A federal judge may have shot down a legal bid for a restraining order against the State of Washington’s social equity cannabis licensing program, but the plaintiffs in that case have re-opened a new legal battlefront in New York, once again alleging that the state is in violation of the U.S. Constitution’s dormant commerce clause.
Attorney Jeffrey Jensen, a perennial plaintiff with a bone to pick against residency requirements for cannabis licensing, is back in New York after subverting the initial roll out of adult-use dispensary licenses, while also challenging residency rules in California and Washington State.
Jensen, who lives in California, is listed as the CEO of Variscite and president of Peridot Tree in CRB Monitor’s licensing database. In previous lawsuits, he has sued along with a majority owner, such as Kenneth Gay, as a social equity candidate.
“Peridot’s arguments all rest on the assumption that the traditional dormant Commerce Clause analysis applies to the cannabis market despite that market remaining illegal under federal law,” wrote U.S. District Judge Tiffany Cartwright in her Jan. 5 order denying Peridot Tree’s request for a temporary restraining order to halt licensing in Washington.
“Peridot does not cite any Ninth Circuit or district court decision within the Ninth Circuit that holds the dormant commerce clause bars a residency preference or requirement for a cannabis retail license,” she said.
Cartwright noted that the First Circuit Court of Appeals in Boston ruled that the dormant commerce clause does apply to the cannabis market, but in the form of protecting interstate investments rather than the transfer of actual cannabis. The plaintiffs argued this interpretation when making their case, but the judge was unconvinced.
“It makes little sense why the dormant Commerce Clause would protect an interstate market that Congress affirmatively prohibited, given that protecting this market would facilitate illegal interstate activity,” she wrote. “Peridot cannot use the dormant Commerce Clause to demand a constitutional right to participate in an illegal interstate market.”
Peridot filed an appeal with the Ninth Circuit Court on Jan. 11, while the Washington State Liquor and Cannabis Control Board asked the judge to dismiss the whole case.
A pretrial conference in the Washington case is scheduled for March 25.
California attorney jumps into New York fray
For now, it appears that New York will remain a battleground in the ongoing dispute over the dormant commerce clause and cannabis.
New York offers a preference for applicants who have a previous cannabis conviction from the state of New York or lived in a part of the state that has been deemed disproportionately impacted by the War on Drugs.
Jensen’s other dispensary company, Variscite, is pursuing a second lawsuit against New York cannabis regulators over residency requirements.
The New York case has its next hearing scheduled for Jan. 26 when the judge is expected to address the plaintiff’s motion for a temporary restraining order against the state’s cannabis licensing process.
The judge in that case on Jan. 11 granted the New York State Cannabis Control Board’s request for a postponement of their Jan. 10 deadline to file a response to the plaintiffs’ complaint, given that the plaintiffs were also seeking an immediate hearing for a restraining order.
Variscite originally sued the Empire State at the end of 2022. The lawsuit resulted in a court-ordered halt to New York’s roll out of cannabis licenses, which only ended when state regulators agreed to grant Variscite a dispensary license.
Previous lawsuits involving Variscite cited Kenneth Gay as the majority owner, though he is not identified in the most recent complaint filed in New York. Gay has a prior conviction in Michigan, according to the earlier lawsuit. The latest one does not name the majority owner but describes him as having closer ties to California than the Great Lakes State.
“Variscite Four is 51% owned by an individual who was convicted of a cannabis crime under California law rather than New York law,” said the newer lawsuit, filed Dec. 18, 2023. “He has an income lower than 80% of the median income of Los Angeles County, where he resides. He lived in a community disproportionately impacted by the enforcement of cannabis prohibition for more than seven years.”
New York regulators also argued in a Dec. 28 filing against the application of the dormant commerce clause, given cannabis’ federal legal status.
“As an initial matter, it is not clear that the Dormant Commerce Clause applies at all to the circumstances at bar because distribution of marihuana [sic] remains illegal at the federal level, and there is no lawful national market or interstate commerce related to cannabis products, which is an industry required to be closely regulated to, among other things, remain strictly within the confines of a state,” wrote Assistant Attorney General Ryan Hickey.
The New York regulators also challenged the plaintiffs’ timing of their lawsuit, claiming that they deliberately waited until the state started issuing new dispensary licenses.
“Plaintiffs’ eleventh-hour request is inequitable to the many existing applicants who are lawfully pursuing licenses and is contrary to the public interest. As Plaintiffs concede, Plaintiffs have been aware of the challenged licensing requirements and prior litigation over those requirements over the past year,” wrote Hickey. “In fact, Plaintiffs’ counsel Jeffery Jensen is a 49% owner of Variscite One, an entity that nearly a year ago brought a constitutional challenge to OCM’s licensing requirements under the Dormant Commerce Clause.
