On September 23, 2024, California Governor Gavin Newsom announced emergency regulations that, among other things, prohibited hemp products containing any “detectable” amount of THC. The next day, September 24, several small businesses operating in the California intoxicating hemp space and the U.S. Hemp Roundtable, Inc. (“USHRT”) trade organization (collectively, “the Plaintiffs”) filed a lawsuit in Los Angeles County court against the California Department of Public Health (“the Department”) and its director Tomás J. Aragón (collectively, “the Defendants”).

In their lawsuit, the Plaintiffs assert eight claims for relief and allege that the Department’s emergency restrictions violate several provisions of the U.S. Constitution. Ultimately, through the course of litigation, the Plaintiffs hope to nullify the emergency regulations and permanently stop the Defendants from enforcing them.

On October 3, 2024, the Plaintiffs filed a motion for a temporary restraining order (“TRO”) seeking to stop the Department and Aragón from enforcing the emergency regulations while the case is pending. Then, on October 11, the court denied the Plaintiff’s TRO motion.

In the wake of the emergency regulations, California’s Department of Alcoholic Beverage Control (“ABC”) has ramped up enforcement efforts. As of October 15, 2024, ABC had visited nearly 700 licensee locations and seized over 1,600 illegal hemp products.

Read on for more information regarding U.S. Hemp Roundtable et al. v. California Department of Public Health et al. and read the complaint here.

California’s Vague Definition of “Intoxicating Cannabinoids” Created a  Regulatory Gray Area for Hemp-Derived THC Products

In 2021, the California legislature passed AB 45, which, in part, adopted definitions of “industrial hemp products,” “hemp products,” and “THC or comparable cannabinoids.” However, it made no distinction between intoxicating and non-intoxicating cannabinoids. AB 45 also broadly addressed the manufacture, warehousing, distribution, offering, advertisement, and sale of hemp products and granted authority to the Department to promulgate the necessary rules and regulations to carry out AB 45.

The complaint alleges that, due to the broad nature of AB 45, several issues were not addressed in the original regulations. According to the Plaintiffs, rather than addressing these issues during the regular rulemaking process, the Department instead proclaimed that emergency circumstances existed and issued sweeping emergency regulations on September 13, 2024.

On September 23, 2024, the Office of Administrative Law adopted the Department’s emergency regulations, making the emergency regulations the state’s official hemp product regulations.

 The Hemp Product Businesses and Organizations Involved in the Lawsuit

The seven Plaintiffs challenging the state’s emergency regulations are:

• USHRT, a non-profit trade organization with members who manufacture, distribute, and sell hemp-derived THC beverage products across the county, including in California
• Cheech and Chong Global Holdings, a hemp-derived beverage company based in California that manufactures, distributes, and sells its beverages in the state and nationwide
• JuiceTiva Inc., a California-based company manufacturing, distributing, and selling a hemp juice powder food supplement containing hemp-derived THCA made from hemp cultivated in California
• Blaze Life LLC, a California-based co-manufacturer and co-packer of hemp-derived THC beverage products sold in California and nationally. The complaint states that Blaze Life has invested more than $20,000,000 in a California production facility to produce its products
• Boldt Runners Corporation, a Delaware corporation doing business in California that manufactures, distributes, and sells its tobacco-free and nicotine-free oral pouches that contain hemp-derived CBD and hemp-derived THC nationwide, including in California
• Lucky To Be Beverage Company, a Nevada corporation doing business in California that manufactures, distributes, and sells hemp-derived THC and other hemp-derived cannabinoid products nationwide, including in California
• SunFlora Inc., a Florida Corporation doing business in California that manufactures and sells ingestible gummies, tinctures, water solubles, and seltzer products containing hemp-derived THC and other hemp-derived cannabinoids in California and across other states

The Plaintiffs filed suit against the California Department of Public Health, the state agency tasked with enforcing the emergency regulations, and Tomás J. Aragón, in his official capacity as the Department’s director.

