United States v. The Bureau of Cannabis Control ( 2020 )

1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 SOUTHERN DISTRICT OF CALIFORNIA 11 12 UNITED STATES OF AMERICA, Case No.: 20cv1375-BEN-LL 13 Petitioner, ORDER GRANTING PETITION TO 14 v. ENFORCE UNITED STATES DRUG ENFORCEMENT 15 BUREAU OF CANNABIS CONTROL, ADMINISTRATION a State of California agency, 16 ADMINISTRATIVE SUBPOENA Respondent. 17 [ECF No. 1] 18 19 Currently before the Court is Petitioner’s petition to enforce its administrative 20 subpoena served on Respondent. ECF No. 1-2 (“Petition” or “Pet.”). Respondent filed an 21 opposition to the petition [ECF No. 4 (“Opposition” or “Oppo.”)], and Petitioner filed a 22 reply [ECF No. 5 (“Reply”)]. Having reviewed the briefs, the Court GRANTS the Petition 23 for the reasons set forth below. 24 I. FACTUAL BACKGROUND 25 Respondent is the Bureau of Cannabis Control (“Bureau”), a State of California 26 agency that regulates commercial cannabis licenses for medical and adult-use in California. 27 ECF No. 1. at 2; Oppo. at 2. When a commercial cannabis business applies for a provisional 28 or annual license, it is required to provide information to the Bureau such as business 1 ownership interest(s), financial interest(s), personal identifying information (e.g., date of 2 birth and social security number), financial information including banking information, 3 business operating procedures, and state and federal criminal arrest and conviction history. 4 Oppo. at 3. To ensure that commercial cannabis activity is conducted between license 5 holders, the “movement of cannabis and cannabis products throughout the distribution 6 chain” is reported to the state through a track and trace program. Id. (quoting Cal. Bus. & 7 Prof. Code § 26067). 8 In January 2020, the Drug Enforcement Administration (“DEA”) issued and served 9 an administrative subpoena on Respondent. Pet. at 1–2; Oppo. at 4. The administrative 10 subpoena demands that the Bureau produce specific documents for three business entities 11 and three individuals for the period from January 1, 2018 to January 9, 2020 pursuant to 12 an investigation of violations of the Controlled Substances Act (21 U.S.C. § 801, et seq.). 13 ECF No. 1-3 at 3; Oppo. at 4; Pet. at 1–2. Specifically, the substantive part of the 14 administrative subpoena states the following: 15 Pursuant to an investigation of violations of 21 U.S.C. 801 et seq., you are to provide all documents including unredacted cannabis license(s), unredacted 16 cannabis license application(s), and unredacted shipping manifest(s) for the 17 below California Bureau of Cannabis Control licensees from January 1, 2018 to Present: 18 [. . .] 19 The information sought in this subpoena is relevant and material to a legitimate law enforcement inquiry; the request is specific and limited to the 20 extent reasonably necessary for the purpose of this request; and de-identified 21 information could not reasonably be used. [. . .] 22 Please do not disclose the existence of this request or investigation for an 23 indefinite time period. Any such disclosure could impede the criminal investigation being conducted and interfere with the enforcement of the 24 Controlled Substances Act. 25 ECF No. 1-3 at 3. 26 The Bureau responded that it objected to the administrative subpoena and would not 27 produce the requested documents because “the subpoena does not specify the relevancy of 28 the subpoena and requests information that is confidential, protected from disclosure, and 1 part of pending licensing application investigations.” ECF No. 1-3 at 5: Pet. at 2; Oppo. at 2 4. The United States spoke with counsel for the Bureau and sent a letter to the California 3 Attorney General (and Bureau counsel) to “negotiate compliance” and “provided further 4 information to [the Bureau] regarding legal authority for compliance and law enforcement 5 relevance of the requested information.” Pet. at 2. When the Bureau did not change its 6 position, the United States filed the instant petition on July 20, 2020. Id. at 1. 7 II. LEGAL STANDARD 8 In determining whether to compel compliance with an administrative subpoena, the 9 scope of judicial review is “quite narrow.” United States v. Golden Valley Elec. Ass'n, 689 10 F.3d 1108, 1113 (9th Cir. 2012) (citing E.E.O.C. v. Children's Hosp. Med. Ctr. of N. 11 California, 719 F.2d 1426, 1428 (9th Cir. 1983) (en banc), overruled on other grounds as 12 recognized in Prudential Ins. Co. v. Lai, 42 F.3d 1299, 1303 (9th Cir.1994)). A court must 13 determine “(1) whether Congress has granted the authority to investigate; (2) whether 14 procedural requirements have been followed; and (3) whether the evidence is relevant and 15 material to the investigation.” Id. (quoting E.E.O.C. v. Children's Hosp. Med. Ctr. of N. 16 California, 719 F.2d at 1428). “Even if these factors are shown by an agency, the subpoena 17 will not be enforced if it is too indefinite or broad.” Peters v. United States, 853 F.2d 692, 18 699 (9th Cir. 1988). 