Lawsuit Casts Doubt on New York’s Cannabis Social Equity Program

August 15, 2023

A lawsuit against New York State has thrown the future of its cannabis social equity program into doubt. The plaintiffs, a group of disabled military veterans, argue that New York’s licensing process discriminates against them. A judge has issued a temporary order stopping any further dispensary licenses from being issued under the program.

An attorney for people who hold conditional licenses under the program is fighting back, telling Filter that the delay is causing them “irreparable harm” and could derail the whole legalization rollout. Other experts also worry about the implications.

In March 2021, the New York State legislature and then-Governor Andrew Cuomo approved full cannabis legalization through the Marijuana Regulation and Taxation Act (MRTA). The first adult-use dispensaries began sales in December 2022, though progress in opening up more stores has been slow.

From the beginning, cannabis justice advocates—with some allies in state government—sought to ensure that in legalizing, New York would begin to right the wrongs of prohibition. For this reason, the law contains “social equity” provisions. These are designed to prioritize and support people from communities disproportionately impacted by criminalization, and other marginalized groups, in entering the new industry.

New York has “improperly limited eligibility” and “indefinitely postponed licensing of hundreds of additional dispensaries necessary to satisfy consumer demand.”

In 2022, the state launched its “conditional adult-use retail dispensary” (CAURD) licenses. These are reserved for people with some history of marijuana arrests or jail time. They have to have been New York residents when arrested, and must also have at least 10 percent ownership in a business that has been profitable for at least two years. All dispensary licenses issued to date have been limited to people who meet these criteria; other people, under the rules, will have to wait until later to apply.

On August 2, four plaintiffs—Carmine Fiore, William Norgard, Steve Mejia and Dominic Spaccio—filed a suit against the New York State Cannabis Control Board and Office of Cannabis Management. They allege that in issuing CAURD licenses, New York has “improperly limited eligibility for this special, yet legally impermissible, license category,” and “indefinitely postponed the licensing of hundreds of additional dispensaries necessary to satisfy consumer demand.”

The suit asks the court to rule that the licensing process is unconstitutional and in violation of state law, and to stop the state from awarding or processing any further conditional licences. The plaintiffs had planned to open their own dispensary under New York’s social equity provisions. All four are service-disabled veterans—a category specifically named in the state’s cannabis equity plans, but not included in the current licensing round.

On August 7, the New York State Supreme Court issued a temporary injunction, suspending license review for five days. Then, following a hearing on August 11, the court issued a temporary restraining order for two weeks. All parties will return to court during that time, before the judge makes a final decision.

In support of their case, the plaintiffs cite MRTA provisions which state that New York “shall create and implement a social and economic equity plan and actively promote applicants from communities disproportionately impacted by cannabis prohibition … by prioritizing consideration of applications by applicants who are from communities disproportionately impacted by the enforcement of cannabis prohibition or who qualify as a minority or women- owned business, distressed farmers, or service-disabled veterans.” They also cite language in the law requiring “fifty percent of adult-use cannabis licenses to social and economic equity applicants and ensure inclusion of” groups including military veterans.

“The plaintiffs are arguing: We’re disabled veterans and under article 4 of the MRTA, we ought to get priority in the application process as social equity applicants, and under article 4 the provision says that when the application window opens it will open to all people,” David C. Holland, a New York-based marijuana law attorney, told Filter. Holland’s firm represents several conditional dispensary licensees but is not a party to the lawsuit.

The state’s defense, Holland explained, is that it has broad discretion to address inequalities in making decisions on how to structure the licensing process.

“The state in response said: Under Article 2, it says the state can create permits as needed, and basically there’s a fundamental emergency or crisis that additional license groups or permit types can be created by the Cannabis Control Board to be able to fill gaps,” he said, “and therefore the CAURD program is in keeping with the restorative justice approach of the preamble of the MRTA, saying they want to help people that have been impacted by the drug war.”

“They already have money invested into building their business after they got their provisional [licenses]. For them not to be able to open is irreparable harm, they’re losing money every day.”

Wei Hu, an attorney at MRTA Law, shared with Filter a document he is submitting to the court on August 15. Hu is representing 11 business owners who were awarded conditional dispensary licenses throughout the state, and is asking for “emergency intervention to redress the unique and irreparable harm” caused by the temporary restraining order. While his clients are not a party in the lawsuit, Hu is asking the court to let them “intervene” because they are directly affected by it.

Hu argues that nothing in state law specifies that all equity licenses must be issued at the same time. He notes that of the several hundred CAURD licenses issued statewide, seven have gone to military veterans who qualify as justice-involved. Hu argues that conditional license holders, who are already paying significant costs as they prepare to open for business, will be most harmed by the court order.

“They have been preparing to open their stores, using their life savings, in order to fund all the buildout costs, construction costs, hiring,” he told Filter. “They’re switching jobs, they’re already paying leases. They already have money invested into building their business after they got their provisional [licenses]. For them not to be able to open is irreparable harm, they’re losing money every day.”

“The public interest is not served by a rollback of the dispensaries that have already opened,” Hu continued. “We need more dispensaries, not less. We need this program to move forward … What happens when you slow the rollout? It decreases confidence in this market, it delegitimizes it. People will go to the illicit or legacy stores, and it will slow down the transition and possibly thwart this entire regulated adult-use market.”

An estimated several hundred unlicensed cannabis dispensaries continue to operate throughout the state, attracting negative attention from politicians, regulators and law enforcement. By comparison, just 18 legal dispensaries have so far opened for business. A delay in state-issued licenses would likely give many residents a reason to keep visiting unlicensed stores—unless officials shut them down.

Other cannabis advocates worry about the impact of the injunction on New Yorkers harmed by the drug war.

“It took so long to finally roll out the CAURD program, and it is really unfortunate when a lot of folks I know were awarded licenses, and [began] the process to start building out their dispensaries, they’re all in limbo right now,” Emily Ramos Rodriguez, co-founder of ¡High Mi Madre!, told Filter. Ramos Rodriguez lobbied for the MRTA, and has helped produce cannabis events and education in New York City. “The CAURD program is the only initiative right now that [the state] has put together for people who have been directly impacted to get a license and actually make reparations from the War on Drugs.”

“It set in motion those people who have said, ‘Let me file litigation and see if I can’t strongarm the state into giving me greater opportunity to get a license.’”

This is not the first lawsuit New York state has faced over its cannabis equity program. Kenneth Gay, the principal of Variscite Inc, previously sued the state in federal court, arguing that he was unfairly excluded from obtaining a dispensary license—he had a prior marijuana conviction—because he was a Michigan resident. In November 2022, a federal judge issued a partial injunction blocking the state from issuing licenses in several regions of New York. But the lawsuit was ultimately settled in May: Gay received a guarantee from the state that he would be awarded a general (non-equity) adult-use dispensary license when the state begins handing those out. Neither side admitted any wrongdoing or liability.

Holland worries about the precedent set by this decision.

“That set in motion those people who have said, ‘Let me file litigation and see if I can’t strongarm the state into giving me greater opportunity to get a license,’” he said. “As a result of [the judge’s August 7 injunction], I’d be highly surprised if we didn’t see more lawsuits filed between now and August 25, when [this case] starts up again.”



Image of cannabis dispensary in Union Square by Eden, Janine and Jim used via Flickr/Creative Commons 2.0

Alexander Lekhtman

Alexander is Filter's staff writer. He writes about the movement to end the War on Drugs. He grew up in New Jersey and swears it's actually alright. He's also a musician hoping to change the world through the power of ledger lines and legislation. Alexander was previously Filter's editorial fellow.

Disqus Comments Loading...