AB 1826: Cannabis: recall, embargo, and destruction of cannabis and cannabis products.

26031.5.

(a) (1) The department may issue a citation to a licensee or unlicensed person for any act or omission that violates or has violated any provision of this division or any regulation adopted pursuant to this division. The department shall issue the citation in writing. The citation shall describe with particularity the legal and factual basis of the citation, and it shall also include the notification described in subdivision (c). The department may include in each citation an order of abatement and fix a reasonable time for abatement of the violation. The department may, as part of each citation, assess an administrative fine not to exceed five thousand dollars ($5,000) per violation by a licensee and thirty thousand dollars ($30,000) per violation by an unlicensed person. Each day of violation shall constitute a separate violation.

(2) In assessing a fine, the department shall give due consideration to the appropriateness of the amount of the fine with respect to factors the department determines to be relevant, including the following:

(A) The gravity of the violation by the licensee or person.

(B) The good faith of the licensee or person.

(C) The history of previous violations.

(b) The sanctions authorized under this section shall be separate from, and in addition to, all other administrative, civil, or criminal remedies.

(c) A citation issued pursuant to this section shall include a provision that notifies the licensee that a hearing or informal conference, or both, may be requested to contest the finding of a violation by submitting a written request within 30 days from service of the citation.

(1) (A) A hearing shall be held pursuant to the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code).

(B) An informal conference shall be held in accordance with the provisions of Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code, the requirements contained in paragraph (2), and the regulations of the department.

(C) If the licensee fails to submit a written request for a hearing or an informal conference within 30 days from the date of service of the citation, the right to a hearing or an informal conference is waived and the citation shall be deemed a final order of the department and is not subject to review by any court.

(2) The department shall, within 15 calendar days after receipt of the written request for an informal conference, hold an informal conference with the licensee or their legal counsel or authorized representative, or any combination of those persons.

(A) At the informal conference, the licensee, or their legal counsel or authorized representative, shall be allowed the opportunity to meet with a representative of the department who has knowledge of the citation. The department representative shall describe the factual and legal basis for the citation, if requested. The licensee, or their legal counsel or authorized representative, shall be allowed to present evidence and argument as to why the citation should be modified or dismissed.

(B) After the informal conference, the department shall affirm, modify, or dismiss the citation, including any fines levied or orders of abatement issued. The department shall notify the licensee of its decision and the reasoning supporting the decision via written notification, which shall be sent to the licensee and their legal counsel or authorized representative, if any, by electronic means or by mail to the premises address, or by both electronic means and by mail, within 15 calendar days after the date of the informal conference. The decision shall be deemed to be a final order with regard to the citation issued, including the levied fine or the order of abatement, if any.

(C) If the citation is dismissed, any request for a hearing shall be deemed withdrawn. If the citation is affirmed, the licensee may either withdraw the request for a hearing or proceed with the administrative hearing process.

(D) If the citation, including any fines levied or orders of abatement issued, is modified, the citation originally issued shall be considered withdrawn and a new citation issued. If a hearing is requested for the subsequent citation, it shall be requested within 30 calendar days after issuance of the citation.

(d) After the exhaustion of the administrative and judicial review procedures, the department may apply to the appropriate superior court for a judgment in the amount of the administrative fine and an order compelling the cited person to comply with the order of the department. The application, which shall include a certified copy of the final order of the department, shall constitute a sufficient showing to warrant the issuance of the judgment and order.

(e) The department may recover from the licensee or person who was the subject of the citation costs of investigation and enforcement, which may include reasonable attorney’s fees for the services rendered. If the department recovers costs from a licensee, the department shall recover the costs pursuant to Section 26031.1.

(f) Fines shall be paid within 30 days of service of a citation by the department. Failure to pay a fine assessed pursuant to this section within 30 days of the date of service of the citation, unless the citation is being appealed, shall constitute a separate violation under this division subject to additional action by the department. The department shall not renew or grant a license to a person who was the subject of the fine until that person pays the fine.

(g) All moneys collected pursuant to this section associated with the recovery of investigation and enforcement costs shall be deposited into the Cannabis Control Fund. Any administrative fine amount shall be deposited directly into the Cannabis Fines and Penalties Account and shall be distributed pursuant to subdivision (d) of Section 26210.

(h) A citation issued by the department under this section shall be issued within three years after the performance of the act or omission that violates this division or any regulation adopted pursuant to this division.

26039.1.

(a) When the department has evidence that cannabis or a cannabis product is adulterated or misbranded, the department shall provide written notice to the licensee.

(1) The notification shall include the following, as applicable:

(A) A copy of the laboratory certificate of analysis and testing data.

(B) A summary of the evidence supporting the finding of adulteration or misbranding, including the identity of the laboratory and a description of the collection and sampling methodology used.

