Interim Suspension Orders in California Cannabis Licensing: Understanding the Standards, Procedures, and Strategic Defenses
This article follows a recent successful defense in which our firm secured denial of a Petition for Interim Suspension Order by the Department of Cannabis Control
Introduction
Interim Suspension Orders represent one of the most consequential enforcement mechanisms available to the Department of Cannabis Control. When the Department initiates ISO proceedings, a licensee faces the prospect of immediate cessation of all licensed commercial cannabis activities—often before a full evidentiary hearing on the underlying allegations. Understanding the legal framework governing these proceedings, the evidentiary burdens imposed upon the Department, and the strategic considerations for mounting an effective defense is essential for any cannabis licensee navigating California's regulatory landscape.
The Statutory Framework: Business and Professions Code Section 494
California Business and Professions Code section 494 authorizes licensing agencies, including the Department of Cannabis Control, to seek interim suspension of a license through an expedited administrative proceeding. The statute establishes a two-prong test that the Department must satisfy by a preponderance of the evidence:
The licensee has violated applicable laws or regulations. This prong requires the Department to demonstrate that the licensee engaged in conduct constituting a violation of the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) or its accompanying regulations.
Permitting the licensee to continue engaging in licensed activity would endanger public health, safety, or welfare. This second prong imposes a forward-looking inquiry—the Department must establish that continued operations pose an actual, present threat to the public, not merely that past violations occurred.
The conjunctive nature of this standard is critical. Proving regulatory violations alone is insufficient. The Department must independently establish that the public would be endangered by the licensee's continued operation.
Legislative Intent and the Extraordinary Nature of ISO Relief
The legislative history of section 494 illuminates its intended scope. When enacted in 1994, the statute extended interim suspension authority to licensing agencies as an emergency tool to address situations where "time is of the essence" in protecting the public. The Legislature specifically contemplated circumstances involving serious criminal conduct or ongoing harm—not routine regulatory disputes that could be addressed through ordinary disciplinary mechanisms.
As the Senate Committee on Business and Professions noted at the time of enactment, the provision was designed for cases where existing disciplinary frameworks proved inadequate to protect the public from imminent harm. The illustrative examples provided by the Legislature—such as a psychologist alleged to have committed sexual assault against a patient—underscore that ISO authority was reserved for circumstances presenting concrete, immediate threats.
This legislative framework carries significant implications for cannabis licensees. An ISO is not a substitute for an Accusation or standard disciplinary proceedings under Business and Professions Code section 26031. It is an extraordinary remedy warranting extraordinary justification.
The Procedural Posture of ISO Proceedings
ISO proceedings are conducted before the Office of Administrative Hearings, typically on an expedited basis. The Department initiates proceedings by filing a petition supported by declarations and documentary evidence. The respondent licensee has the opportunity to file opposition, including counter-declarations and memoranda of points and authorities. The Administrative Law Judge receives evidence and oral argument before rendering a decision.
Unlike a full evidentiary hearing on an Accusation, ISO proceedings do not involve live witness testimony or cross-examination. The ALJ evaluates the competing declarations and documentary submissions to determine whether the Department has met its burden. This procedural posture places a premium on the quality and specificity of the written record.
Key Strategic Considerations in Defending Against an ISO Petition
Challenging the Temporal Element: Delay as Evidence of Non-Emergency
Where the Department delays filing an ISO petition following the discovery of alleged violations, that delay itself becomes probative evidence undermining the claim of imminent public danger. If the Department conducts an inspection, discovers alleged violations, and then permits the licensee to continue operating for months before seeking emergency relief, the Department's own conduct suggests the circumstances do not present the kind of immediate threat contemplated by section 494.
Addressing Data Reliability: The METRC Problem
The California Cannabis Track and Trace system (METRC) serves as the foundation for regulatory compliance verification. However, the system has been judicially recognized as prone to generating internally inconsistent and unreliable data. In HNHPC, Inc. v. Department of Cannabis Control (2023) 94 Cal.App.5th 60, the Court of Appeal reversed a dismissal where a licensee plausibly alleged that inventory anomalies were attributable to defects in the database rather than unlawful conduct.
When the Department's allegations rest primarily on METRC discrepancies—particularly impossible data points such as negative inventory quantities—licensees should challenge the reliability of that evidence. Negative inventory is a mathematical impossibility that cannot exist in the physical world; it reflects corrupted or improperly processed data, not diverted cannabis. Expecting licensees to reconcile thousands of internally contradictory entries generated by a defective system imposes an unreasonable burden and cannot establish diversion by a preponderance of the evidence.
Demonstrating Remediation and Cooperation
Where alleged violations have been remediated prior to the ISO hearing, that remediation directly undermines the Department's showing of present danger. Section 494 authorizes relief to prevent future endangerment—it is inherently prospective. If the conditions allegedly endangering the public no longer exist, the statutory predicate for an ISO evaporates.
Licensees should document cooperation with Department directives, voluntary remediation efforts, and compliance with embargo and destruction orders. Evidence of good-faith efforts to address regulatory concerns demonstrates that the licensee does not pose an ongoing threat warranting emergency intervention.
Distinguishing Regulatory Disputes from Public Safety Emergencies
Not every regulatory violation presents a public safety emergency. Technical compliance issues—such as premises diagram discrepancies, recordkeeping deficiencies, or disputes over the characterization of business arrangements—may warrant administrative discipline through ordinary channels but do not necessarily justify the extraordinary remedy of immediate license suspension.
The distinction between operational compliance matters and genuine public safety threats is critical. The Department must demonstrate not merely that violations occurred, but that those violations create an ongoing danger to the public that cannot be adequately addressed through standard enforcement proceedings.
Consequences and Proceedings Following an ISO Determination
If the ISO Petition Is Granted
Should the ALJ grant an ISO petition, the licensee's ability to conduct licensed commercial cannabis activity is immediately suspended. The suspension remains in effect pending resolution of formal disciplinary proceedings. The Department must file an Accusation within 15 days of the ISO, and the licensee is entitled to a hearing within 30 days of the Accusation's filing.
If the ISO Petition Is Denied
Denial of an ISO petition does not preclude the Department from pursuing formal disciplinary action through an Accusation. The licensee may continue operations pending resolution of any subsequently filed Accusation. However, the ALJ's findings in the ISO proceeding—including determinations regarding which violations were or were not proven—may inform the subsequent disciplinary process.
Importantly, denial of an ISO does not constitute vindication on the merits of all allegations. An ALJ may find that certain violations were proven while nonetheless concluding that the Department failed to establish the requisite showing of public danger. Licensees should anticipate continued regulatory scrutiny and potential Accusation proceedings even after successfully defeating an ISO petition.
Conclusion
Interim Suspension Order proceedings present substantial stakes for cannabis licensees. The prospect of immediate cessation of business operations, loss of inventory, and reputational harm demands a sophisticated and aggressive defense. However, the statutory framework imposes meaningful constraints on the Department's authority. By holding the Department to its burden of proving both violations and present danger to the public, licensees can successfully defend against ISO petitions that improperly seek to convert routine regulatory disputes into emergencies.
Even where some regulatory violations are established, the Department cannot obtain emergency relief absent a genuine showing of imminent public harm. Strategic emphasis on the Department's delay, the unreliability of METRC data, the licensee's remediation efforts, and the distinction between technical violations and public safety threats can prove decisive.
For questions regarding Department of Cannabis Control enforcement actions, Interim Suspension Order proceedings, or cannabis regulatory compliance, please contact our office.
