Marijuana Companies With Provisional Licenses Have Right to Appeal Regulation Enforcement

What can marijuana businesses with a provisional license do if regulators decide to revoke the license? Can they appeal? This is a question that 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. According to them, the decision was unconstitutional because they were not allowed 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 lab after it was forced to close in January when the BCCI revoked its provisional license due to numerous alleged violations, including:

  • Lack of fixed and representative samples for testing.
  • Violation of using a third party courier to ship marijuana strains samples.
  • A transportation error means that the marijuana product was not delivered.
  • Shipping marijuana products and samples without state metric tags (required for state tracking).
  • Alterations to laboratory property 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. The recent Supreme Court decision prohibits the state from enforcing the license revocation and allows the cannabis lab to continue operations under its provisional license until a new court decision.

A hearing is scheduled later this month to determine whether the state has the authority to issue a restraining order against the lab. However, our Los Angeles cannabis lawyers know that the more important question is whether marijuana businesses that have been granted a prior 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 majority of industry players in the state – and that their ownership interests should be constitutionally protected. Therefore, they argue that BCC should not be allowed to terminate their operations without giving them the legitimate benefit of due process.

If the lab prevails at the hearing later this month, even the judge will note that it will be an interesting case. The potential impact is certainly significant, given that there are an estimated 8,300 temporary licenses held by marijuana businesses in the state. In the meantime, the state has only issued about 1,700 permits annually.

As you may recall, the purpose of pre-licensing was to allow 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 Los Angeles-based CANNABIS LAW group 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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