(2) The notice shall also state whether or not the department has determined that a mandatory recall will be ordered.

(b) (1) The licensee may conduct a voluntary recall of the affected cannabis or cannabis product and may remediate the cannabis or cannabis product, if approved by the department, or shall, subject to the requirements in subdivision (d), destroy the affected cannabis or cannabis product under the supervision of the department.

(2) Prior to a voluntary recall by the licensee, the department shall provide the licensee with an opportunity for an informal conference on why the cannabis or cannabis product is considered adulterated or misbranded. The informal conference shall be with department staff who are knowledgeable on the matter and shall provide the licensee with an opportunity to present information and argument as to why the cannabis or cannabis product is not adulterated or misbranded, and is not otherwise in violation of this division. The department shall not permit destruction of the product until either the informal conference process has concluded or the licensee has declined to participate in the informal conference.

(3) Following the informal conference, the department may determine that a product does not need to be recalled. If the department determines that a product does not need to be recalled, the department shall send the licensee a written notification that will serve as a final decision on the matter.

(c) The department may issue a mandatory recall order and require the licensee to immediately cease distribution of cannabis or a cannabis product and recall the cannabis or cannabis product if the department determines both of the following:

(1) The cultivation, manufacture, distribution, or sale of the cannabis or cannabis product creates or poses an immediate and serious threat to human life or health.

(2) Other procedures available to the department to remedy or prevent the occurrence of the situation would result in an unreasonable delay.

(d) (1) Simultaneously with the issuance of a mandatory recall order, the department shall provide the licensee with a summary of the department’s determination for the recall and the specific evidence upon which the order is based, which may include, but is not limited to, the following:

(A) The specific section or subdivision of code law or regulation alleged to be violated.

(B) A copy of the laboratory certificate of analysis and testing data, if applicable.

(C) Sampling methodology documentation.

(D) A detailed description of the sampling procedure.

(E) Any photographic, electronic, or other evidence, if applicable.

(F) A summary of the evidence supporting the finding of adulteration or misbranding.

(2) (A) The department shall provide the licensee with an opportunity for an informal conference on the recall order. The department shall permit the licensee to, within five calendar days of the delivery of the recall order, request an informal conference. If the licensee fails to submit a written request for an informal conference within five calendar days from the delivery of the order to the licensee, the right to an informal conference is waived and the order shall be deemed a final order of the department. The informal conference shall be held in accordance with the provisions of Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code, the requirements contained in subdivision (d), and the regulations of the department.

(B) The department shall, within 15 calendar days after receipt of the request for an informal conference, hold an informal conference with the licensee or their legal counsel or authorized representative, or any combination of those persons.

(i) At the informal conference, the licensee, or their legal counsel or authorized representative, shall be allowed the opportunity to meet with a representative of the department who has knowledge of the order. The licensee, or their legal counsel or authorized representative, shall be allowed to present evidence and argument as to why the order should be modified or set aside.

(ii) After the informal conference, the department shall affirm, modify, or set aside the order. The department shall notify the licensee of its decision and the reasoning supporting the decision via written notification, which shall be mailed to the licensee and their legal counsel or authorized representative, if any, within 15 calendar days after the date of the informal conference. The decision shall be deemed to be a final order of the department.

(C) The department shall not permit destruction of the product until either the informal conference process has concluded or the licensee has declined to participate in an informal conference. Following the informal conference or the licensee’s decision not to participate in the informal conference, the order shall be affirmed, modified, or set aside as determined appropriate by the department in a written decision setting out the reasons for the action taken.

(e) The department’s powers set forth in this section expressly include the power to order movement, segregation, isolation, or destruction of cannabis or cannabis products, as well as the power to hold cannabis or cannabis products in place.

(f) If the department determines it is necessary, it may issue the mandatory recall order, may conduct the recall, and may use all appropriate measures to obtain reimbursement from the licensee for any and all costs associated with these orders. All funds obtained by the department from these efforts shall be deposited in the Cannabis Control Fund and shall be available for use by the department upon appropriation by the Legislature.

(g) It is unlawful to move or allow to be moved cannabis or a cannabis product subject to an order issued pursuant to this section unless that person has first obtained written authorization from the department.

(h) (1) (A) The department shall not require a licensee to conduct a voluntary recall, sign a waiver of liability, or waive any right to an informal meeting or an administrative or judicial hearing or appeal as a condition of approving a voluntary recall, authorizing remediation, or supervising the destruction of the product.

(B) A licensee that conducts a voluntary recall does not waive any right to an informal meeting or an administrative or judicial hearing or appeal.

(2) A waiver of liability or appeal rights shall be valid only if expressly stated in writing and signed by the licensee following the conclusion of a condemnation proceeding pursuant to Section 26039.3 or civil litigation regarding the matter.

