California AG files forceful response in fight against DEA over subpoena for cannabis licensees’ confidential information from state marijuana regulators.
This fight has the industry on the edge of its chair. It involves the interplay and nebulous no-man’s-land between state and federal laws regarding cannabis.
The US Attorney’s office in Southern California is representing the DEA in a subpoena enforcement kerfuffle against the State of California and its Bureau of Cannabis Control that arose after the DEA sent a subpoena demanding the production of specific documents (licenses,license applications, and shipping manifests), for six adult-use cannabis licensed or related entities from the state agency responsible for licensing and regulating the medical and adult-use cannabis industry in California. The state marijuana regulator has this information as it was collected as part of the extensive licensing process and as part of the ongoing records reporting requirements for cannabis enterprises.
The Bureau of Cannabis Control (the State of California) resists the subpoena. In a filing yesterday (reply due on August 5 with ruling shortly thereafter which will certainly be appealed) the California Attorney General’s Office stands by the initial response from the state regulators that the Federal Government hasn’t shown that the requested materials are relevant to the DEA’s investigation/probe.
You can read the brief filed on behalf of the California Bureau of Cannabis Control here. It argues that the DEA needs to show how the material it seeks relates to the DEA’s inquiry about cannabis sales in southern California and also doesn’t specifically detail the breadth/scope of the investigation. In the initial response (attached to the DEA’s request to enforce the subpoena here) the cannabis regulator asserted additionally that the records were protected under state privacy statutes. Here’s the full text of that portion of the subpoena response that the cannabis regulator sent back before this became a federal case with the DEA looking to enforce the matter against the state:
Additionally, the subpoena seeks information that is confidential and not subject to disclosure. Application materials contain private personal identifying information, such as social security numbers, dates of birth, personal contact information, bank account details, loan and investment disclosures, revenue information, insurance information, vehicle information, and criminal history information. This information is protected by the right to privacy and California Civil Code section 1798.24. A California state agency may not disclose any personal information in a manner that would link the information disclosed to the individual to whom it pertains. In addition to state law protections, federal law limits disclosure of taxpayer return information, including taxpayer identifying number, by a state officer or employee. (26 U.S.C. §6103; Cal. Gov. Code § 6254(n).)
The Bureau also receives criminal history information as part of its licensing process, which is governed by California Penal Code section 11142. This section provides that any person authorized by law to receive state summary of criminal history information who furnishes that information to anyone not authorized by law to receive it is guilty of a misdemeanor. The application information is utilized for the Bureau to investigate whether the person and premises location are suitable for licensure; thus, are part of pending investigations.
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. 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. (Cal. Gov. Code, § 6254, subds. (f) and (k) [incorporating Evid. Code, § 1060 protections of trade secrets].)
Further, shipping manifests for cannabis licensees are confidential pursuant to California Business and Professions Code section 26067, subdivision (b)(6). These shipping manifests are part of the track and trace program used to follow the movement of cannabis goods through the regulated supply chain; thus, subject to the confidentiality provisions for information maintained as part of that system.
This case has all the hallmarks of something that will shape up to be an important delineation and discussion of the rights and obligations vis-a-vis state cannabis regulators and federal agencies for as long as marijuana remains a controlled substance. Is pursuing a federal drug investigation for an activity lawful under state statutes as easy as grabbing the state records from the state regulators? Can state regulators charged with overseeing federally illicit activity assert the protections of both state law and federal precedent regarding inquiries into lawfully regulated state activities?
For the benefit of the cannabis industry one hopes not only that the answers come out in favor of the state here, but also that a sound precedent develops – especially for cannabis entities engaged in activities in states with regulators or attorneys general that may be more willing to cooperate and that would not, for political or ideological reasons, put up a fight over disclosing this type of information. States interested in protecting the confidentially supplied records and data regarding their cannabis operators should consider strong statutory prohibitions against the regulators providing this information to counteract situations where the decision to fight these types of subpoenas is presently at the discretion of state agencies or AG’s offices.