California Appeals Ruling Finding State Marijuana Track-and-Trace System Fails to Comply With Law
- California’s Department of Cannabis Control (DCC) is appealing a court ruling that found the state’s marijuana track-and-trace system fails to automatically flag irregular transactions as required by law.
- The dispute centers on California Business and Professions Code Section 26067, which mandates an electronic database designed to detect and flag irregularities for investigation, a requirement the court found unmet by the current system.
- HNHPC Inc., a licensed marijuana operator, successfully challenged the system after a multi-year legal battle, with the Orange County Superior Court ordering DCC to develop objective criteria for identifying irregular transactions.
- The case has gone through multiple levels of the judiciary, including an appellate court that reversed an earlier dismissal, and DCC’s latest appeal will prolong the resolution of the legal dispute over compliance with state tracking laws.
California’s Department of Cannabis Control (DCC) is asking an appeals court to overturn a ruling requiring changes to the state’s marijuana track-and-trace system after a judge found it does not flag irregular transactions as required by law.
The DCC filed a notice of appeal Friday, September 25, challenging a final judgment entered in August in HNHPC Inc. v. Department of Cannabis Control. The case concerns California’s statewide system for tracking marijuana and marijuana products through the licensed supply chain.
Orange County Superior Court Judge Lee Gabriel entered final judgment August 4 in favor of HNHPC, a licensed marijuana operator that has been challenging the state’s tracking system for nearly five years. The ruling followed a December decision granting HNHPC’s petition for a writ of mandate.
At issue is California Business and Professions Code Section 26067, which requires the Department of Cannabis Control to maintain an electronic track-and-trace database. The statute states that “the database shall be designed to flag irregularities for the department to investigate.”
The court found the state’s existing system does not satisfy that requirement. According to the judgment, the system relies on analysts reviewing large amounts of transaction data rather than automatically identifying irregular activity based on established criteria. The court ordered the department to bring the system into compliance, including by developing objective criteria for determining what constitutes an irregular transaction.
The dispute previously reached the California Court of Appeal in 2023 after a lower court initially dismissed HNHPC’s lawsuit. The Fourth District Court of Appeal reversed that dismissal, finding HNHPC had adequately alleged that the department failed to perform a mandatory statutory duty.
In that decision, the appellate court emphasized that simply contracting for a tracking system was not enough. State law requires the department to establish a database that actually flags irregularities, the court said. The 2023 ruling returned the case to the trial court without deciding whether the department was ultimately violating the law.
Following further proceedings, Gabriel ultimately ruled in HNHPC’s favor and entered the August judgment requiring corrective action.
The Department of Cannabis Control’s new appeal means that judgment will now face another round of appellate review rather than ending the long-running dispute.
California requires licensed marijuana businesses to report inventory and transactions through its statewide track-and-trace system, commonly known as Metrc. The system is intended to follow marijuana from cultivation through manufacturing, distribution and retail sale while helping regulators identify diversion and other potentially unlawful activity.