The following was posted on SIVA’s attorney’s website
Cannabis Team Obtains Federal Court Order Protecting the Access of Cannabis Businesses to Federal Remedies
November 6, 2018
Dean Rocco (Partner-Los Angeles), Ian Stewart (Partner-Los Angeles) and Nicole Aaronson (Associate-Los Angeles) successfully defended a motion seeking dismissal of a federal lawsuit brought on behalf of a top U.S. cannabis consulting firm and its CEO that alleges Misappropriation of Trade Secrets and Lanham Act violations by a competing business.
Defendants moved to dismiss the federal causes of action on several bases, including that a cannabis-related business has no standing to seek a remedy under federal statutes due to the illegal status of cannabis under the Controlled Substances Act (CSA). Defendants also argued that there could be no claim for misappropriation of trade secrets because “there is no trade secret protection for ongoing illegal activities.” Judge Christina Snyder of the U.S. District Court for the Central District of California rejected these arguments. She noted that “Defendants are essentially arguing that their alleged actions are immune from federal law because plaintiffs are engaged in an illegal enterprise under federal law,” and that “authority in this area is sparse, particularly with respect to the applicability of federal civil laws to state-sanctioned cannabis businesses.” Importantly, Judge Snyder emphasized that the plaintiffs did not seek a remedy that would compel either party to violate the CSA, and the dispute did not involve the actual production or sale of cannabis but rather involved alleged misappropriation of the plaintiff’s confidential business information. For these reasons, the Court held that “the CSA’s prohibition on cannabis does not immunize defendants from federal laws.”
The Court’s decision lays the foundation for further access to federal courts and federal remedies by cannabis businesses in California and within the Ninth Circuit.