Cannabis: New Industry, New Exposure

Feb 07, 2023
post featured image

By: Hon. Ruth Bogatyrow Kraft and Andrew P. Cooper, Esq., LL.M., with contributions from Terran Cooper.

Typically, when businesses are in their infancy, management, often hampered by financial constraints, does not seek experienced employment law counsel and, instead, operates based on perceived principles of good faith and fairness, along with a limited understanding of the regulatory environment. The emerging cannabis industry is no exception. Licensees, confronted with overwhelming, abundant and immediate obligations, and uber focused on things like securing financing, establishing operating guidelines, executing real estate transactions and complying with enormous regulatory compliance obligations, often forget the world outside of cannabis. 

Nowhere has this become more apparent than here in New York. With the emergence of a newly regulated adult-use cannabis market, populated (at least initially) by Conditional Adult-Use Retail Dispensary (CAURD) licensees, these mainly first-time cannabis business owners have been tasked with handling every aspect of opening a business in one of the most regulated industries on an extremely limited budget. In addition, they are now expected to start delivering cannabis products from a warehouse facility while simultaneously working on identifying a suitable brick-and-mortar retail location along with complying with all local permitting and other requirements under the Marijuana Regulation & Taxation Act (MRTA). Add to this the need to fast track sales and generate capital for business operations. While cannabis legalization has provided a historic opportunity, it is surely not without significant inherent pitfalls. 

Newly established dispensaries, justifiably, view websites as essential to business development. However, in a case filed on January 17, 2023 in the United States District Court for the Eastern District of New York entitled, Bunting v. Housing Works Cannabis, LLC, a plaintiff has charged that defendant’s website is not fully accessible to blind and low vision individuals in violation of the Americans with Disabilities Act as well as the New York State and City civil rights laws. A website serving as an adjuvant to a brick-and-mortar operation has been deemed a public accommodation by many jurists, notwithstanding the absence of a precedential decision in the 2nd Circuit. Notably, this lawsuit was filed before all the paint had even dried at Housing Works Cannabis Co, a mere 20-days after its grand opening. In the recent past, literally thousands of lawsuits have been commenced by blind and low vision plaintiffs alleging that websites did not afford them accessibility to goods and services and alleging willful, intentional discrimination. These suits have sought not only mere remediation but monetary damages as well. It is not uncommon for a single plaintiff to bring tens or even hundreds of “copy-cat” suits.

The financial consequences for start-up businesses can be crippling and, further, defending these actions diverts management from critical business development activities. Capital which would otherwise be directed toward growth will be diverted to litigation defense and settlement. Until the United States establishes a consistent, clearly articulated standard for website accessibility, one can only wonder how social equity, in an industry designed to achieve such a model, can be served.

Perhaps we should see the timing of Bunting v. Housing Works as fortuitous in that the case was brought when all CAURD licensees could learn how to avoid falling victim to this type of lawsuit and the opportunistic lawyers who bring them. Unfortunately, despite the handwriting on the wall, there are likely to be early licensees who will not properly recognize the risk and heed the warning.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship.  This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm.  Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.

Have Questions? Contact Us