Apothio, LLC, v. Kern Cnty.

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APOTHIO, LLC, Plaintiff, v. KERN COUNTY, KERN COUNTY SHERIFF'S OFFICE, CALIFORNIA DEPARTMENT OF FISH AND WILDLIFE, DONNY YOUNGBLOOD, JOSHUA NICHOLSON, CHARLTON H. BONHAM, ANDREW HALVERSON, et al., Defendants.

No. 1:20-cv-00522-JLT-CDB

United States District Court, E.D. California

August 20, 2024

ORDER GRANTING IN PART AND DENYING IN PART STATE DEFENDANTS' MOTION TO DISMISS; GRANTING IN PART AND DENYING IN PART COUNTY DEFENDANTS' MOTION TO DISMISS; GRANTING PLAINTIFF'S MOTION FOR LEAVE TO FILE SUR-REPLY; DENYING PLAINTIFF FURTHER LEAVE TO AMEND THE COMPLAINT; AND DENYING AS MOOT PLAINTIFF'S MOTION FOR RECONSIDERATION OF DISCOVERY STAY

(DOCS. 94, 95, 115, 128)

This case arises out of the destruction of approximately 500 acres of Apothio, LLC's industrial hemp plants cultivated in Kern County. This is the second round of motions to dismiss filed by the Defendants. For the reasons set forth below, the motions to dismiss, (Docs. 94, 95), are GRANTED IN PART AND DENIED IN PART, and Plaintiff's Motion for Leave to File a Sur-Reply, (Doc. 115), is GRANTED. The Court DENIES Plaintiff further leave to amend its Complaint. Accordingly, Plaintiff's Motion for Reconsideration of Discovery Stay, (Doc. 128), is DENIED AS MOOT.

I. LEGAL FRAMEWORK: HEMP LAW

The parties' briefing illustrates their continued disputes regarding the applicability of federal and state cannabis law, as it existed at the time Apothio's crops were destroyed in October 2019. (See, e.g., Doc. 94 at 9, 10-11 (“Apothio conflates California and federal [cannabis] law.”); Doc. 95 at 14, 16; Opp'n, Doc. 103 at 16.) For this reason, the Court will once more recite the legal framework of state and federal cannabis law below. (See also First Order, Doc. 86 at 2-6, also located at Apothio, LLC v. Kern Cnty., 599 F.Supp.3d 983, 991-995 (E.D. Cal. 2022).)

A. Federal Cannabis Law

“In 1970, Congress passed the Controlled Substances Act (‘CSA'), which, among other things, made it unlawful to ‘manufacture, distribute, or dispense' controlled substances,” including categorizing marijuana as a “Schedule I” drug, and making its possession, manufacture, and use a criminal offense. Peridot Tree, Inc. v. City of Sacramento, 94 F.4th 916, 923 (9th Cir. 2024) (citing 21 U.S.C. § 841(a)); see also 21 U.S.C. §§ 812 sched. I(c)(10) (listing “marihuana” as a Schedule I drug), (17) (listing “Tetrahydrocannabinols” [hereinafter, “THC”] as a Schedule I drug).

On February 7, 2014, the Agricultural Act of 2014, Pub. L. No. 113-79 (“2014 Farm Bill”), codified at 7 U.S.C. § 5940 (2014) was enacted. The 2014 Farm Bill allowed “an institution of higher education . . . or a State department of agriculture [to] grow or cultivate industrial hemp if” it is grown or cultivated under a pilot program, or for agricultural or academic research.^[1] 7 U.S.C. §§ 5940 (a)(1)-(2). Then, in December 2018, the revised Farm Act, Pub. L. No. 115-334, 132 Stat. 4490 (“2018 Farm Bill”) was enacted, which repealed and replaced 7 U.S.C. § 5940, and legalized the possession and cultivation of hemp. See 21 U.S.C. §§ 802(16)(B), 812 sched. I(c)(17); see also Zini v. City of Jerseyville, No. 3:23-cv-02120-GSC, 2024 WL 1367806, at *4 (S.D. Ill. Mar. 30, 2024) (“In 2018, the Agriculture Improvements Act of 2018 (‘2018 Farm Act') repealed and replaced the 2014 Farm Act, legalizing the possession and cultivation of hemp.”) (internal quotation marks and citations omitted). After passage of the 2018 Farm Bill, the term “marijuana” now explicitly excludes hemp, 21 U.S.C. § 802(16)(B)(i), which has an expanded definition, including: “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids . . . whether growing or not, with a delta-9 [THC] concentration of not more than 0.3 percent on a dry weight basis.” 7 U.S.C. § 1639o (1). Similarly, the 2018 Farm Bill explicitly removed hemp from Schedule I of the CSA.^[2] See 21 U.S.C. § 812 sched.I(c)(17) (“[THC], except for [THC] in hemp (as defined in section 1639o of Title 7).”); cf. Brown v. United States, 144 S.Ct. 1195, 1201 (2024) (same).