The Legal Argument Against the New California Ban on Hemp-Derived Products

The Plaintiff’s overarching legal challenge claims that the Department “has acted entirely outside the boundaries of California’s applicable law to adopt [the emergency regulations]” and that the “emergency regulations contradict express California and federal law.” Specifically, the complaint alleges that the text of the emergency regulations unlawfully changed the California Code of Regulations in three ways:

1. By adding an age restriction that has not been adopted by the state Health & Safety Code, which prohibits persons under 21 years of age from purchasing and consuming industrial hemp extract final form products and hemp final form food products intended for human consumption
2. By illegally and “significantly” expanding the definition of THC to include an additional 30 substances deemed “intoxicating,” including Delta-5 THC, Delta-6 THC, and Delta-6a THC, to name a few, and any metabolites, derivatives, salts, isomers, and any salt or acid of an isomer of the additional substances. The Plaintiffs allege that this was an unlawful action to take because AB 45 made no distinction between “intoxicating” and “nonintoxicating” substances
3. By adding a new provision that created a serving size and standard for “hemp” in contradiction of the Health & Safety Code for all hemp final form food products in California intended for human consumption. Namely, the emergency regulations provide that hemp final form food products intended for human consumption cannot contain any “detectable amount of total THC” when AB 45 adopted the standard of the 2018 Farm Bill (no more than 0.3% THC on a dry weight basis)

In their complaint, the Plaintiffs allege that prior legislative efforts to enact an age restriction, THC limit, or prohibition on synthetic cannabinoids were unsuccessful during both the 2023 and 2024 legislative sessions. To highlight their point that the Department acted outside the scope of its authority with the emergency regulations, the Plaintiffs argue that Governor Newsom’s office already proposed a prohibition on final form consumable hemp products with a “detectable” level of THC as an amendment to the 2024 bill.

The Plaintiffs maintain that they do not oppose “fair and reasonable regulations” for these products so long as such regulations “comport with California’s regular rulemaking process.” However, the Plaintiffs allege that the emergency regulations violate the APA because the Department had been aware of the issues addressed by the emergency regulations long before enacting them and had failed to act during nonemergency rulemaking processes.

The Plaintiffs’ Claims for Relief

The Plaintiffs are seeking the following relief from the California Superior Court:

1. A declaratory judgment that the Department and Aragón promulgated the emergency regulations in violation of the APA and state Health & Safety Code and that the Department exceeded its statutory authority in promulgating the emergency regulations in violation of the state and federal constitutions
2. A declaratory judgment stating that the emergency regulations are preempted by federal law because they expanded the definition of “THC” in contradiction of the 2018 Farm Bill’s definition of “hemp” and that this violates the U.S. Constitution’s Supremacy Clause and general conflicts of laws principles
3. A writ of traditional mandamus directing the Department and Aragón to rescind or set aside the emergency regulations because they are invalid
4. A determination that the Department and Aragón violated the California APA for failing to find that an emergency existed before enacting the emergency regulations
5.  A determination that the Department and Aragón committed a regulatory taking because the emergency regulations “damaged Plaintiffs’ property . . . and otherwise depriv[ed] Plaintiffs of all, or substantially all, economically viable uses of their businesses”
6. A declaratory judgment that the Department and Aragón violated the U.S. Constitution’s Commerce Clause because the emergency regulations do not exempt products manufactured in California but are then sold into interstate commerce for exclusive sale in other states from its criminalization of final form food products with detectable amounts of total THC
7. A determination that the emergency regulations violate the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution because they “threaten ruin for Plaintiffs,” given that the Plaintiffs may have to shut down their businesses entirely to comply with the law
8. A determination that the emergency regulations violate the Due Process Clause of the Fifth Amendment to the U.S. Constitution because the definitions of “detectable” and “limit of detection” are unconstitutionally vague and fail to give a fair warning of what conduct is exactly prohibited

Additionally, the Plaintiffs seek an award of attorney fees and costs associated with the litigation.

Current Legal Status of Intoxicating Hemp Products in California

As of October 14, 2024, the emergency regulations remain in effect due to the court’s denial of the Plaintiffs’ TRO request. This means that hemp food, beverages, and dietary products containing any detectable level of hemp-derived THC are banned in the state, that consumers must be at least 21 years old to purchase any hemp products, and hemp products may contain no more than five servings per package.

What’s Next?

The case is scheduled for trial in late November 2024. Stay tuned.