California’s licensed cannabis market is one of the largest in the world — and one of the most litigated. Unlike most industries, cannabis operators navigate overlapping state and local regulatory frameworks, banking restrictions, federal illegality, and a highly competitive market where disputes over equity, licensing, and supply chains are routine.
When those disputes turn into litigation, a compliance attorney is not enough. You need a litigator who understands the business.
The Most Common Disputes We See
Investor and Equity Disputes
Cannabis startups frequently take on private investment to fund licensing applications and build-outs. When the business underperforms — or when founders and investors disagree over control — litigation follows quickly. Common claims include:
- Breach of operating agreement or shareholder agreement
- Minority shareholder oppression
- Breach of fiduciary duty by managing members
- Fraudulent inducement to invest
California courts will hear these disputes even when federal law does not recognize cannabis as a legal business. Courts have generally enforced cannabis-related contracts between licensed parties in California.
Supply Chain and Distribution Failures
Licensed distributors, manufacturers, and retailers frequently enter supply agreements without adequate breach and remedy provisions. When a distributor fails to deliver, a manufacturer produces non-compliant product, or a retailer fails to pay, the injured party often has a viable breach of contract or commercial tort claim.
The key issue: because cannabis cannot move in interstate commerce, California operators have limited options when a supplier disappears. Litigation in California courts — moving quickly — is often the only remedy.
Real Estate and Licensing Disputes
Cannabis licenses in California are tied to specific premises. Disputes with landlords over lease compliance, landlord consent to cannabis use, and unlawful detainer are common. Operators have also sued municipalities and counties that changed zoning or licensing rules mid-application, raising due process and vested rights claims.
Employment Claims
The cannabis industry has significant labor compliance challenges. Many operators bring on workers during rapid growth phases with informal arrangements that later generate wage and hour claims, classification disputes, or discrimination complaints. California’s labor laws apply to cannabis employers without exception.
What Makes Cannabis Litigation Different
Cannabis businesses cannot use federal courts to resolve most disputes (federal courts apply federal law, which still classifies cannabis as a Schedule I controlled substance). This means state court litigation in California is almost always the venue.
California courts have become increasingly sophisticated about cannabis commercial disputes. Our state’s Uniform Commercial Code, contract law, and tort principles apply — but an attorney unfamiliar with the regulatory framework can make costly errors in how claims are pleaded and what evidence is obtainable.
When to Call a Litigator
You need a litigator — not just a transactional attorney — when:
- An investor is making threatening demands or has sent a demand letter
- A business partner is taking actions inconsistent with your operating agreement
- A supplier, distributor, or retailer has breached a significant contract
- You’ve received notice of a license suspension or enforcement action that will be contested
- You’re contemplating a lawsuit against a regulator, landlord, or business partner
The earlier you involve a litigator, the more options you have. Evidence gets lost. Statutes of limitations run. Partners move money.
Related practice area: Cannabis & Marijuana Law
This article is for general informational purposes only and does not constitute legal advice. Cannabis operators facing legal disputes should consult a licensed California attorney promptly.
Trujillo & Winnick LLP handles cannabis business litigation throughout California. Contact us at (310) 210-9302 or office@tru-win.com.