Essentially, “[a] straightforward reading of § 1639o yields a definition of hemp applicable to all products that are sourced from the cannabis plant, contain no more than 0.3 percent delta-9 THC, and can be called a derivative, extract, cannabinoid, or one of the other enumerated terms.” AK Futures LLC v. Boyd St. Distro, LLC, 35 F.4th 682, 691 (9th Cir. 2022). The 2018 Farm Bill provides a “Rule of Construction,” indicating that “[n]othing in this title or an amendment made by this title prohibits the interstate commerce of hemp . . . or hemp products.” Pub. L. No. 115334, § 10114(a) (capitalizations omitted); e.g., Big Sky Sci. LLC v. Idaho State Police, No. 1:19-cv-00040-REB, 2019 WL 438336, at *2 (D. Idaho Feb. 2, 2019).

B. California Cannabis Law

California enacted the 2013 California Industrial Hemp Farming Act (“Hemp Act”). California Industrial Hemp Farming Act, CAL. LEGIS. COUNSEL'S DIGEST, 2013 Cal. Legis. Serv. Ch. 398, § 2(b) (S.B. 566) (Cal. Sept. 27, 2013). The Hemp Act amended Section 11018, and added Section 11018.5, to the California Health and Safety Code, explicitly excluding “[i]ndustrial hemp” from the definition of “Cannabis.” See Cal. Health & Safety Code § 11018(a). Since then, “industrial hemp” is presently defined as “an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant . . . with a delta-9 [THC] concentration of no more than 0.3 percent on a dry weight basis.” Id. § 11018.5(a). In this way, California and federal law “define ‘industrial hemp' in a consistent manner.” Free Spirit Organics, NAC v. San Joaquin Cnty. Bd. of Supervisors, No. 2:17-CV-02271-KHM-JDP, 2022 WL 902834, at * 1 (E.D. Cal. Mar. 25, 2022). The Hemp Act permits the private cultivation of hemp as “regulated by the Department of Food and Agriculture.” Id.; Cal. Health & Safety Code § 11018.5(b). As such, the Hemp Act added Division 24 (“Industrial Hemp”) to California's Food and Agricultural Code.^[3] Cal. Food & Agric. Code §§ 81000 et seq. Specifically, the Hemp Act allows Established Agricultural Research Institutions (“EARIs”) and registered hemp breeders to cultivate industrial hemp. See id. at §§ 81004, 81004.5. At the time of the events of this case, an EARI was defined as “any institution that is either: (1) A public or private institution or organization that maintains land or facilities for agricultural research, including colleges, universities, agricultural research centers, and conservation research centers; or (2) An institution of higher education” that grows and cultivates hemp for research purposes under an agricultural pilot program. See Cal. Food & Agric. Code §§ 81000(c)(1)-(2) (2019).

In November 2016, California voters enacted Proposition 64, also known as the Control, Regulate and Tax Adult Use of Marijuana Act (“AUMA”), “which was intended ‘to establish a comprehensive system to legalize, control and regulate the cultivation, processing. . . and sale of nonmedical marijuana, including marijuana products, for use by adults 21 years and older, and to tax the commercial growth and retail sale of marijuana.” People v. Raybon, 11 Cal. 5th 1056, 1063 (2021) (citation omitted); Lucas v. City of Pomona, 92 Cal.App. 5th 508, 517 (2023). Thus, EARIs were allowed “to cultivate or possess industrial hemp with a laboratory test report that indicates a percentage content of THC that is greater than three-tenths of 1 percent if that cultivation or possession contributes to the development of types of industrial hemp that will comply with the three-tenths of 1 percent THC limit established” elsewhere in the Code. Cal. Food & Agric. Code § 81006(f)(9) (2017); see also Gold Country Dev., LLC v. Cnty. of El Dorado, No. 2:20-cv-01712-MCE-CKD, 2021 WL 4443180, at *1 (E.D. Cal. Sept. 28, 2021) (“EARIs are expressly permitted to cultivate and produce hemp plants with a THC content greater than 0.3% if such cultivation contributes to the development of types of industrial hemp that will comply with the 0.3 percent THC limit.”) (internal quotation marks and citation omitted). EARIs are exempt from the requirement to “obtain a laboratory test report indicating the THC levels of a random sampling of the dried flowering tops” of the hemp, within 30 days before harvest. Cal. Food & Agric. Code § 81006(f) (2017);^[4] Gold Country, 2021 WL 4443180, at *1 (citation omitted). However, though EARIs may cultivate or possess hemp above this 0.3% THC threshold, they are still subject to the Health and Safety Code's prohibition of the sale of marijuana. See Cal. Health & Safety Code §§ 11360 (2017) (“Except as otherwise provided by this section or as authorized by law, every person who transports, imports into this state, sells, furnishes, administers, or gives away, or offers to transport, import into the state, sell, furnish, administer, or give away, or attempts to import into this state or transport any cannabis shall be punished as follows . . .”).^[5] With this legal framework in mind, the Court turns to the facts of the present case.

II. FACTUAL BACKGROUND

A. Hemp Background

“Hemp is a hardy plant” that grows well in dry, arid climates like Kern County. (FAC, Doc. 88 at ¶¶ 58-59, 92.) The amount of THC found in a mature hemp plant is determined based on both the growing conditions and plant genetics, and such levels are higher in younger, undried hemp plants, as compared to mature, dried plants. (Id. at ¶ 60; e.g., id. at ¶¶ 80-81.) Male hemp plants have “little to no CBD/THC content,” and when grown together with female plants, they destroy the value of the crop “because male plants are killed in...