Not long ago, the Honorable Gary Sharpe, of the United States District Court for the Northern District of NY, granted Variscite NY One, Inc.’s (Variscite) request for an injunction prohibiting the NY State Office of Cannabis Management (NYOCM) from providing the initial batch of conditional retail operating licenses stemming from an application program held between August 25, 2022 and September 26, 2022. This month-long application period resulted in New York planning to issue 150 retail dispensary licenses, for which the injunction affects 63.
Variscite and Gay filed a complaint on September 26, 2022 against the NYOCM, and moved for an injunction soon after, arguing that the application process approved by the NYOCM is unconstitutional because it unlawfully restricts interstate commerce in violation of the dormant Commerce Clause. Plaintiffs sought an injunction prohibiting the NYOCM from issuing any licenses in certain New York geographic areas.
Judge Sharpe, applying the heightened level of dormant Commerce Clause scrutiny as was previously applied by district courts in addressing similar cannabis regulatory schemes, noted that the NYOCM made no effort to show the challenged provisions were narrowly drafted to serve a legitimate local purpose. Judge Sharpe also found irreparable harm to Variscite, and found that public interest will be served by granting the injunction because of the unconstitutional nature of the regulations that ultimately led to Variscite’s application denial.
More recently, Gay and Variscite filed a similar lawsuit against the City of Los Angeles, the Los Angeles Department of Cannabis Regulation, and Michelle Garakian (Interim Executive Director for the City of Los Angeles), and soon thereafter moved for a TRO. Plaintiffs raised similar arguments as they did in New York, but Judge Sherilyn Peace Garnett reached the opposite conclusion. The crux of defendants’ arguments was that plaintiffs lacked standing because they failed to comply and submit documents showing they met the criteria for the social equity program, and thus the harm suffered was not caused solely by the allegedly unconstitutional provisions of the social equity program. Despite the fact that Judge Garnett determined plaintiffs’ argument presented enough factual support to raise disparate impact implications which would require a court to apply strict scrutiny, Judge Garnett turned back to plaintiffs’ standing, and discussed the fact that cannabis is still federally illegal which may warrant abstention due to the lack of a national market for cannabis.
Judge Sharpe and Judge Garnett reached opposite conclusions. The lack of uniformity shown by these two decisions may very well continue to exist until the Supreme Court weighs in on the dormant Commerce Clause, or Congress legalizes cannabis.
These two decisions lay in the shadow of the August 2022 First Circuit decision ruling that the dormant Commerce Clause applies to the cannabis industry. That ruling, found at Ne. Patients Grp. v. United Cannabis Patients & Caregivers of Maine, 45 F.4th 542, 547 (1st Cir. 2022), along with the two cases mentioned above demonstrate a recent trend that may find its way to the Supreme Court.