What can marijuana businesses with a temporary license do if regulators decide to revoke the license? Can they appeal? This question will likely be answered when Harrens Lab Inc. v. The Bureau of Cannabis Control is going to court.

In this case, the marijuana testing lab was forced to close earlier this year after the California Bureau of Cannabis Control revoked its provisional license. They argued that the decision was unconstitutional because they had no right to challenge it. But in a recent case filed in Alameda County Superior Court, the attorney general argued that no cannabis business in California operating under a temporary license is entitled to due process under state law.

The Supreme Court ordered the reopening of the testing laboratory after it was forced to close in January when the BCCI revoked its provisional licence due to numerous alleged irregularities, including:

  • Lack of robust and representative samples for testing.
  • Violation of using a third party courier to ship marijuana samples.
  • A shipping error means that the marijuana was not delivered.
  • Transportation of marijuana products and samples without state metric tags (required for state tracking).
  • Change of ownership of the laboratory without Agency approval.
  • Failure to install a video surveillance system.

Shortly thereafter, the company filed a lawsuit against BCC, arguing that the lack of an appeals process violated the company’s due process rights. A recent Supreme Court decision prohibits the state from enforcing the revocation of a permit and allows a cannabis lab to continue operating under its provisional permit until a new court decision is made.

A hearing is scheduled later this month to determine whether the state has the authority to issue an injunction against the lab. However, our Los Angeles cannabis lawyers know that the most important question is whether marijuana businesses that have been granted a provisional license are actually entitled to due process, including an appeals process.

The Attorney General argued that there should be no due process for temporary permit holders because these permits are for temporary use and therefore temporary permit holders do not have the same legal rights and status as full-time annual permit holders.

But the lab believes that temporary licensees represent 8 out of 10 cannabis businesses in California – the largest number of industry players in the state – and that their ownership interests should be constitutionally protected. They therefore argue that BCC should not be allowed to terminate the agreement without the legitimate benefits of due process.

If the lab wins at the hearing at the end of this month, even the judge will find it an interesting case. The potential impact is certainly significant given that there are approximately 8,300 temporary licenses held by marijuana businesses in the state. At the same time, the state issued only about 1,700 permits per year.

As you may recall, the purpose of pre-licensing was to give cannabis companies and regulators more time to streamline the licensing process while maintaining the vertical and functional nature of the industry. It began in 2018.

The CANNABIS LAW Group, based in Los Angeles, represents manufacturers, dispensaries, suppliers, patients, physicians and individuals facing marijuana-related charges. Call us at 714-937-2050.

Additional resources :

California judge rules that closed marijuana lab may reopen, Marijuana Business Daily, 5. March 2021.

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