Latest New York cannabis lawsuit aims to invalidate 463 retail permits

The latest in a host of legal actions filed against New York marijuana regulators is asking a state judge to strike down a whopping 463 cannabis retail permits issued last year, alleging that authorities wrongly skipped a required step in the licensing process.

The lawsuit, filed May 9 in New York Supreme Court in Albany County by a quartet of would-be cannabis shop owners, charges that the state Office of Cannabis Management (OCM) and Cannabis Control Board (CCB) improperly issued cannabis retail licenses through the Conditional Adult Use Retail Dispensary (CAURD) program without requiring all applicants to coordinate with the municipalities where their proposed shops will be located.

Of those 463, only 122 are open for business as of May 10, according to the OCM.

The regulatory misstep, the lawsuit claims, should invalidate all of the CAURD permits because municipal notification is required by the 2021 state law that legalized marijuana and launched the new industry, the Marijuana Regulation and Taxation Act (MRTA).

“Prior to filing an application for licensure, applicants are required under MRTA § 76(1) to notify the municipality in which the proposed premises is located of the applicant’s intent to file an application,” the suit asserts. “However, CCB and OCM permitted CAURD applicants to apply for adult use retail dispensary licenses without identifying proposed premises and without municipal notification.”

The plaintiffs – Organic Bloom LLC, Niagara Nugget LLC, Blackmark LLC, and Windward Management LLC – all applied for retail permits during the most recent window, which was open from Oct. 3 to Dec. 18 last year, but have yet to learn whether or not they’ll receive licenses. They don’t seem hopeful, given that there were 4,303 retail applications filed in that period, and regulators have previously said they only intended to license at most 1,000 from that pool.

So they decided to sue and argued that the OCM and CCB “have acted in contravention of the statute and therefore outside of the scope of their statutory authority” by awarding the CAURD licenses without requiring they all notify their cities or towns where their shops would be opening.

“Despite MRTA’s application to all applicants, Respondents have arbitrarily treated certain applicants differently than others without any factual basis or rational reason for doing so,” the suit charges.

“Petitioners request a declaration that Respondents’ actions in waiving of MRTA requirements for CAURD and provisional applicants were unlawful, and any and all licenses improperly granted pursuant to this program are invalid,” the suit requests.

A spokesperson for the OCM said the agency does not comment on pending litigation.

Still, the suit is the latest in a wave of legal actions brought against New York cannabis regulators over the past few years, and some have resulted in temporary court orders that froze licensing altogether or partially for months on end.

It’s also not clear yet how drastically the OCM and CCB may yet be pivoting on licensing processes, or whether the plaintiffs may be in line for retail permits, following Friday’s dramatic government shakeup after a scathing state audit found a wide range of procedural flaws in cannabis licensing by the OCM.

Gov. Kathy Hochul asked OCM Executive Director Chris Alexander to step down after his term concludes in September. A report from the Office of General Services released on Friday found that OCM and CCB hadn’t properly staffed up to review all of the license applications and that the agency never intended to review all of them, despite accepting application fees from nearly 7,000 entrepreneurs for various license types.

The OGS report offered a number of policy recommendations to streamline and increase the pace of cannabis licensing, but at the moment it’s unclear just how much New York marijuana regulators may speed up or expand permitting, if at all.