regulation 5416(d)] does not command local jurisdictions, including plaintiffs, to permit delivery. Nor does it override their local ordinances prohibiting or regulating delivery.” The BCC pointed out that the delivery regulation applies to state licensees, not local jurisdictions. Therefore, the regulation and plaintiffs’ local ordinances do not occupy the same field and are not in conflict.

While many are framing this as a win for the industry, the decision does nothing more than preserve the status quo. The court pointed out in its decision that “[l]ocal jurisdictions can impose regulatory and health and safety standards that are stricter than state laws. The standards established by the BCC are the minimum standards for licensees statewide, and ‘local jurisdiction[s] may establish additional standards, requirements, and regulations.’ (Bus. & Prof. Code, § 26201). The BCC is not required to enforce plaintiffs’ local ordinances.”

What this decision reinforces is that in fact, local jurisdictions can enact more restrictive regulations that prohibit delivery within their jurisdictional boundaries because state law does not preempt those regulations. Many jurisdictions, including here in the City of San Francisco, have already enacted such prohibitions on deliveries by entities not licensed in that jurisdiction. The issue has been with the ability of local jurisdictions to effectively enforce these restrictions, rather than the validity of the restrictions themselves.

This decision makes it clear that cities and counties can prohibit delivery within their jurisdictional boundaries, but the BCC will not be involved in enforcing those prohibitions, and the task of enforcement will be left up to local jurisdictions.