The Justice Department is asking a federal court to force California marijuana regulators to disclose documents about cannabis businesses’ licenses and shipping manifests for reasons that remain unclear.
A petition with the U.S. District Court for the Southern District of California on Monday says the Drug Enforcement Administration (DEA) subpoenaed documents about marijuana companies and owners from the state’s Bureau of Cannabis Control (BCC) back in January—but regulators declined to comply because the request did “not specify relevancy” and they said it risked violating privacy laws.
What sort of federal investigation is at hand is unclear. In general, the Trump administration has maintained a hands-off approach to state marijuana policies despite the rescinding of an Obama-era memo that generally directed prosecutors to avoid interference in licensed cannabis markets, and the president has asserted that he supports the rights of states to set their own laws regardless of federal prohibition.
The DOJ court filing listed three specific types of records DEA is seeking through the subpoena: “unredacted cannabis license(s), unredacted cannabis license application(s), and unredacted shipping manifest(s).” The department said it “seeks the documents for only six entities, which include three corporations and each corporation’s presumed owner; and it seeks the documents for a limited period of roughly two years, stated as ‘January 1, 2018 to Present.’”
The targeted cannabis businesses and owners are not named in documents that have been publicly released in the new case. Marijuana Moment reached out to DOJ and BCC for comment, but representatives were not immediately available.
Two months after DOJ’s initial request, the agency “spoke with BCC attorneys and attempted to assure them of the Subpoena’s validity and the necessity for compliance, but the BCC’s position did not change,” the filing states. “The United States sent a letter to the California Attorney General (and BCC Counsel) in May and provided an opportunity to respond prior to filing this action. The BCC stated that its position had not changed, and it has not complied with the Subpoena to date.”
The federal filing says that the federal government is “not aware of any court that has invalidated DEA’s use of administrative subpoenas to obtain material relevant to an investigation.”
It also rejects the state’s arguments about privacy concerns with sharing the requested materials.
“The United States is aware of no authority holding that a state entity may rely on state law-based privacy interests to refuse to respond to a federal subpoena, issued pursuant to federal law,” the filing states. “And the BCC has not presented any federal law that permits non-compliance with this federal subpoena.”
“In refusing to comply with the Subpoena, the BCC asserted that California state laws prevent disclosure of the requested documents. These state laws, however, either permit disclosure or do not apply. Yet even if a state law does purport to prevent production, the Supremacy Clause would preempt such law. None of the cited state laws prevent producing the documents to the DEA. But it also would not matter. That is because when state law does contradict federal law that requires production, federal law, not state law, controls.”
DOJ said DEA “meets the procedural requirements” for its subpoena request, which the government argues “is relevant and material to a DEA investigation, and is specific and narrow in accordance with the Fourth Amendment reasonableness requirement.”
“Not one reason permits the BCC to refuse to comply with the Subpoena. And even if a state law does purport to prevent compliance, the Supremacy Clause would preempt such law,” the filing states.
DOJ requested the court that it must compel the California agency to act within seven days.
BCC “has not complied with the Subpoena and informed the United States multiple times that it will not produce the requested documents,” the feds wrote. “The United States has made all efforts to obtain compliance short of litigation, but the BCC refuses to comply with the Subpoena.”
In the initial subpoena, a redacted version of which was released as an exhibit attached to the court petition, DEA had asked that California’s regulatory agency “not disclose the existence of this request or investigation for an indefinite time period. Any such disclosure could impede the criminal investigation being conducted and interfere with the enforcement of the Controlled Substances Act.”
BCC responded at the time in a letter that is also being publicly released that it “objects to the subpoena and will not produce the requested documents as the subpoena does not specify the relevancy of the subpoena and requests information that is confidential, protected from disclosure, and part of pending licensing application investigations.”
The department argued that DOJ’s request “fails to meet the appropriate standard of establishing that the records are in fact relevant to this particular investigation” and “seeks information that is confidential and not subject to disclosure.”
“In addition to the personal information provided to the Bureau, an applicant or licensee must provide procedures for the business and a diagram of the businesses premises,” it argued. “These operating procedures contain information concerning trade secrets or other proprietary information protected from disclosure. Additionally, both the procedures and diagram of the premises contain information that could impact the security of the business.”
This legal action comes weeks after a DOJ whistleblower accused Attorney General William Barr of directing investigations into 10 cannabis firm mergers because of the top prosecutor’s alleged personal animus for the industry.
That said, a top department official said in a letter to Congress that those actions are better understood as helping to ensure consumers have affordable access to products in a competitive cannabis market—a curious position for the federal government to take.
Read the federal court filings seeking California marijuana business information below: