/>iSeven years ago, the California Secretary of State announced the debut of "Cannabizfile", a portal "for all information relevant to cannabis-related business and trademark filings with the Secretary of State". According to the Secretary of State's website:
The Secretary of State’s office accepts filings submitted for cannabis-related business entities currently lawfully engaged in medical and/or adult-use cannabis activities as well as those that are forming for the purpose of engaging in these activities in the future after seeking the appropriate licenses. Filings are accepted for domestic corporations (e.g. general stock corporations, nonprofit mutual benefit corporations, cannabis cooperative associations) as well as domestic other business entities (e.g. limited liability companies and limited partnerships). (emphasis added)
As I noted yesterday, the California Court of Appeal recently declared that "cannabis is illegal in California because federal law says so". JCCrandall, LLC v. Cnty. of Santa Barbara, N2024 WL 4599704 (Cal. Ct. App. Oct. 29, 2024). If Cannabis is "illegal in California", the question naturally arises how a cannabis-related entity may be "lawfully engaged" in business. One might also question whether a cannabis-related business is a purpose permitted by California Corporations Code Section 202(b)(1)(A) ("The purpose of the corporation is to engage in any lawful act or activity . . .").
It might be argued that California Civil Code Section 1550.5(b) answers these questions by providing:
Notwithstanding any law, including, but not limited to, Sections 1550, 1667, and 1668 and federal law, commercial activity relating to medicinal cannabis or adult-use cannabis conducted in compliance with California law and any applicable local standards, requirements, and regulations shall be deemed to be all of the following:
(1) A lawful object of a contract.
(2) Not contrary to, an express provision of law, any policy of express law, or good morals.
(3) Not against public policy.
However, the Court of Appeal in JCCrandall, LLC found that federal law preempts this statute:
The subdivision defies the Supremacy Clause. No matter how much California voters and the Legislature might try, cannabis cultivation and transportation are illegal in California as long as it remains illegal under federal law.
In light of the foregoing, the Secretary of State may want to consider the possible application of 18 U.S.C. § 2(a) ("Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.").
