Four Veterans File Suit Against New York’s OCM Over Claims That Its Process Prioritizes Applicants with Prior Marijuana Convictions

Foley Hoag LLP - Cannabis and the Law

Foley Hoag LLP - Cannabis and the Law

A group of four military veterans last week filed a lawsuit in New York State Supreme Court against the New York’s Office of Cannabis Management (“OCM”), claiming that the agency’s rules that prioritize applicants with prior marijuana convictions for cannabis dispensary licenses violate the NY Marijuana Regulation and Taxation Act (“MRTA”).

In Fiore et al. v. NYS Cannabis Control Board et al., the plaintiffs sought a temporary restraining order barring the state from issuing or further processing applications for licenses, or from conferring operational approval upon any other Conditional Adult-Use Retail Dispensary (“CAURD”) program, which have been reserved for applicants with a New York state cannabis-related criminal conviction. On August 7, 2023, the court granted a temporary restraining order (“TRO”), prohibiting the OCM and the NYS Cannabis Control Board (“CCB”) from “awarding or further processing any more CAURD licenses and/or conferring operational approval upon any more provisional or existing CAURD licensees, pending further order” of the court. As of August 7th, there are 463 total CAURD licensees, of which 442 have not yet opened their doors and likely have not received OCM approval to begin operations. Additionally, OCM has issued 282 conditional adult-use cannabis cultivation licenses who are scaling up to meet the impending demand from these retailers while still largely trying to remain in business in light of the slower-than-anticipated rollout of NY’s adult use industry. (Governor Kathy Hochul has publicly indicated that 20 dispensaries would be open by the end of 2022 with another 20 opening each month thereafter. Only 21 total have been opened since the Governor made this statement in October 2022).

In a complaint filed in the New York State Supreme Court, the four plaintiffs argue that the OCM and CCB violated the MRTA when it did not open the application window for cannabis retail licenses to certain other “priority groups”, particularly in light of the fact that the MRTA clearly establishes certain social and economic equity “priority” groups, including individuals from communities disproportionately impacted by the enforcement of cannabis prohibition, minority and women-owned businesses, distressed farmers, and service-disabled veterans. Specifically, Section 10(19) of the MRTA states that “the initial adult-use cannabis retail dispensary license application period shall be opened for all applicants at the same time”.

Moreover, the plaintiffs are seeking an order from the Court (i) declaring the CAURD program an ultra vires and unconstitutional licensing category that both violates the MRTA and New York’s separation of powers doctrine, and (ii) enjoining the state indefinitely from “awarding or further processing any more CAURD licenses and/or from authorizing any more CAURD licensees to open adult-use retail dispensaries”. In other words, the plaintiffs contend that the OCM and CCB have acted outside of their authority in establishing the CAURD program because the New York State Constitution does not authorize unelected agency administrators to “craft their own social and economic policies” – a responsibility plaintiffs contend is a duty assigned to the legislature.

The CCB and OCM’s response is due Wednesday August 9 and the Court will hold a hearing on the TRO Friday August 11, where OCM will need to “show cause why an order should not be entered”. In a letter from the NY State Office of the Attorney General, the defendants argue that “[a]sking for a stop to all this activity is not asking for the status quo to be maintained, but rather is asking for affirmative mandatory action that will harm current licensees, and which should be issued only in extraordinary circumstances, which Plaintiffs have not established here”. With respect to the permanent injunction, such an action, if successful, would have a catastrophic impact on New York’s existing market by further delaying the rollout of additional licenses well into the future, it will put the +400 licensed but pre-operational CAURD winners in an indefinite state of limbo, and limiting the wholesale sales channels available to the 282 cannabis cultivators who have already struggled with the glacial pace of NY’s adult-use market roll-out.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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