By: David Standa, Partner
On Friday, in the case of Qualified Applicants v. Minnesota Office of Cannabis Management, et al. , Judge Smith, of Ramsey County District Court, ruled that the OCM’s decision to cancel the preapproval lottery after the lottery was judicially stayed late last year was a “public wrong” that was inconsistent with the OCM’s obligations under the Minnesota cannabis statute. According to Judge Smith, the OCM had a “legal duty to conduct a preapproval (social equity) lottery.” Members of the group of plaintiffs that brought the suit said they felt vindicated by the decision. But what exactly does the decision mean and what happens next?
The suit arose after an injunction was issued requiring the OCM to pause the preapproval lottery until after disqualified applicants had a chance to appeal their disqualifications. Instead of going through that process, the OCM chose to cancel the preapproval lottery outright and move straight to the social equity lottery and general lottery. As we wrote about here , there were always going to be issues with that decision. Those issues have not come to the forefront and the OCM has a bit of a mess on their hands. Judge Smith has issued what is called a Writ of Mandamus, which is a legal term that requires a government agency to do something. In this case, that something is conduct the preapproval lottery. However, there are still several previously disqualified applicants that have appeals pending in which they can now seek a stay to prevent the preapproval lottery from going forward. Additionally, there are also previously disqualified applicants that have had their disqualifications reversed based on the OCM’s own request for more information process. Given that so many previously disqualified applicants have already had their disqualifications overturned without judicial intervention, it is a safe bet to assume that there are several more previously disqualified applicants that were wrongfully disqualified. That suggests that a stay of the preapproval lottery is unquestionably necessary as those previously disqualified applicants deserve to have their appeals heard before the preapproval lottery moves forward.
The biggest variable here is how the OCM responds to the writ. First, it should be noted that due to the procedural posture of the case, the OCM has the option to comply with the writ or to move to dismiss the entire case. The OCM appears intent on pursuing the latter. The interim director of the OCM released a statement yesterday that did not make the OCM’s position clear but seems to suggest they intend to seek dismissal of the lawsuit on an expedited basis:
The judge’s order allows the Office of Cannabis Management to seek dismissal of the case on an expedited basis, which we intend to do. With the adoption of the rules governing Minnesota’s cannabis industry imminent, OCM expects to be able to begin issuing licenses to qualified social equity applicants in a matter of weeks. There are currently more than a thousand qualified applicants for social equity licenses who are first in line to receive business licenses, and OCM has been clear since November that any delay to the lottery would prove fatal to the preapproval process. At this stage, additional litigation and delays serve no one. OCM looks forward to continuing its work to get licenses out the door and launching the market as soon as possible. -Eric Taubel, Interim Director
Given how far along the OCM is with the process of pursing the social equity lottery and general lottery, it seems likely any preapproval lottery would take place concurrently, or maybe even after, those lotteries anyway.
Second, if dismissal is unsuccessful, or if the OCM seeks to comply with the writ, the OCM has some decisions to make. The writ does not indicate who is required to be part of the preapproval lottery just that the preapproval lottery needs to take place. The OCM could let the applicants it previously disqualified – most of which appear to unquestionably have been wrongfully disqualified – back into the preapproval lottery, or it can litigate the pending appeals and hope it does not suffer yet another legal setback. Given where things stand in the myriad of pending lawsuits, the cleanest outcome here is for the OCM to be successful in dismissing the Qualified Applicants case and moving forward with the social equity and general lotteries. That said, nothing has been clean or smooth so far in the Minnesota cannabis rollout.
David Standa ([email protected]
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