Yet another lawsuit requesting a court order to halt retail marijuana business licensing in New York state was filed Monday evening, this time by a group of women entrepreneurs who allege state cannabis regulators broke the rules with how they created and are trying to implement a “randomized queue” of more than 2,000 dispensary license applicants.
The suit was filed Monday evening in the Supreme Court of New York in Albany County by seven women-owned social equity cannabis companies, each of which is hoping to win either a retail or microbusiness permit from the most recent application window, which ran from October to December last year.
All of the seven applied in the initial period, which was reserved for retailers that had already locked down real estate for their shops. But when the state Office of Cannabis Management announced last fall that it would be using the random queue process to put the applications in order for review, and then notified applicants in January they would only be giving out 250 retail permits and another 110 for microbusinesses, the group realized they were up against a brick wall and chose to sue.
The lawsuit is an “Article 78” legal action, meaning that it’s attacking the procedure by which regulators have gone about creating the randomized queue, instead of questioning the right of the OCM to proceed in such a fashion.
“We chose that vehicle because it puts us in a position to halt everything as soon as possible, which we feel is important. There’s a first mover advantage here at play,” said attorney Joseph Levey, who’s representing the plaintiffs.
Levey said there’s a meeting scheduled for Tuesday afternoon between the parties, and that “theoretically” the judge overseeing the case could issue a temporary restraining order halting all retail licensing the same day. A hearing has been scheduled for Friday morning at 9 a.m., Levey said.
A flurry of missteps
The entire randomized queue process, the lawsuit argues, is “arbitrary and capricious,” and asks the state court to halt it immediately. The suit also requests an order forcing the OCM to make public all of its policies and procedures related to retail marijuana business licensing and an order requiring the OCM to “reissue a new queue” for retailers and microbusinesses who applied between Oct. 4 and Nov. 17.
The suit also charges that the OCM didn’t notify applicants until the queue itself was released on Jan. 12 that social equity retail applicants who qualified for “extra priority” would also get three chances in the queue instead of just one, arguably decreasing the odds for many of the applicants, including the plaintiffs.
“Had Petitioners known that the rules were subject to change, they would have reconsidered submitting applications in the First Application Period due to the costly barrier to entry such submission required,” the suit states.
A spokesman for the OCM said the agency doesn’t comment on pending litigation.
Levey said his clients had all spent years prepping for the retail license window last year, and one of them even purchased an entire building with the intent of making at least part of it into a dispensary. He estimated the seven had each spent between $50,000 and $750,000 investing in their dreams of opening legal cannabis businesses.
“Everybody on that list in our lawsuit has spent years preparing for this moment, doing every tough thing that they were told to do … and they don’t feel like they’ve gotten that fair shot,” Levey said.
However, Levey also acknowledged he’s not sure what an ideal outcome to the lawsuit would be for his clients, since the OCM appears to be bound to the randomized queue process instead of a merit-based scoring system for permit applications.
“I don’t know what the answer is. I think throwing this lottery out and re-picking numbers would just bring on a whole raft of other lawsuits, and I don’t know that’s realistic, but that’s one potential way to go,” Levey said.
Levey said he’d “love” a merit-based process instead of the randomized queue, and said that’s what his clients believed they were preparing for. But it’s unclear if that may be on the table.
He also noted, however, that the OCM managed to “screw up” the randomized queue. Each retail applicant was allowed to apply for a maximum of three shops, and if each “extra priority” social equity applicant got three chances apiece, that would be a total of nine entries in the queue. But at least one company, Buds R Us LLC, has 10 entries in the queue, Levey said.
“If that’s wrong, what else is wrong? This is just what we know about,” Levey said. “If that’s happening by accident … the whole thing is compromised, as far as I’m concerned.”
The latest suit follows several others that have also been filed in recent weeks and requested court orders to halt or redo the licensing process.
The first, filed just before Christmas by Variscite NY Four and Variscite NY Five, was filed in federal court instead of state court and challenges the social equity requirements tied to New York residency. A judge heard arguments on Friday in that case but has yet to issue a ruling.
A second lawsuit, filed in federal court by Valencia Ag LLC this month, claims the social equity criteria in the New York marijuana licensing regime is discriminatory toward white men and thus violates the U.S. Constitution’s Equal Protection Clause. Hearings in that lawsuit are scheduled for April 29 and May 6, according to court records.