26039.3.

(a) (1) If the department finds or has probable cause to believe that cannabis or a cannabis product is adulterated or misbranded within the meaning of this division, or the sale of the cannabis or cannabis product would be in violation of this division, the department shall affix to the cannabis or cannabis product, or component thereof, a tag or other appropriate marking.

(2) (A) The department shall provide written notice to the licensee that the cannabis or cannabis product is, or is suspected of being, adulterated or misbranded or the sale of the cannabis or cannabis product would be in violation of this division and has been embargoed and that the cannabis or cannabis product shall not be removed or disposed of by sale or otherwise until permission for removal or disposal is given by the department or a court.

(B) The notice shall be accompanied by clear, articulable facts and evidentiary documentation supporting the department’s legal basis for the embargo, which may include, but is not limited to, all of the following:

(i) The specific section or subdivision of code or regulation alleged to be violated.

(ii) A copy of the laboratory certificate of analysis and testing data, if applicable.

(iii) Sampling methodology documentation.

(iv) A detailed description of the sampling procedure.

(v) Any photographic, electronic, or other evidence, if applicable.

(vi) A summary of the evidence supporting the finding of adulteration or misbranding.

(C) The department shall send the notice to the licensee within five calendar days of the tag or marking being placed on a product.

(b) (1) It is unlawful to remove, sell, or dispose of embargoed cannabis or an embargoed cannabis product without written permission of the department or a court. The removal, sale, or disposal of each item of embargoed cannabis or cannabis product without written permission of the department constitutes a violation of this subdivision. A violation of this subdivision is subject to a citation and fine of not more than ten thousand dollars ($10,000).

(2) Notwithstanding paragraph (1), a licensed cultivator may request permission for the continued cultivation or harvesting of the cannabis subject to embargo. The department may authorize, and may impose conditions on, the continued cultivation or harvesting of the cannabis subject to embargo.

(c) If the adulteration or misbranding can be corrected by proper labeling or additional processing of the cannabis or cannabis product and all of the provisions of this division can be complied with, the licensee may request that the department remove the tag or other marking to permit correction. If, under the supervision of the department, the adulteration or misbranding has been corrected, the department may remove the tag or other marking. Cannabis and cannabis products found at an unlicensed location, or cultivated, processed, produced, or manufactured at an unlicensed location, or derived from an unlicensed source, shall not be corrected and shall be destroyed.

(d) (1) For any cannabis or a cannabis product that is embargoed, the department shall provide the licensee with an opportunity for an informal conference on the matter within 15 calendar days of the delivery of the notification required by paragraph (2) of subdivision (a). The informal conference shall include department personnel with knowledge of the matter and shall provide the licensee with an opportunity to present information and argument as to why the cannabis or cannabis product is not adulterated or misbranded, and is not otherwise in violation of this division.

(2) The department shall, within 15 calendar days from the date of the informal conference, make a final determination on whether or not the cannabis or cannabis product is adulterated or misbranded, or the sale of the cannabis or cannabis product would be in violation of this division.

(3) If the department finds that cannabis or a cannabis product that is embargoed is not adulterated or misbranded, or that its sale is not otherwise in violation of this division, the department shall remove the tag or other marking within five calendar days of that determination.

(e) The cannabis or cannabis product may be destroyed or remediated by the licensee or product owner pursuant to a corrective action plan approved by the department and under the supervision of the department. If destroyed, the cannabis or cannabis product shall be destroyed at the expense of the licensee or product owner.

(f) (1) (A) The department may condemn cannabis or a cannabis product under the provisions of this section.

(B) If the department does not approve the corrective action plan, or the department does not receive a response from the licensee within seven calendar days after providing the notice described in paragraph (1) of subdivision (a), the department may initiate condemnation proceedings in accordance with the provisions of this section.

(C) A petition for condemnation shall be subject to appropriate notice to, and the opportunity for a hearing with regard to, the person or licensee affected in accordance with Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code.

(i) For cultivation licensees, the petition for condemnation shall be filed and served no later than 15 days after the department’s decision to deny the corrective action plan or, if the department does not receive a response from the licensee within 7 calendar days of the notice of the embargo, within 15 days from the expiration of that time period, whichever is later. The cultivation licensee shall be given at least 15 days’ notice of the hearing on the petition for a condemnation order, and an expedited hearing shall be scheduled. The notice shall include documents submitted in support of the petition.

(ii) Manufacturer and retailer licensees are not entitled to an expedited hearing process for a petition for condemnation.

(2) A decision on the petition shall be rendered no later than 10 days after submission of the matter.

