The 2019 Cannabis Regulation and Tax Act provided the authority for the Illinois Department of Agriculture (the “IDOA”) and the Illinois Department of Financing and Professional Regulation (the “IDFPR”) to issue additional adult-use craft grower, infuser, transporter, and dispensary licenses. Each Department developed an application process for each license type to be graded by a third-party contractor. KPMG was awarded the contract to score the license applications. The award of several categories of licenses has been inhibited by a number of lawsuits. We have provided a brief summary of the status of each license category and the corresponding litigation below.
Craft Grow Licenses
The state of Illinois had initially planned to issue up to 60 new craft grower licenses on December 21, 2021, pursuant to the licensing application process developed by the IDOA in accordance with the 2019 Cannabis Regulation and Tax Act. However, those plans were foiled due to an injunction issued by Cook County Judge Neil Cohen on November 22, 2021, restraining the Department of Agriculture from announcing or issuing the licenses.
The Illinois Supreme Court consolidated four cases that affected fourteen craft grow applications and one case including the 60 licenses mentioned above. The consolidated case had its first substantive hearing on December 14, 2021, before Sangamon County Judge Gail Noll on several motions. The state argued that Judge Cohen overstepped his jurisdictional bounds by issuing the stay when handling ia GP LLC v. IL Dept. of Agriculture (“ia GP”) and advanced motion to dismiss made on the grounds that regulators should be allowed to issue licenses before the court makes rulings on the process. Upon review, Judge Noll found no error of law with respect to Judge Cohen’s injunction and stay in ia GP and the motion to modify that injunction and stay was denied. Additionally, she ruled against the motion to dismiss reasoning on the grounds that the disqualifications issued by the state were a final administrative decision, therefore subject to judicial review.
Following additional hearings and briefings, on March 14, 2022, Judge Noll lifted the stay on the issuance of the additional 60 craft grow licenses and restored the application of the 11 applicants challenging their respective disqualification. The IDOA is currently reviewing applications for the issuance of additional licenses.
The award of the 75 dispensary licenses contemplated by the Cannabis Regulation and Tax Act was delayed numerous times throughout 2020. On September 3, 2020, IDFPR announced that 21 of the over 700 applicants achieved perfect scores and the licenses would be issued pursuant to a lottery of those applicants. Public outcry ensued and in an attempt to address the controversy, the Illinois General Assembly passed H.B. 14430 which was signed into law on July 15, 2021. This Bill created a sequence of lotteries for both the original 75 licenses and an additional 110 licenses which would be based on social equity status. The winners of the various lotteries were announced in the fall of 2021, however, all have been enjoined from issuance due to ongoing litigation. There are currently three pending lawsuits impacting the issuance of the dispensary licenses.
The first lawsuit, WAH Group LLC dba Leafing Dispensary v. Illinois Department of Financial and Professional Regulation, et al (“Wah”), challenges the award of points to veteran applicants alleging that it essentially created an additional applicant class, which would violate the Illinois legislative framework. The original judge in this case issued a stay that prevented IDFPR from issuing any of the 185 dispensary licenses pending the resolution of the case. The next hearing in Wah is scheduled for April 25 and will be presided over by a new judge, covering the state’s motion to dismiss the case and remove the stay.
A second lawsuit, a consolidation of fourteen different lawsuits into one “supercase,” fundamentally challenges the application process, claiming violations of Illinois administrative law. In March, the judge in the consolidated Cook County supercase opined that she did not have jurisdiction over the stay. As a result, the administrative review of the licenses in the supercase will proceed, however, this case will not impact the stay on the issuance of the 185 licenses in question.
Recently, a third case was filed that challenges the entire licensing process based on the residency requirement. Finch, et al. v. Mario Tretor, Acting Secretary of IDFPR, (“Finch”), scrutinizes the additional points awarded to Illinois residents as part of the application process for the 185 dispensary licenses in question, arguing this requirement should be deemed unconstitutional under the “dormant commerce clause.” A residency requirement was recently struck down in Missouri under similar grounds. The outcome of this case could impact the entire process.
While these issues are being sorted the applicant must expend time, money, and effort to maintain their proposed businesses. This is particularly difficult for many of the hopeful social equity licensees. Husch Blackwell continues to monitor this situation. If you have any questions please feel free to reach out to Alyssa Samuel, Destinee Burrell or your Husch Blackwell attorney.