By: Irina Dashevsky, Esq. and David Standa, Esq.
Earlier this week, the New York Office of Cannabis Management (the “OCM”) issued a memo stating that it had overstepped its regulatory authority and miscalculated the distance dispensaries are required to be from schools. According to the OCM, its error “impacts 152 businesses: 105 licensees (about 60 are open and operating stores) and 47 pending applications.” In the one-page document detailing the OCM’s proposed response to the error, the OCM says it will support a legislative effort to grandfather in “non-compliant” locations that are open and began operations before its announcement. Whether such legislation can be passed remains to be seen. For now, those open and operating “non-compliant” dispensaries can continue to stay open until their license renewal. No doubt, this is an incredibly unfair and stressful situation for anyone affected by this issue.
However, applicants who previously received approval for their dispensary locations but have not yet opened are even more out of luck and placed in a position of significant disadvantage. The OCM’s position is that those not-yet-open applicants will not be permitted to open at their chosen and previously approved locations and instead have to go find new locations for their dispensaries. The document identifies a $15 million fund set aside to compensate such applicants. The document states that applicants will be limited to $250,000 in compensation. In most instances, this amount is nowhere near the damages applicants will incur if they are unable to open their chosen sites. The OCM seems to have grossly underestimated the time, effort, work, and money that applicants put into sourcing approved locations, negotiating leases, building out facilities, and securing staff in anticipation of opening. Not to mention the speed to market, sales, market share and goodwill that these applicants will miss out on by being forced to restart all their efforts. A more realistic number of the total damages at issue here is probably closer to $200 million, and even Assembly Majority Leader Crystal Peoples-Stokes has acknowledged that the OCM’s band-aid approach is not going to stop justified litigation over this issue.
Compounding the myriad of issues and problems here is OCM’s arbitrary and unsupported distinction between “non-compliant” dispensaries that are open and those that are not, and the disparate treatment and options afforded to the latter group. If you are an applicant who has been impacted by the OCM’s recent announcement, you should consider all of your options for how to preserve your OCM-approved location.
This is a developing story, and there will likely be additional details as the full scope of the OCM’s missteps are disclosed. Be sure to follow our blog for more information on this decision and all cannabis developments in New York. If you have any questions or would like to contact the authors, please email David Standa at [email protected] or Irina Dashevsky at [email protected].