Rochester’s legal cannabis industry can finally move forward thanks to settlement

Last week marked a potential watershed moment for the legal cannabis industry in Rochester as a lawsuit preventing cannabis dispensary licenses from being issued in the Finger Lakes was settled between the state of New York and Michigan-based Variscite NY One, Inc.

Variscite had claimed the state’s Conditional Adult Use Retail Dispensary (CAURD) program – which is reserved for justice-involved individuals and non-profits – discriminated against interstate commerce by favoring those with New York State cannabis convictions and requiring a significant presence in New York, in violation of the US Constitution’s Dormant Commerce Clause.

While certain details of the settlement were originally unknown, parts became public when the settlement agreement was signed by the parties and e-filed with the court.

Among them: “Neither party is admitting fault or liability, and the public settlement agreement does not indicate the payment of costs to either side,” said Jacob H. Zoghlin, partner and chair of the cannabis law practice group at The Zoghlin Group, PLLC in Rochester.

Additionally, per the settlement agreement and stipulation of dismissal, Variscite will be awarded a general adult-use retail dispensary license in the first group to be awarded. If their application does not satisfy requirements set forth by the state Office of Cannabis Management, they will not be denied – instead, they will have an opportunity to update their application.

“We are closer to the finish line,” said William M. X. Wolfe an associate and member of the cannabis industry team at Harris Beach PLLC, about legal retail dispensaries opening in the Rochester region. Currently, just over a dozen licensed recreational dispensaries are open for business in New York – the closest to Rochester being the William Jane Corporation in Ithaca.

As of May 11, 2023, the state has issued 215 individual CAURD licenses. The application portal for general adult-use retail dispensary licenses has not yet opened.

Willie Thomas, of Rochester, applied for a CAURD license for the Finger Lakes region in September 2022 and has been waiting anxiously for the Variscite case to conclude.

“I’m very happy it’s over,” said Thomas, who is the owner of KandyKoolers – a slushie and taco business in Rochester, and the founder of the Monroe Minority Marijuana Alliance Organization. “The waiting was really hard. A lot of people got discouraged and it put a lot of people (who lacked the) funds to hang in there at a disadvantage.”

Thomas said he saw that discouragement peak among fellow applicants in March 2022 when the injunction brought about by the Variscite action was lifted for four other regions in New York, but not the Finger Lakes.

At one point during the lawsuit Thomas came across what he thought was the perfect property for him to set up his retail dispensary should his CAURD license be approved, however, he lost it.

“I did have a property, but I didn’t know how long the lawsuit would last,” said Thomas, who shared that his eligibility for a CAURD application stemmed from a 2013 marijuana-related conviction in Rochester. “Now I’m looking for a property again that’s suitable for the regulations and zoning.”

Wolfe said that some potential legal cannabis retailers in New York opted to get licenses in other states due to the injunction. It also caused supply issues for licensed cultivators in the Finger Lakes region.

“Because of the whole injunction and delay in the rollout, cultivators have a lot of products they can’t do anything with,” said Wolfe, who believes things will move relatively quickly now that the injunction is settled. “I’m hopeful OCM will keep the momentum up and by Fall the application process will open up for everyone.”

Zoghlin, who is a member of the New York State Bar Association’s Cannabis Law Section, where he has chaired the Local Government Committee since 2022, said he believes settling the Variscite case was likely important to the state because it had a disproportionate impact on the enjoined region(s) and undermining the policy goals behind the State’s CAURD program.

It could have also undermined the CAURD program — considered the equity bedrock of the state’s cannabis program. The state recently announced plans to increase the number of CAURD licenses that will be issued statewide from the originally planned 150 to 300 (18 of which are reserved for the Finger Lakes region).

“Settling this was important because it was the only way to get the benefits of this remedial program in the Finger Lakes,” Zoghlin said. “If they hadn’t been able to settle it, the Finger Lakes would have had to wait for the regular applications to open up” to receive CUARD licenses.

While Variscite has settled, there is one other pending lawsuit those interested in New York’s cannabis industry will want to keep their eyes on: It’s a lawsuit filed in Albany Supreme Court in March 2023 by the Coalition for Access to Regulated & Safe Cannabis.

Wolfe and Meaghan T. Feenan, senior counsel at Harris Beach PLLC, explained in a recent legal alert, that this suit accuses the state’s Office of Cannabis Management and Cannabis Control Board of “unconstitutional overreach” in its management of the state’s legalized cannabis effort.

The suit claims the state’s CAURD licensing process violates the intent of the 2021 Marijuana Regulation and Taxation Act by creating a new license class, providing priority on dispensary licenses to justice-involved individuals with a significant presence in New York. It also asks for a judge to immediately open up licensing to all retail dispensary applicants.

“This case is still ongoing,” Wolfe said. “I don’t think it will slow things down; if anything, it could speed things up.”

Caurie Putnam is a Rochester-area freelance writer.