(3) Notwithstanding Section 11502 of the Government Code, the department or an administrative law judge sitting alone may, upon petition, issue an order condemning cannabis or cannabis products. The department may, in its sole discretion, delegate the hearing to an administrative law judge in the Office of Administrative Hearings. If the department hears the noticed petition itself, an administrative law judge shall preside at the hearing, rule on the admission and exclusion of evidence, and advise the department on matters of law. The department shall exercise all other powers relating to the conduct of the hearing but may delegate any or all of them to the administrative law judge. When the petition has been delegated to an administrative law judge, the administrative law judge shall sit alone and exercise all of the powers of the department relating to the conduct of the hearing. A decision issued by an administrative law judge sitting alone shall be final when it is filed with the department. The decision of the administrative law judge sitting alone on the petition for a condemnation order is final, subject only to review in accordance with subdivision (h).

(4) Upon a finding by the department or an administrative law judge pursuant to paragraph (3) that the cannabis or cannabis product is adulterated or misbranded, or that its sale is otherwise in violation of this division, the department or the administrative law judge may direct the cannabis or cannabis product to be destroyed at the expense of the licensee and under the supervision of the department. The licensee shall pay fees and reasonable costs, including the costs of storage, testing, and supervision, incurred by the department in investigating and prosecuting the action taken pursuant to this section.

(5) Upon a finding by the department or an administrative law judge pursuant to paragraph (3) that the adulteration or misbranding can be corrected by proper labeling or additional processing of the cannabis or cannabis product and that all provisions of this division can be complied with, the department or the administrative law judge may direct the cannabis or cannabis products to be brought into compliance under the department’s supervision. The licensee shall pay fees and reasonable costs, including the costs of storage, testing, and supervision, incurred by the department in investigating and prosecuting the action. After the costs, fees, and expenses have been paid, the department may release the embargo and remove the tag or other marking and supervise the corrective action.

(g) (1) The department shall not require a licensee to sign a waiver of liability, or to waive any right to an informal meeting or an administrative or judicial hearing or appeal, as a condition of removing an embargo tag, approving a corrective action plan, or permitting the destruction of product.

(2) A waiver of liability or appeal rights shall only be valid if the licensee agrees to a voluntary condemnation and destruction of the cannabis or cannabis products or if the waiver is executed following the conclusion of a condemnation proceeding pursuant to this section or civil litigation regarding the matter.

(3) Failure to comply with a condemnation order shall constitute a separate cause for disciplinary action against a licensee. Violation of the condemnation order is established upon proof that the licensee was on notice of the condemnation order and its terms, and that the order was in effect at the time of the violation.

(h) Condemnation orders shall be subject to review by the Cannabis Control Appeals Panel pursuant to Section 26043. The review of a condemnation order shall be limited to a determination of whether the department abused its discretion in the issuance of the condemnation order. Abuse of discretion is established if the respondent department has not proceeded in the manner required by law, or if the panel determines that the condemnation order is not supported by substantial evidence in light of the whole record.

26039.5.

(a) Cannabis or a cannabis product is misbranded if it is any of the following:

(1) Cultivated, processed, manufactured, packed, or held in a location not duly licensed as provided in this division.

(2) Consists of cannabis or cannabis product that was cultivated, processed, manufactured, packed, or held in a location not duly licensed as provided in this division.

(3) Its labeling is false or misleading in any particular.

(b) It is unlawful to cultivate, process, manufacture, sell, deliver, hold, or offer for sale cannabis or a cannabis product that is misbranded.

(c) It is unlawful to misbrand cannabis or a cannabis product.

(d) It is unlawful to receive in commerce cannabis or a cannabis product that is misbranded or to distribute, deliver, or offer for delivery any such cannabis or cannabis product.

26039.6.

(a) Cannabis or a cannabis product is adulterated if it is any of the following:

(1) It has been produced, prepared, packed, or held under unsanitary conditions in which it may have become contaminated with filth or in which it may have been rendered injurious.

(2) It consists, in whole or in part, of any filthy, putrid, or decomposed substance.

(3) It bears or contains any poisonous or deleterious substance that may render it injurious to users under the conditions of use suggested in the labeling or under conditions that are customary or usual.

(4) It bears or contains a substance that is restricted or limited under this division or regulations promulgated pursuant to this division and the level of substance in the product exceeds the limits specified pursuant to this division or in regulation.

(5) Its container is composed, in whole or in part, of any poisonous or deleterious substance that may render the contents injurious to health.

(b) It is unlawful to cultivate, manufacture, distribute, sell, deliver, hold, or offer for sale cannabis or a cannabis product that is adulterated.

(c) It is unlawful to adulterate cannabis or a cannabis product.

(d) It is unlawful to receive in commerce cannabis or a cannabis product that is adulterated or to distribute, deliver, or proffer for delivery any such cannabis or cannabis product.