Legal Cannabis Stores on Hold Again as Judge Continues Weed Injunction
A battle over who is entitled to early retail licenses has flared to the point where an upstate judge implored the two sides to reach a compromise before a hearing in two weeks.
Carson Grant was supposed to be in Bayside, Queens, on Friday for state inspectors to do a walk-through of his cannabis store, which is nearly set to open. He had already done a second round of interviews with candidates to staff the store and was eyeing a date at the end of the month to admit customers.
Instead, Grant spent Friday morning traveling two hours north of the city to Kingston to attend a hearing in a court case that may upend not only his own business, but nearly all the progress that New York’s legal cannabis market has made over the past two years. For now, his plans to open remain stalled by a court order in place on any new retail dispensary operations.
“The store is finished, we’re ready to go and now this week we get hit with this,” Grant said, who was awarded his license last November. “It’s just waiting, waiting, waiting. I’m not even going to announce the grand opening now.”
His plans were thrown awry by a suit brought by military veterans who contend that under the state law legalizing weed sales they and other designated groups, like women and the disabled, were specifically entitled to the same early consideration for retail licenses as members of the one group that has received them — people who were incarcerated under the state’s old drug laws, and their relatives.
On Monday, state Supreme Court Judge Kevin Bryant granted an injunction that halted the licensing program and prohibited the state from approving any new store openings while he considered the case. Four days later, before a courthouse packed with dozens of licensees like Grant, he extended the injunction until another hearing in two weeks, almost pleading with the two sides to reach an accommodation.
“The whole state is feeling this. I do believe that there is some space that you can all find together to bring this to a resolution that allows everyone to progress,” Bryant said Friday. “I don’t want anyone in the state to feel unnecessary pain. I just need some reasonable minds with some good ideas that can make everyone flourish.”
While the state had no immediate plans to issue more of the Conditional Adult-Use Retail Dispensary (CAURD) licenses, which are intended to give the designated groups early access to the legal pot market before larger players can move in, the injunction was a financial blow for authorized retailers who had been working toward opening for months.
An Opening Forestalled
When the ruling was issued, Jeremy Rivera was in the last week of preparing to open his store, Terp Bros, in Astoria, Queens. Rivera was awarded a license in April, approved for a location in May and signed a lease in June. Over the last few months, he has built out the space, secured inventory, and started hiring — at a cost of more than $300,000, according to details of a court filing. Like Grant, Rivera had a final inspection scheduled this week, and was planning to train employees over the weekend for an Aug. 15 opening date. But all of that has come to a halt.
“We were on a super-heightened schedule,” said Rivera. “We didn’t take any outside funding,” he said.
“We didn’t sell any equity. We were hoping to prove to the cannabis world that you can do this as a blue-collar man or woman coming up and wanting to start a business.”
With everything halted for the time being, a bus filled with licensees left Union Square in Manhattan at 6 a.m. on Friday for Kingston, to witness the second hearing. Others drove to the Ulster County seat from Albany or other parts of the state.
As Judge Bryant took his place just after 10 a.m. he told the pews of lawyers, licensees and other stakeholders that he understood the gravity of the situation. “I know that there is emotion, significant emotion that is tied and connected to these proceedings and it is going to be impacting futures,” he said.
Behind that emotion were the experiences of many people who had borne the brunt of a contentious program that is well behind schedule.
One year after New York legalized adult-use cannabis in March 2021, the state agency in charge of regulating and taxing the new industry announced it was creating conditional retail licenses. In order to reflect the social equity goals of the original law, applicants had to show that they or a relative had been convicted of a cannabis-related offense and that they have experience operating a business. Grant was among the first round of 37 people granted CAURD licenses last November.
The cannabis law, however, enumerates a number of different groups eligible for social equity licenses, including military veterans, minorities, women and justice-impacted individuals. By granting CAURD licenses only to justice-impacted individuals, the veterans argued, the state unfairly prioritized one social equity group above the others in a way that violated its own law.
But it took time for the first stores to get up and running. Many licensees ran into difficulties securing capital and locations. The state had promised to create a $200 million equity fund to help assist with financing, but that has failed to meet its goals thus far. Today there are only about 20 CAURD licensees who have been able to open stores. Only 24 locations have been approved.
Vets vs. the State
In court, Brian Burns, a lawyer for the veterans, argued “our clients are being excluded from applying for the licenses and the law says they shouldn’t be allowed to apply for it at the same time as everyone else.”
As a result, Burns said, they are “losing out on first-mover advantages, market shares that early entrants generally enjoy.”
Assistant Attorney General Shannan Krasnokutski argued the program was consistent with the law, and challenged the logic of seeking an injunction to stop the entire program.
“How is this injunction helping these plaintiffs in any way? It’s harming a lot of other people by keeping them out of the market,” Krasnokutski said. “This is a situation where you’re enjoining an entire industry with a lot of stakeholders that have been invested in it for a long time.”
Meanwhile, Christine Richardson, a licensee from the Albany area, jiggled her foot and sighed. With crossed arms and legs, she shook her head listening to the plaintiff’s arguments. Richardson had been seeking a license for months, calling the state agency weekly, asking for updates. At the last board meeting in July, just a few weeks ago, she was finally awarded a license as the state brought the number of authorized retailers up to 463. Most of those licensees have yet to open their stores.
With a $200,000 lease agreement already executed, Richardson has a lot on the line. “If the injunction is upheld, we will become financially unstable and unable to pay the rent obligations and therefore go into bankruptcy and pay legal fees associated with that bankruptcy,” she wrote in a letter to the judge.
Lawyer Jorge Vasquez said that, rather than the veterans, it’s licensees like the four he represents “who have invested the money and who are ready to open and are scheduled to open as early as next week” that are suffering the greater irreparable harm because of the injunction.
The sentiment drew claps and cheers from the onlookers as Bryant quieted them. “This is what I was talking about and I understand how you’re feeling, but I need you to restrain yourself,” he said.
Outside the courtroom, the mood of the licensees was hopeful despite the stresses of delayed openings and lack of resolution. “I’m very optimistic that it’s going to turn our way,” said Osbert Orduña, CEO of The Cannabis Place, a licensed home delivery cannabis service.
Others are still frustrated. “We were supposed to come into this program and be set up in a certain way. And it’s been slow,” said Harold Baines, who was granted a retail license in April. Baines is close to launching a delivery service based in East Harlem, choosing that business model because it is faster than building out a store given delays in receiving state funding.
“I was literally at the five-yard line ready to get open in the next few weeks,” Baines said. “Every time we asked a question to the state, it was just — if you can get open, get open. Now we can’t.”
Jeffrey Hoffman, a cannabis lawyer in New York with a weekly show on LinkedIn, said his phone has been ringing off the hook since the injunction.
“This is not the last lawsuit,” Hoffman cautioned. “There’s just going to be tons of lawsuits. Everybody’s going to sue.”
As the injunction remains in place, Rivera, of Astoria, said he is making sure everything is perfect for when opening day finally comes. “We’re feeling hurt as a community,” Rivera said. “But we will rebound.”