Prince Lobel: New York’s CAURD Cannabis Program Temporarily Enjoined

On August 7, 2023, a New York state judge halted the state’s conditional adult use dispensary (“CAURD”) program by issuing a temporary restraining order against its continued implementation.  The ruling, by Justice Kevin R. Bryant of the New York State Supreme Court, comes in a lawsuit against New York’s Cannabis Control Board (“CCB”) and Office of Cannabis Management (“OCM”) by a group of service-disabled veterans, Fiore, et al. v. New York State Cannabis Control Board, et al., Index No. 907282-23 (Sup. Ct. Albany County). The order enjoins CCB and OCM from “awarding or further processing any more [CAURD] licenses and/or conferring operational approval upon any more provisional or existing CAURD licensees pending further order of this court.” A hearing is scheduled to be held this Friday, August 11, 2023.

The CAURD program was created by the OCM, not the New York State Legislature, with the stated goal of providing an opportunity for “justice involved” individuals – meaning individuals or their immediate families who were convicted of a marijuana-related offenses prior to the enactment of New York’s Marihuana Regulation and Taxation Act (the “MRTA”) – to own and control a conditional adult use retail dispensary. The Plaintiffs in Fiore allege that, as service-disabled veterans, they qualify as first-priority social equity applicants for licenses under the MRTA, but that priority position has been undermined by the CAURD program, in which they are not qualified to participate.  To date, approximately 450 CAURD licenses have been awarded by the state.

Plaintiffs allege that the creation of the CAURD program, which is entirely absent from the MRTA, is an unconstitutional overreach that violates the separation of powers doctrine of the New York State Constitution. They allege that the state agencies have failed to perform the duties imposed upon them by the MRTA and have “improperly assumed the role of the Legislature to impose their own social and economic policies over those of New York’s elected officials and, by extension, their constituents.”  Plaintiffs are asking for a judgment declaring the CAURD licensing program unconstitutional and permanently enjoining OCM and CCB from awarding or processing any more CAURD licenses, as well as from authorizing any more CAURD licensees to open retail dispensaries.

The Plaintiffs in Fiore have adopted many of the allegations by the plaintiffs in Coalition for Access to Regulated & Safe Cannabis v. New York State Cannabis Control Board, Index No. 902390-23 (Sup. Ct. Albany County), another pending action to which Justice Bryant has been assigned.  In that case, the plaintiffs include registered organizations that hold vertical licenses in connection with the medical cannabis program. They allege that they are being improperly excluded from New York’s adult use cannabis industry and that the CAURD program is unconstitutional. However, the plaintiffs in the Coalition case did not seek interim relief.  Instead, both the plaintiffs and the New York State defendants in the Coalition case moved and cross-moved for summary judgment.  The motion and cross-motion for summary judgment are still being briefed and accordingly have not been decided.

Unlike the plaintiffs in Coalition, the Fiore plaintiffs have moved for an order preliminarily enjoining OCM and CCB from awarding or further processing any more CAURD licenses and/or from authorizing any more CAURD licensees to open adult-use retail dispensaries, pending the adjudication of the motion and cross-motion for summary judgment filed in Coalition. The Fiore plaintiffs have applied for and, at least through Friday, August 11, 2023, have obtained the TRO for the injunctive relief sought pending further order of the Court.

The relief sought in Fiore is more extreme than what the plaintiff in the Variscite NY lawsuit obtained, which prevented the CCB and OCM from awarding CAURD licenses in five out of the fourteen regions that were designated for CAURD applicants, bringing the CAURD program to a standstill in those regions for several months. While the preliminary injunction in the Variscite NY case was eventually narrowed to only apply to the Finger Lakes region, it was only lifted due to a settlement of the case, which guaranteed an adult-use retail license for the individual plaintiff once the general application period opens.

If you are a CAURD licensee with questions regarding how this temporary restraining order and possible preliminary injunction may affect any contracts, leases, and/or goods and services agreements you have executed or are currently negotiating, please contact James K. LandauDavid HollandAndrew Schriever, or any other member of the Prince Lobel Cannabis Team.

With thanks to Dalton Battin for his work on this Client Alert.

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