Falcon Rappaport & Berkman Secures Landmark Victory for Cannabis Client in Article 78 Proceeding

We are proud to announce that our litigation team, led by Partner Chris Slowik, has successfully challenged the New York State Cannabis Control Board's denial on our client's license application to sell cannabis for adult use. In a decision issued on April 14, 2025, the Supreme Court of Albany County annulled the Board's decision and remitted the matter for a new determination based on valid procedures.

Our client, DNP-Z, Inc., is a corporation owned and controlled by individuals who also own and control another corporation, DNP-Y, Inc., that also holds a license to sell cannabis for adult use. In November of 2023, DNP-Z applied for a license to sell cannabis for adult use, but the Board denied the application in June of 2024, based on a policy that prohibited the issuance of more than one license per entity and majority owner. The Board adopted this policy in May of 2024, without following the rulemaking requirements of the State Administrative Procedure Act (SAPA), which mandates public notice and comment, regulatory impact analysis, and other procedural safeguards.

We filed an Article 78 petition on behalf of DNP-Z, arguing that the Board's policy was an invalid rule that violated SAPA and the Cannabis Law, which grants the Board discretion to limit or not to limit the number of licenses, but also directs the Board to consider various factors, such as social and economic equity, market diversity, and the individual circumstances of the applicant. We contended that because the Board's policy was a rigid and arbitrary rule that applied to all applicants without regard to these factors, the Board was required to have followed the rulemaking procedures of SAPA, and its failure to do so rendered the rule unlawful.

The Supreme Court agreed with our arguments and held that the Board's policy was a rule within the meaning of SAPA, and that the Board did not comply with any of SAPA's procedural requirements before adopting and applying the rule. The court annulled the Board's denial of DNP-Z's license application and remitted the matter to the Board for a decision based on a properly promulgated rule or upon DNP-Z's individual facts and circumstances.

This decision is a significant victory for our client and for the cannabis industry in New York, as it clarifies the rights and responsibilities of both applicants and the Board, thereby promoting stability and ensuring that the process for approving cannabis licenses remains in accord with law and public policy.

Our Litigation and Cannabis attorneys have the knowledge and experience necessary to guide you through legal cannabis litigation matters. If you have questions about how we can assist you with your matters related to legal cannabis and applications in New York, contact us today.

The matter is DNP-Z, Inc. v. New York State Cannabis Control Bd. et al., No. 908870-24 (Sup. Ct. Albany County, decided Apr. 14, 2025) (link to docket) (link to decision).