Variscite Hearing Friday, NY Regulators Are Sued Again – Cannabis Business Executive

This Friday (1/26) marks the first hearing in Variscite NY Four et al v. NYS CCB et al, a lawsuit filed in December of last year that challenges New York’s cannabis residency requirements. Seeking an immediate cessation to licensing similar to what the adult-use program just went through, the plaintiffs allege that the state’s residency regulations precludes them from being granted “extra priority” status in the adult-use application program for the sole reason that they were “convicted of a cannabis crime under California law rather than New York law.”

That, they allege, is illegal under the “Dormant Commerce Clause” of the U.S. Constitution. “A state, including its subdivisions, may not enact laws that discriminate against citizens of other states,” reads the complaint. The plaintiffs also complain that when the state implemented the CAURD program before the general adult-use program, it violated its own cannabis law, which required all adult-use applications to be processed at the same time.

Friday’s hearing – which takes place at 11am at the James T. Foley Courthouse in Albany, Courtroom 6 on the first floor, with The Honorable Anne M. Nardacci presiding – is a Show Cause Hearing during which lawyers for the parties will present evidence why the court should or should not order OCM to cease awarding and processing any storefront applications for licenses in the adult-use and CAURD programs. According to legal resources, the hearing has three possible outcomes: 1) the complaint is dismissed, 2) issued, or 3) continued.

But Variscite isn’t the only legal headache currently facing the program. Wednesday, a new lawsuit was brought against the New York State Office of Cannabis Management (OCM) and its officers that only proves the proposition that when it comes to the state’s social equity program, “damned if you do, damned if you don’t” is the order of the day. Filed yesterday in US District Court for the Northern District of New York, Valencia AG v. NYS OCM et al takes an opposing stance from Variscite in seeking a declaratory judgment against the CAURD program for alleged violations of the Equal Protection Clause, arguing without using the word that the program is racist, and all but stating that the board members themselves are racist because they are not white.

The logic used, if one can call it that, is expressed in the lazy syllogism of a luddite. After listing board members by their “pigmentation” and presumed ethnicity, the complaint argues, “Absent from the positions of OCM Board members, Executive Director, and the Chief Equity Office is any person who could be described as a Caucasian or white man or who otherwise would fail to qualify as a minority or a woman according to Section 87 and to qualify for SEE application status.

“The status of having only minorities and women, and no white man, in the key positions associated with the OCM is statistically aberrant to such a degree as to lead to a reasonable, fair conclusion that the Defendants were selected to their aforementioned positions on the basis of race and gender.

“The Defendants thus have been in charge of implementing SEE standards and procedures that give favor and prejudice to their own race and gender. The situation is akin to having such key positions held by only white men, and allowing those white men to create and implement regulations and procedures that favor white men.”

Interestingly, the complaint goes out of its way to exclude any mention of two SEE groups prominently listed in the regulations: distressed farmers and service-disabled veterans. It’s an absence that could be construed as statistically aberrant to such a degree as to lead to a reasonable, fair conclusion that they were excluded on the basis of race and gender.

Section 87 reads:

§ 87. Social and economic equity, minority and women-owned businesses, distressed farmers, and service-disabled veterans; incubator program.

1. The board, in consultation with the chief equity officer and executive director, and after receiving public input shall create and implement a social and economic equity plan and actively promote applicants from communities disproportionately impacted by cannabis prohibition, and promote racial, ethnic, and gender diversity when issuing licenses for adult-use cannabis related activities, including mentoring potential applicants, 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. Such qualifications shall be determined by the board, with recommendations from the state cannabis advisory board, the chief equity officer and executive director, by regulation.
2. The board’s social and economic equity plan shall also promote diversity in commerce, ownership and employment, and opportunities for social and economic equity in the adult-use cannabis industry. A goal shall be established to award fifty percent of adult-use cannabis licenses to social and economic equity applicants and ensure inclusion of:

(a) individuals from communities disproportionately impacted by the enforcement of cannabis prohibition;

(b) minority-owned businesses;

(c) women-owned businesses;

(d) minority and women-owned businesses, as defined in paragraph (d) 42 of subdivision five of this section;

(e) distressed farmers, as defined in subdivision five of this section; and

(f) service-disabled veterans.

3. The social and economic equity plan shall require the consideration of additional criteria in its licensing determinations. Under the social and economic equity plan, extra priority shall be given to applications that demonstrate that an applicant:

(a) is a member of a community disproportionately impacted by the enforcement of cannabis prohibition;

(b) has an income lower than eighty percent of the median income of the county in which the applicant resides; and

(c) was convicted of a marihuana-related offense prior to the effective date of this chapter, or had a parent, guardian, child, spouse, or dependent, or was a dependent of an individual who, prior to the effective date of this chapter, was convicted of a marihuana-related offense.