Marijuana Retailers File Suit to Void Delivery Rules
Making good on a warning issued months ago, the organization that represents most of the state's marijuana retailers is suing the Cannabis Control Commission to invalidate the new regulations that create a separate category of businesses allowed to deliver non-medical marijuana directly to consumers.
The Commonwealth Dispensary Association opposed the commission's regulations while they were in development last year and last week filed suit in Suffolk Superior Court asking a judge to void the regulations. The group and its attorneys from Foley Hoag argue that the new delivery-only license types violate the state's marijuana law, which they say gives the retailers the right to deliver cannabis under their existing licenses.
"Simply, the CCC overstepped its authority and disregarded state law, radically upending the established rules that hundreds of small businesses and their host communities operated in accordance with since 2016," the CDA said in a statement.
The CCC declined to comment on the ongoing legal matter, but Chairman Steven Hoffman was adamant late last year that the commission was on solid legal ground if the CDA carried out its threat to sue to overturn the commission's 3-1 vote to adopt the new industry rules.
"That's certainly their prerogative to do so. We made what we thought was the right decision, one that we stand by," Hoffman told reporters about the threat from the CDA immediately after the CCC approved its regulations on Nov. 30. "We're fully prepared to defend ourselves if that happens, but that is certainly outside of my control and outside of the commission's control."
The CCC's new regulations create two delivery license types: a "marijuana delivery operator" that can buy products wholesale from growers and manufacturers and sell them to their own customers, and a "marijuana courier" that can charge a fee to make deliveries from CCC-licensed retailers and dispensaries. Advocates have argued that delivery-only licenses will help level the playing field between large corporations and small businesses because the barriers to entry for delivery are typically far less burdensome than those for retail licenses.
But the CDA, which said it represents 70 percent of the marijuana companies operating in Massachusetts, argues in its suit that the state's recreational marijuana law, Chapter 94G, "explicitly mandates that Marijuana Retailers, which are heavily regulated and consumer-facing, shall be permitted to deliver" and that the CCC is violating the law by preventing existing retailers from delivering marijuana without first paying for and obtaining a delivery-specific license.
The law defines a marijuana retailer as "an entity licensed to purchase and deliver marijuana and marijuana products from marijuana establishments and to deliver, sell or otherwise transfer marijuana and marijuana products to marijuana establishments and to consumers." Delivery has long been allowed as part of the state's medical marijuana program, but home delivery has never been allowed in the non-medical side of the industry.
The CDA's lawsuit also claims that the regulations should be voided by the court because they were not approved by at least three "lawfully seated" commissioners.
The CCC voted 3-1 on Nov. 30 to adopt the regulations, but Commissioner Shaleen Title's initial three-year appointment to the CCC had lapsed Sept. 1 and she continued to serve on the commission as a holdover.
The section of state law that set up the CCC as an agency says that commissioners "shall serve for a term of 5 years or until a successor is appointed," but Title was an inaugural member of the CCC so her initial appointment was subject to a different section of the law that declares that the initial appointments made jointly by the governor, treasurer and attorney general "shall serve for a term of 3 years" without a clause specifically allowing the appointee to serve until a successor is named.
"[T]he regulations were not promulgated consistent with the law since only two lawfully-seated commissioners voted for the regulations. A third commissioner who voted for the regulations was not lawfully-seated because her term had expired and state law did not allow for her to holdover," CDA attorneys from Foley Hoag said in a statement.
If Title's vote in favor of the regulations were removed, the vote would have been 2-1, but the law that established the CCC says that "the affirmative vote of 3 commissioners shall be required for an action of the commission."
While the CDA made its objections to the new delivery structure known in the fall as the CCC was preparing to adopt the rules, the organization did not publicly raise issues with Title's continued service on the CCC. When the CCC voted to adopt the regulations, the CDA issued a statement that focused more on "misguided online retailer policies that will only serve to cannibalize the legal industry by large, corporate interests at the expense of our small businesses, communities and Main Streets."
"While the CDA is disappointed by today's outcome, this will not be the final word on delivery. The very real concerns of introducing online retailers should be heard and addressed," the group said in November. "To that end, we are prepared to contest the matter to ensure that policy continues to adhere to the statute and that the market is not upended."
The lawsuit puts the newly-reshaped CCC in a position of defending policies that a majority of members were not around to draft, debate or vote on.
Since the Nov. 30 vote to adopt the regulations, Title and Britte McBride -- two of the three commissioners who voted in support -- have departed and have been replaced by Nurys Camargo and Ava Callender Concepcion, respectively. Bruce Stebbins filled the seat that Kay Doyle resigned in May.
Hoffman voted in favor of the delivery regulations and Commissioner Jennifer Flanagan voted in opposition after an earlier attempt to delay delivery until 2023.
-State House News Service