New York State’s Legalized Marijuana Market on Pause After Supreme Court Ruling Halts Issuances of Conditional Adult-Use Retail Dispensary (CAURD) Licenses - Maron Marvel
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New York State’s Legalized Marijuana Market on Pause After Supreme Court Ruling Halts Issuances of Conditional Adult-Use Retail Dispensary (CAURD) Licenses

August 23, 2023

Brian E. Bergin

Jersey City

On Friday, the Supreme Court of the State of New York, Albany County issued an Order that has effectively placed the long-anticipated rollout of New York’s legalized marijuana market on hold.

In Fiore v. New York State Cannabis Control Board, et al., the Hon. Kevin R. Bryant granted the application of four service-disabled veterans and issued a temporary restraining order and a preliminary injunction that prohibits the New York State entities charged with overseeing this rollout – the New York State Cannabis Control Board and the New York State Office of Cannabis Management (together “The State or “State”) – from issuing any further “Conditional Adult-Use Retail Dispensary” (hereafter “CAURD”) licenses.

Prior to Friday’s ruling, the State had been issuing CAURD licenses at “an expanded and accelerated rate” in a concerted effort to launch the market. This ruling comes only two months after the State resolved a similar Federal Court challenge to the CAURD program in which the United States District Court for the Northern District of New York had issued a temporary injunction that for a time paused the issuance of CAURD licenses. The Federal Court matter was resolved between the parties in June 2023, and since then the State has “undisputedly accelerated” the processing and issuance of CAURD licenses.

The four veterans filed an Order to Show Cause that sought a temporary restraining order and a preliminary injunction against the State to stop the issuance of any further CAURD licenses and argued that the State was issuing licenses “to the exclusion of all of the other classes,” including “service-related veterans,” in violation of the State’s 2021 Marijuana Regulation and Taxation Act (hereafter “MRTA”). MRTA outlines eleven specific types of adult-use licenses that allow for the production and retail sale of Marijuana in the State, of which “service-related veterans” are one class. And, as it relevant here, MRTA importantly requires that “the initial adult-use cannabis retail application program shall be opened for all applicants at the same time.”

As part of their application, the veterans noted that MRTA does not include any language authorizing the State to issue the “Conditional Adult-Use Recreational Licenses” required to open a legal CAURD. The veterans also asserted that the Office of Cannabis Management (“OCM”), which had been issuing CAURD licenses, did not have the power to administratively create an additional license category not explicitly mentioned in the MRTA. The veterans aptly observed that the terms “Conditional Adult-Use Recreational Licenses” and CAURD do not appear anywhere in MRTA, and, further, that although the New York State Legislature previously amended the MRTA, it never authorized the creation of an additional class of licenses. The State conceded this during the pendency of this motion yet argued that the CAURD program was properly “acknowledged” by the State since it is specifically mentioned in the State’s official budget.

The Court agreed with the veterans’ arguments and enjoined the State from processing, approving, or investigating any pending CAURD license applications. The Court reasoned that the veterans had proven a likelihood of success on the merits of their claim that the State failed to follow the clear, plain language of its own legislation. It also specifically denounced any argument that the New York State Cannabis Board or OCM had the authority to establish new classes of licenses on its own, since any such reading would render meaningless the MRTA’s plain language outlining the specific classes of licensees and the requirement that license applications be opened to all applicants at the same. The Court additionally agreed that the Plaintiffs would suffer irreparable harm if the CAURD application program continued to proceed unchecked, since the marijuana market would continue to develop before these veterans would be issued an adult-use license.

The Court’s decision has effectively put a pause on New York State’s rollout of legalized marijuana, as it has capped, at least temporarily, the number of dispensaries with legal licenses. The ruling does exempt all retail CAURD licenses that were issued before August 7, 2023, so dispensary operators who were issued licenses before then can continue to legally operate.

The decision is noteworthy for several other reasons, one being that it tacitly admonishes the State for prioritizing retail outfits, who tend to have greater resources than the historically disadvantaged adult-use groups that MRTA sought to prioritize and protect. The decision also was sharply critical of the State and outlined the “numerous potential defects in the process followed by the state” to date. The Court went as far to even suggest that it was conceivable that a successful challenge to the CAURD program could result in a finding that every license issued under the burgeoning CAURD program could be retroactively ruled invalid .

The Court’s decision will almost certainly be appealed to the Appellate Division, New York State’s intermediate appeals court, and it is possible that the case could ultimately make its way up to the State’s highest Court, the Court of Appeals.

Following the ruling, the OCM has released a statement that reads: “The Office of Cannabis Management’s mission is to establish a first-of-its-kind adult use cannabis market that works to right the wrongs of the past, and we are proud of the work we’ve done to achieve that goal. We are reviewing the recent Court decision and will be in touch with all licensees to discuss the path forward but we will absolutely apply to the Court for exemptions from the injunction on behalf of provisional licensees who are ready to open as we work to provide access to safer, tested cannabis products. While today’s ruling is a disappointment, we are committed to working with the Cannabis Control Board to find a way forward that does not derail our efforts to bring the most equitable cannabis market in the nation to life.”


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