Another Lawsuit May Hamper OCM’s Application Process

On December 18, 2023, another lawsuit was commenced against the Office of Cannabis Management (“OCM”) in the Northern District of New York, entitled Variscite NY Four, LLC and Variscite NY Five, LLC v. New York State Cannabis Control Board et al., alleging that OCM’s current application process discriminates against out-of-state citizens in violation of the United States Constitution’s dormant commerce clause.

Plaintiffs, Variscite NY Four, LLC and Varscite NY Five, LLC (collectively, “Variscite”) alleges that pursuant to OCM’s regulatory scheme a person seeking to have their application have “extra priority” must demonstrate that they are an individual from a community disproportionately impacted by the enforcement of cannabis prohibition by having (i) an income lower than eighty percent (80%) of the median income of the county in which the applicant resides; and (ii) a  conviction of a marihuana-related offense prior to the effective date of the Marihuana Regulation and Taxation Act, or had a parent, guardian, child, spouse, or dependent, or was a dependent of an individual who, prior to the effective date of the Marihuana Regulation and Taxation Act, was convicted of a marihuana-related offense.

Variscite further alleges that it satisfies each element to be awarded “extra priority” status but cannot prove its residence because the OCM’s application does not accept California documentation.  An individual who was convicted of a cannabis crime under California law, who has an income lower than eighty percent (80%) of the median income of Los Angeles County, and has lived in a community disproportionately impacted by the enforcement of cannabis prohibition for more than seven (7) years is allegedly fifty-one percent (51%) owner of Variscite.  Yet, as of now, Variscite cannot apply for “extra priority” status due to the application restrictions.  As a result, it is unable to receive, or be considered to receive, “extra priority” status in the application process.

Last November, a company with a similar name to the plaintiffs here -Michigan-based Variscite NY One – filed a suit seeking an injunction against the state after unsuccessfully applying for licenses in under the Conditional Adult-Use Retail Dispensary (“CAURD”) program, which halted the issuance of CAURD licenses in 5 New York regions for several months.

It is unclear whether this lawsuit will have a similar impact, but it could significantly hamper OCM’s ability to process the recently submitted adult-use applications. As a result, the establishment of New York’s cannabis supply chain may be further delayed.

That lawsuit prevented retailers from opening across significant portions of the state. The Wagoner Firm continues to monitor this lawsuit and its implications for current and prospective cannabis licensees.  If you are concerned on how this lawsuit will affect you or your business, please contact the Firm (518)-400-0995 to discuss further with a cannabis attorney.