Should Marijuana Companies With Provisional Licenses Have Right to Appeal Regulation Enforcement?

What recourse do marijuana companies with provisional licenses have if regulators choose to revoke them? Can they appeal? It’s a question that’s likely to get some answers as the case of Harrens Lab Inc. v. Bureau of Cannabis Control works its way through the courts.

In that case, a marijuana testing lab forced to close earlier this year after the California Bureau of Cannabis Control revoked its provisional license said the move was unconstitutional because they were denied due process by not being allowed to appeal the decision. But in a recent filing before the Superior Court in Alameda County, the state’s attorney general argued that no cannabis business in California operating on a provisional license is entitled to due process under state law.

The superior court ordered the testing lab is allowed to reopen its doors after being forced to close them in January, when the BCC pulled its provisional license for numerous alleged offenses, including:

• The inability to take solid representative testing samples.
• Violation of rules in use of a third-party courier to ship marijuana samples.
• The failure to produce shipping manifests prior to moving marijuana goods.
• Shipping marijuana goods and samples absent the state-required Metrc labels (those required for track-and-trace within the state).
• Modifications of lab property absent agency approval.
• Failure to install a video surveillance system.

Soon after, the company filed a lawsuit against the BCC, arguing the absence of an appeals process was a violation of the company’s due process rights. The superior court’s most recent ruling bars the state from enforcing the license revocation, allowing the cannabis lab to continue operating under its provisional license until further order from the court.

A hearing is set for later this month to determine if the state has the right to impose a preliminary injunction on the lab. However as our Los Angeles cannabis business attorneys know, the bigger question is really whether marijuana companies with provisional licenses have a right to due process – including the appeals process.

The state’s attorney general had argued that there should be no due process for provisional licensees because such permits are designed to be temporary and thus provisional license holders don’t have the benefit of the same legal rights and standing as full-fledged annual license holders.

It’s the position of the lab, however, that provisional licensees comprise 8 in 10 cannabis companies in California – the majority of industry players in this state – and that their property interests should be constitutionally protected. Thus, they argue, the BCC shouldn’t be allowed to shutter their operations without giving them the legal benefit of due process.

If the lab prevails at the hearing later this month, even the judge noted it would be an “interesting case.” The potential consequences are certainly wide-reaching, given that there are an estimated 8,300 provisional licenses held by marijuana companies in the state. Meanwhile, the state has only issued about 1,700 annual permits.