19 III. DISCUSSION 20 There is no dispute here regarding whether Congress has granted the authority to 21 investigate or whether procedural requirements have been followed. The Bureau concedes 22 that in this case, the first two elements of the Court’s inquiry have been met and only the 23 third is at issue, arguing that “the United States has failed to show that the subpoenaed 24 records are relevant to any investigation.” Oppo. at 5. The Bureau argues that relevance 25 can be shown “by the affidavit of an agent conducting the investigation, describing the 26 nature of the investigation, and explaining how the subpoenaed records are relevant to the 27 investigation.” Id. at 6. The Bureau contends that a facial reading of the subpoena does not 28 satisfy the relevancy requirement because it only shows that there is an ongoing 1 investigation authorized under the Controlled Substances Act. Id. at 7. The Bureau further 2 argues that it is unable to determine if the subpoenaed documents are too indefinite or broad 3 because the subpoena fails to state how the documents are relevant to the DEA’s 4 investigation.1 Id. at 7–8. 5 The United States argues that the relevancy requirement has been met because the 6 properly authorized and certified subpoena states that “[t]he information sought . . . is 7 relevant and material to a legitimate law enforcement inquiry” and that there is a “criminal 8 investigation being conducted.” Reply at 3 (quoting ECF No. 1-3 at 3); Pet. at 4–5. It 9 contends that nothing more is required to show that the documents requested are relevant 10 to an ongoing federal investigation. Reply at 3–4. The United States adds that “in an effort 11 to work cooperatively with the [Bureau] before issuing the Subpoena” the DEA did in fact 12 explain in an email to the Bureau in August 2019 that it was seeking the documents to 13 investigate “possible importation/transportation of a controlled substance (marijuana 14 “crude oil”) from Mexico” by specific licensees. Id. at 8; see also ECF No. 5-1 at 3–4. The 15 United States also argues that the subpoena is not too indefinite or broad because “the 16 narrowly-tailored Subpoena is specific as to parties (six), documents (three types), and 17 timeframe (two years).” Reply at 6; Pet. at 5. 18 “Relevancy is determined in terms of the investigation rather than in terms of 19 evidentiary relevance.” United States v. Golden Valley Elec. Ass'n, 689 F.3d at 1113–14 20 (quoting E.E.O.C. v. Fed. Exp. Corp., 558 F.3d 842, 854 (9th Cir. 2009)). The relevance 21 limitation is “not especially constraining.” E.E.O.C. v. Shell Oil Co., 466 U.S. 54, 68 22 (1984); United States v. Golden Valley Elec. Ass'n, 689 F.3d at 1113. A court “must 23 enforce administrative subpoenas unless the evidence sought by the subpoena is plainly 24 25 1 The Bureau states that the objections it initially made to the requested information as 26 “confidential, protected from disclosure, and part of pending licensing application 27 investigations” were made in its role as an administrative agency of the State and in order to preserve them for review. Oppo. at 8–9. The Bureau does not present arguments on those 28 1 incompetent or irrelevant to any lawful purpose of the agency.” Id. at 1113–14 (quoting 2 E.E.O.C. v. Karuk Tribe Hous. Auth., 260 F.3d 1071, 1076 (9th Cir. 2001)). On the other 3 hand, “Congress did not eliminate the relevance requirement” and courts must be careful 4 not to construe the relevancy requirement of an administrative subpoena “in a fashion that 5 renders that requirement a nullity.” See E.E.O.C. v. Shell Oil Co., 466 U.S. 54, 69 (1984). 