Lawsuit Withdrawl – CCA’s
Lawsuit Withdrawl – CCA’s – Cannabis Cooperative Associations Accomplish What The CGA Litigation Never Would Have
The lawsuit filed by the California Growers Association [“CGA”] against CDFA  approximately a year ago was withdrawn this week. [See California marijuana growers association drops suit over loophole for mega-farms]
“Former CGA Executive Director Hezekiah Allen told Marijuana Business Daily last year that he was “torn” about the lawsuit’s chances, however, and said, “I don’t want to fight with growers.”
The case, which never gained much traction in court, focused on a sudden change in course by the
CDFA in late 2017 when the agency decided to allow cannabis companies to obtain unlimited numbers of “small” MJ grow permits. Such licenses have a maximum capacity of 10,000 square feet – essentially opening the door to immense cannabis grows.
That allowance, the lawsuit argued, was contrary to Proposition 64, approved by California voters in 2016, which prohibited any “large” cultivation licenses from being issued by the state until 2023.
The limitation on the number of medium cultivator licenses, but not on small cultivator licenses, was included in the final CDFA Regulations. We believe there is far more to the dropping of this lawsuit than is immediately apparent.
The Cannabis Cooperative Association [“CCA”] provisions contained in Stats. 2017, Ch. 27., Sec. 107 [SB 94] added provisions which permit CCAs to enter into arrangements with other CCA’s covering a wide range of enumerated business activities. The provisions added to the Business and Professions Code by SB94 specifically authorize CCAs to utilize the resources of other CCAs and to pool resources with other CCAs. SB 94 further authorizes CCAs equity investments with and in other CCAs and to invest in and own other CCAs.
Based on the understanding of the usefulness of a CCA structure for conducting business in California’s cannabis industry [See Licensing a Cannabis Cooperative Association], we believe Mr. Allen has accomplished far more through SB94 than could possibly have been accomplished through this lawsuit. We surmise that Mr. Allen and his Emerald Grown venture have concluded they can compete with any conventionally structured cannabis cultivator in California using a CCA structure. The CCA structure is a far more elegant solution than the outcome of prevailing in the litigation. Mr. Allen should be recognized for giving California’s small cannabis growers a business structure that provides a platform that allows them to be competitive.
 California Growers Association [“CGA”] vs. California Dept of Food and Agriculture [“CDFA”], January 23, 2018, Case# 34-2018-00225874
§ 8209. Medium Cultivation License Limits. A person shall be limited to one (1) Medium Outdoor, or one (1) Medium Indoor, or one (1) Medium Mixed‐Light A-License. This section shall remain in effect until January 1, 2023
 “Sec. 26227.9.
(a) “Any association may, upon resolution adopted by its board of directors, enter into all necessary and proper contracts and agreements and make all necessary and proper stipulations and arrangements with another cannabis cooperative or association that is formed in this state for the cannabis cooperative and more economical carrying on of its business or any part of its business.
(b) Any two or more associations may, by agreement between them, unite in employing and using, or may separately employ and use, the same personnel, methods, means, and agencies for carrying on and conducting their respective business.”
“Sec. 26229.2. – Any association may become a member or stockholder of any other association.”