New York judge just says no to serial cannabis litigator

New York Judge Anne Nardacci has denied the request from serial litigators Variscite NY Four and Variscite NY Five to stop the state’s adult-use cannabis program.

The plaintiff companies have filed lawsuits in several states challenging residential and incarceration restrictions on cannabis licenses. On Friday, Judge Nardacci refused to issue a temporary restraining order and a preliminary injunction as the Variscite companies had requested.

Priority status request

The Variscite group has claimed they faced irreparable harm if they did not receive priority status and get early entry into the market. However, the Judge noted in the order that Variscite didn’t file its original lawsuit against the state for a year after the program was announced. The judge also noted that if the Variscite companies aren’t reviewed in the early rounds of license approval, there would be more rounds to participate in.

In the judge’s denial, the court order stated that there were 2,853 December applications submitted.

“On January 30, 2024, the December Applications were queued and ‘randomly ordered.’ Defendants represent that Plaintiffs’ Applications each received three entries since they had indicated they sought ‘extra priority’ status, and as a result, ‘Plaintiff Variscite Four’s application appears at 816,2121, and 3812 in the review queue’ and ‘Plaintiff Variscite Five’s application appears at 949, 2153, and 4147 in the review queue.’ The Office intends to issue 450 retail licenses from the December Applications.”

Dormant Commerce Clause

The bulk of the Judge’s opinion though centered on the Dormant Commerce Clause. The Variscite companies argued on the merits of its position by saying that it was likely to win its case because of the Dormant Commerce Clause. The Commerce Clause of the U.S. Constitution provides Congress with the power “[t]o regulate commerce and that it prevents state laws that unduly restrict interstate commerce. The court document stated,

The Supreme Court has stated that the “dormant Commerce Clause’s fundamental objective [is to] preserv[e] a national market for competition undisturbed by preferential advantages conferred by a State upon its residents or resident competitors,” Gen. Motors Corp. v. Tracy, 519 U.S. 278, 299 (1997), and thus to “prevent[ ] the States from adopting protectionist measures and thus preserve[] a national market for goods and services.”

The Variscite team argued that the New York requirement to have a state conviction for cannabis to get a license violated the commerce clause. Judge Nardacci then reviewed various court opinions regarding cannabis and the commerce clause. The judge wrote that some courts have agreed that the commerce clause applies to cannabis, while others disagreed saying that because cannabis is federally illegal, the commerce clause doesn’t apply.

Nardacci decided to side with the courts saying the Dormant Commerce Clause didn’t apply.

This Court is persuaded by the reasoning of the courts in Brinkmeyer and Peridot Tree WA Inc., and Judge Gelpí’s dissent in Northeast Patients Group, and therefore finds that Plaintiffs are unlikely to succeed on the merits of their dormant Commerce Clause challenge.

Who is hurt most?

The Variscite companies also argued that applicants had only spent $1,000 apiece to apply for a New York license and so weren’t hurt by very much money. Instead, the Judge wrote that state cannabis applicants had likely spent far more than that on the process.

The judge’s order stated that an injunction would harm the approximately 400 conditional adult use retail dispensary (CAURD) applicants with provisionally approved licenses who have invested substantial capital into their businesses, including leasing property, and would harm their employees.

It stated, “Additionally, an injunction as to the Adult Use Application Program would harm the approximately 7,000 applicants who applied to the program, including the SEE applicants who encompass approximately 55 percent of the applicants.  Moreover, the requested injunction would harm cannabis growers and producers who have incurred significant expense operating under the expectation that several hundred CAURD and Adult Use Licenses would be issued without delay.”

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Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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