With a second lawsuit filed against the state’s Conditional Adult-Use Retail Dispensary license program, cannabis industry insiders are watching closely to see what happens next.
The latest lawsuit was filed against the New York’s Office of Cannabis Management on March 16 by the Coalition for Access to Regulated and Safe Cannabis, a group led by medical registered organizations that includes some with local operations like Acreage Holdings and PharmaCann.
Their complaint calls into question several aspects of the CAURD program such as whether it violated the Marijuana Regulation and Taxation Act. It follows an earlier lawsuit out of Michigan that has prevented CAURD dispensaries from opening in five regions including Western New York.
For those in the cannabis industry — or waiting to get into it — another lawsuit poses additional questions. Several cannabis attorneys weighed in on what this case means for legal weed in Western New York.
What’s the problem this time?
The complaint filed March 16 argued that the OCM exceeded its authority when it started the CAURD program, because the MRTA states that “the initial adult-use cannabis retail dispensary license application period shall be opened for all applicants at the same time.” The act was signed into law on March 31, 2021.
The CAURD program — for which 66 licenses have already been approved and five dispensaries opened statewide — was created for people with a previous marijuana-related conviction who have had two years of business experience.
“We think the way to create a more regulated and safer market is to open up the application for all dispensaries and to crack down on the illicit dispensaries,” said David Feuerstein, a New York City-based cannabis attorney who is representing the coalition. “Because time is of the essence, we decided to file a lawsuit.”
The state is approaching its second anniversary of the legalization of recreational weed on March 31. Time was an important factor for PharmaCann, a cannabis company headquartered in Chicago that operates the Verilife Dispensary in Amherst, according to an emailed statement from Jeremy Unruh, senior vice president of public and regulatory affairs.
“There are hundreds of millions of dollars of cannabis products grown by New York’s nascent cultivators wasting in warehouses for lack of retail outlets because New York state has only opened a handful of licensed adult-use dispensaries over these past two years,” Unruh said.
The OCM declined to comment on pending litigation.
Medical cannabis companies are also unhappy about the unfinished non-conditional regulations, which state that medical companies must wait three years before converting dispensaries to adult-use. Unruh said medical cannabis operators have been providing quality products for almost a decade and have the experience to get safe and regulated weed to adults without that wait.
“We could be serving Buffalo-area adult-use cannabis consumers with these locally sourced cannabis products tomorrow, helping to jumpstart what most stakeholders regard as a failed rollout of New York’s adult-use cannabis program,” he said. “Unfortunately, the state’s decision-makers are failing to turn market theory into an industry ecosystem, and we all share in the repercussions of those failures.”
One of the biggest goals in the law is social equity, which the coalition argued was jeopardized since the retail application wasn’t open to everyone. Feuerstein said that even though the coalition is calling out the CAURD program, the group is “pro social equity.”
“The MRTA talks about categories of social equity that are much broader than the parameters of the CAURD program,” he said. “People that were negatively affected by the War on Drugs that don’t have a business background should be allowed to enter the marketplace.”
Can the CAURD program survive a second lawsuit?
The state’s Cannabis Control Board recently committed to increasing the number of CAURD licenses from 150 to 300. So far, the board has received more than 900 applications. It plans to issue another 100 licenses at its April 3 meeting.
The first lawsuit, filed by a Michigan dispensary applicant Variscite New York One Inc., alleges that the CAURD license program is unconstitutional and violates the Dormant Commerce Clause, which protects interstate commerce. In November, a U.S. District judge granted an injunction in the case, which prohibited CAURD licenses from being issued in Western New York and several other regions.
This second lawsuit from the coalition, came just months after.
“I think it’s the only way the plaintiffs feel they can influence action,” said Lippes Mathias attorney Joseph Schafer. “Variscite got something done, and it hurt. The parties who are ultimately the plaintiffs in this coalition lawsuit are what’s telling about it. They have locations here and all they have to do is flip a switch.”
Feuerstein said the coalition isn’t seeking an injunction to the CAURD program or attempting to shut it down or slow the process. Rather, it wants to push the state to speed things up and open a retail application for everyone.
OCM created the CAURD program in a regulatory process instead of a legislative process like the Conditional Adult-Use Cultivators and Processor licenses.
“The way the regulations were drafted, every attorney saw this lawsuit coming,” said local cannabis attorney Aleece Burgio. “They made it very difficult for medical registered organizations to enter into the adult-use space.”
Burgio, who practiced cannabis law on the West Coast when other states like Oregon began legalizing weed, said lawsuits like this “happen in every state” that begins a regulatory program. If the state doesn’t win in these cases, it could mean the end or at least significant changes to the CAURD program.
“I do think that the idea of the CAURD program won’t die, but they may have to open a general application window for everyone else at the same time,” Burgio said. “It’s one component of a very in-depth social equity and inclusion mission that the OCM has been doing. They’re prioritizing social equity so much that they’re way outside of what other states have done.”
Will WNY ever get a legal weed store?
The short answer is almost certainly. But frustrated growers and processors, who had product ready to sell last summer, are getting to a point where they’ll have to see it to believe it.
Mary-Jane Morley, an associate at Phillips Lytle who practices in litigation and cannabis law, said the coalition’s case is an Article 78 proceeding, which seek to appeal a decision of the state or local agency like the OCM.
“Article 78 proceedings are very difficult to win,” Morley said.
She said the OCM and CCB will need to answer the complaint in the next few weeks. She said it could go to discovery or there could be a motion to dismiss, but if a judge agrees that the OCM violated the state law, it could get drawn out.
“Everyone’s frustrated, and no one knows what the next steps should be,” Morley said. “The stakes are pretty high, and the existence of the CAURD program kind of hangs in that complaint.”
H/T: www.bizjournals.com
