The Drug Enforcement Administration (DEA) and California’s Bureau of Cannabis Control (BCC) are in the news because the BCC is refusing to honor a subpoena issued by the DEA. The DEA has demanded that the BCC hand over various documents for six entities covering a two-year period from 2018 to 2020. The BCC has refused to turn over the documents, and the DEA has asked a federal court to order the BCC to hand them over.
On the surface, this is a dispute over whether the DEA has properly subpoenaed the requested documents, and whether the BCC is required to comply. However, lurking underneath these legalities appears to be some distrust by the BCC of the DEA’s motivations, and a larger disagreement between states and the feds over how to handle and manage the nascent legal cannabis industry.
In November of 2019, and then again in January of 2020, the DEA made a legal demand for documents that the BCC has in its possession. The DEA demanded that the BCC turn over records that include “unredacted cannabis license(s), unredacted cannabis license application(s), and unredacted shipping manifest(s)” for three business entities and three individuals for the period from January 1, 2018 to January 9, 2020. The subpoena stated that the DEA was investigating “violations of the Controlled Substances Act” and that the documents were needed for an ongoing “legitimate law enforcement inquiry.”
The BCC refused to comply. In a letter sent from the BCC to the DEA in late January, the BCC said that the federal agency failed to specify how the documents were related to a DEA investigation. The BCC also stated that there were several laws in place to protect the privacy of Californians, and turning over the documents would violate California law. The two agencies spent several months communicating about their respective arguments, but neither would budge. Ultimately, when it became clear that administrative channels would not facilitate a satisfactory response to their demand, the DEA sued in the United States District Court for the Southern District of California, asking a Federal Judge to order the BCC to comply.
The Legal Arguments
The DEA is a federal law enforcement agency that regularly conducts criminal investigations. The law gives the DEA broad powers to demand that people, companies, and government agencies provide them with documents related to their investigation. The DEA must explain why those documents are necessary, and in most instances, the documents must then be handed over.
What is less clear is how much explanation must be given. According to the DEA in the court documents it filed, the law is not especially restraining, so their statement that the documents are “relevant and material to a legitimate law enforcement inquiry” is sufficient.
On the other hand, according to the documents filed by the BCC, merely saying that the documents are related to an ongoing investigation is not enough. The California agency’s filing asserts that without specific details as to how the documents will help the DEA with their investigation, or a declaration from an agent working on the case, the BCC is not required to comply. 
Under the Surface
These legal arguments are only the tip of the proverbial iceberg. The BCC may believe that the subpoena is deficient, but they also may have a distrust for the DEA and its motives for making such a demand. This likely stems from the fact that the federal enforcement agencies under the Drumpf administration do not have a strong track record of acting favorably toward the state-legal cannabis industry.
When Drumpf was campaigning, he famously said that he would favor a hands-off approach, opting to leave cannabis issues up to the states. However, in the eyes of the cannabis industry and legalization advocates, his administration has been anything but hands-off. Under President Obama, the DEA announced the expansion of the cultivation-for-research-purposes program. Then President Drumpf took over, and Attorney General Jeff Sessions secretly delayed the program, by simply failing to act on the 30+ applications that the DEA received from cultivators and manufacturers seeking to increase the supply of research-grade cannabis available for medical cannabis researchers. The DEA created a legal memo that many critics found to have questionable reasoning to support their actions, and kept the memo secret for years until FOIA lawsuits got it released earlier this year.
Sessions also rescinded the Cole memorandum, a 2013 memo that directed federal prosecutors to not focus federal resources on state-legal medical marijuana operations. Sessions stated that marijuana was illegal and carried significant penalties, and there was no reason to give it any kind of special treatment.
Drumpf has repeatedly stated his disapproval for the Rohrabacher-Farr amendment, a part of the annual spending bill that prohibits the federal government from using funds to interfere with the implementation of state medical cannabis laws. Congress sends the president a completed and passed spending bill every year, and Drumpf has repeatedly notated that he will “treat this provision consistently with my constitutional responsibility to take care that the laws be faithfully executed.”
Attorney General William Barr has also come under fire recently, as DOJ whistleblower John Elias testified before Congress about Barr’s decision to continue anti-trust investigations into cannabis industry mergers. Elias testified that there were no legitimate anti-trust issues with the mergers, yet Barr pushed his agency to open large investigations and spend significant resources on looking into these mergers. Elias testified that these mergers were motivated by personal dislike of the industry by Barr himself, and not by any legitimate anti-trust concerns.
The BCC’s concerns
One possible explanation for the BCC’s unease may be that all of these actions by the federal government have given the BCC reason to doubt the DEA’s stated reasoning. The BCC may be concerned that the subpoena may be about more than the just the illegal activity of a few license holders, and that the DEA may have more sinister goals in mind, such as interfering with the California legal market in a serious way.
The DEA has stated that its investigation concerns “violations of the Controlled Substances Act.” The Controlled Substances Act (CSA) makes marijuana cultivation, distribution, transportation, sale and consumption all illegal under federal law, with no exceptions for medical use. This being the case, the BCC’s entire operations are technically a violation of the CSA. It is possible that the DEA may try to inhibit the BCC’s operations in a major way by using these documents to conclusively prove that the BCC is issuing licenses for “drug trafficking operations”.
By the same token, individuals at the BCC may be (rightfully) concerned that by turning over this information to the DEA, they may open themselves up to criminal or civil liability. Whether the California license-holders are following the rules or not, issuing them licenses in violation of the CSA likely could enable the federal government to pierce the “qualified immunity” that is otherwise extended to government officials. While government officials are typically immune from criminal prosecution for actions taken within the scope of their official capacities, there are exceptions for intentionally wrongful acts, clear violations of law, criminal acts, and things done beyond the scope of their duties. Although it has not been tested in any states where medical or adult-use cannabis has been legalized, the DEA in theory could try to press charges against the creators of the BCC’s license framework, arguing that federal law clearly prohibited their conduct, and that they are not immune from prosecution.
Even the DEA’s attempts to get involved with the California market may implicate federalism concerns. To the extent that California has a full law enforcement arm that is tasked with ensuring that license-holders in California are following the rules, the BCC may feel that the DEA is overstepping its boundaries.
Surely the DEA could use all of its resources toward clamping down on the cannabis black market, and leave the BCC and its licensees alone. By some estimates, the illegal market in California is 3 times larger than the legal one. From cartel grows on federal land, to interstate shipments to states with no legal marketplace, there are plenty of enforcement actions that the DEA could choose to take before it turns its sights on the BCC.
These days, the licensing costs, due diligence requirements, and prohibitive tax rates already make a legal business hard to operate successfully. For companies to learn that their supposedly private license applications might get turned over to the DEA over the issuance of a simple, vague subpoena would mean adding an unnecessary source of fear that will further chill companies from coming out of the shadows. This enforcement of the subpoena as worded could set a dangerous precedent, and the BCC seems to be protecting the interests of its license holders and the future of its licensing program.
 The DEA has added a bit more specificity to their request, asserting that it is inquiring about the licensees for possible importation/transportation of a controlled substance from Mexico. It remains to be seen whether the BCC will find that this specificity meets the required threshhold, or whether it alleviates any of their other concerns.