6 The Court finds that the United States has sufficiently established the relevancy of 7 the subpoena to meet the “not especially constraining” standard. In making this 8 determination, the Court finds that the subpoena by itself does not establish relevancy 9 because it states only a bare and conclusory statement that the material being sought is 10 “relevant and material to a legitimate law enforcement inquiry” in connection with a 11 criminal investigation. This satisfies part of the procedural requirement of the analysis, but 12 not relevancy. See United States v. Golden Valley Elec. Ass'n, 689 F.3d at 1114 (finding 13 procedural requirements met when DEA employees found the records being sought to be 14 relevant or material to the investigation prior to issuing a subpoena, which was signed by 15 a DEA supervisor and served by a DEA agent). To accept a statement that the documents 16 being sought are relevant to a criminal investigation as meeting the relevancy requirement 17 is to nullify the requirement completely, which the Supreme Court has warned against. See 18 E.E.O.C. v. Shell Oil Co., 466 U.S. at 69, 72 (finding that permitting a mere allegation of 19 a violation with no other details “would render nugatory the statutory limitation of the 20 Commission’s investigative authority to materials ‘relevant’ to a charge”). 21 In this case, the DEA also communicated to the Bureau that it was seeking 22 documents as part of a criminal investigation into the possible importation or transportation 23 of marijuana “crude oil” from Mexico by specific California Bureau of Cannabis Control 24 licensees. The Court finds that the records sought in the subpoena—"all documents 25 including unredacted cannabis license(s), unredacted cannabis license application(s), and 26 unredacted shipping manifest(s)”—are relevant to an investigation into importation or 27 transportation of marijuana “crude oil” from Mexico by specific licensees. The Court thus 28 finds that the subpoena and the communication between the agencies together are sufficient 1 to establish the relevance of the requested records to the investigation. See United States 2 v. Golden Valley Elec. Ass'n, 689 F.3d at 1114 (“The information subpoenaed need only 3 be relevant to an agency investigation.” (citing E.E.O.C. v. Fed. Exp. Corp., 558 F.3d 842, 4 854 (9th Cir. 2009))); United States v. California, No. 3:18-CV-2868-L-MDD, 2019 WL 5 2498312, at *2 (S.D. Cal. May 9, 2019) (“The instant subpoena was served on California 6 DOJ in June 2018, and the relevance to the data sought was plainly identified in the 7 communications between the agencies before the petition was filed.”). 8 The Court does not find that the subpoena is too indefinite or broad. It requests three 9 types of documents—unredacted cannabis license(s), unredacted cannabis license 10 application(s), and unredacted shipping manifest(s)—from three business entities and three 11 individuals for a time period of two years. The Court finds the request to be sufficiently 12 narrow and specific. See United States v. Golden Valley Elec. Ass'n, 689 F.3d at 1115 13 (finding a subpoena requesting records related to electricity consumption at three customer 14 addresses for a fourteen-month period to be narrow and specific). 15 The Bureau mentions briefly in its Opposition that if the Court is inclined to grant 16 the petition, “it should ensure that the subpoenaed records are collected only as needed for 17 purposes consistent with the [Controlled Substances Act] and that the records will be 18 disseminated only as necessary for those purposes.” Oppo. at 5. The Court agrees with the 19 United States that existing law already limits the DEA’s use of the requested records and 20 privacy rights are protected. See Reply at 7 n.5; see also United States v. California, 2019 21 WL 2498312, at *3 (“Petitioner has demonstrated that the Privacy Act, see 5 U.S.C. § 552a, 22 restricts its use of [the subpoenaed] records. To the extent any privacy protections under 23 California conflict with the Controlled Substances Act (“CSA”), the CSA expressly 24 preempts state law. See 21 U.S.C. § 903.”). Accordingly, the Court declines to impose 25 additional restrictions. 26 IV. CONCLUSION 27 For the reasons set forth above, the Court finds that the DEA’s subpoena sought 28 information relevant to an investigation into the transportation or importation of a 1 ||controlled substance and was not overly broad or indefinite. Accordingly, the Court 2 || GRANTS the Petition of the United States to enforce the administrative subpoena served 3 || by the DEA upon the State of California Bureau of Cannabis Control. See United States v. 4 ||Golden Valley Elec. Ass'n, 689 F.3d at 1113-14 (“We ‘must enforce administrative 5 ||subpoenas unless the evidence sought by the subpoena is plainly incompetent or irrelevant 6 any lawful purpose of the agency.’” (quoting E.E.O.C. v. Karuk Tribe Hous. Auth., 260 7 || F.3d 1071, 1076 (9th Cir. 2001))). 8 IT IS SO ORDERED. 9 ||Dated: August 31, 2020 XO 10 DEF 11 Honorable Linda Lopez 1D United States Magistrate Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28