Marijuana Retailers Ready To Sue Over Delivery Rules

Commissioners seem ready to close out a bumpy policy-setting process next week with a vote to adopt new regulations that would reshape the legal marijuana industry to include a home delivery aspect, but that decision could give way to a legal challenge in short order.

Through an attorney, some existing marijuana retailers recently threatened to sue the Cannabis Control Commission if it votes to adopt its latest set of industry rules on Monday, as is expected. Though the new regulations affect the entire marijuana industry, the provisions that would allow a new class of licensees to deliver marijuana to customers at home have drawn the most controversy.

"Put simply, the Commission's adoption and implementation of the Proposed Regulation would be in direct contravention of its own governing and enabling statute which clearly and unambiguously states that only Marijuana Retailers, as defined in the statute, are permitted to deliver cannabis products to consumers," Howard Cooper, an attorney with Todd & Weld LLP, wrote in the letter earlier this month.

Cooper added, "Given the clarity of the law here, please understand that our clients will have no choice but to challenge the Commission's Proposed Regulations in court if adopted. We write in hope of avoiding a legal dispute."

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Cooper's letter was not the first to claim the CCC's agreed-upon delivery framework would be illegal or to threaten legal action if it's implemented. But it was more direct than most and was written, Cooper said, in direct response to comments CCC Chairman Steven Hoffman made to reporters in October.

Asked about a letter from 19 state lawmakers questioning the legal grounding of the delivery regulations, Hoffman told reporters last month that the commission feels comfortable that it has the authority it needs to move ahead with its delivery plan.

"We do respectfully disagree ... We absolutely feel that we do have the authority under the statute," Hoffman said after the CCC voted 3-1 to approve its delivery policy on Oct. 20. "We certainly wouldn't have taken the action we took today without believing we have the authority."

The CCC voted 3-1 to approve its delivery policy and beat back an attempt by Commissioner Jennifer Flanagan to delay the implementation of home delivery for recreational marijuana. Last week, commissioners made a few minor tweaks to the regulations but did not substantially change the framework. A final vote was initially scheduled for late September, but was postponed until Nov. 30 so the CCC could accept additional comments.

Cooper's argument on behalf of some of the retailers who have sold more than $1 billion worth of marijuana since stores opened two years ago is essentially that a line in the CCC's proposed regulations that says a marijuana retailer "cannot deliver Marijuana or Marijuana Products to Consumers unless the Marijuana Retailer also has been issued a Delivery License" would violate the existing state marijuana law's definition of marijuana retailer as "an entity licensed to ... deliver, sell or otherwise transfer marijuana and marijuana products to marijuana establishments and to consumers."

However, the same state law also grants the CCC the authority to "establish and provide for issuance of additional types or classes of licenses to operate marijuana-related businesses, including licenses that authorize ... limited delivery of marijuana or marijuana products to consumers..."

Home delivery of marijuana has long been allowed under the state's medical marijuana program, and the Cannabis Control Commission has been thinking about a non-medical delivery framework for about three years. During that time, 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.

Though the CCC has approved a delivery policy, it postponed the late October vote it had planned to take to make official its new regulations -- including the delivery policy — after vocal opposition from a group of state lawmakers, some municipal officials and representatives of the existing brick-and-mortar retail marijuana industry.

The CCC's delivery policy would create two delivery license types: a "marijuana delivery operator" that could buy products wholesale from growers and manufacturers and sell them to their own customers, and a "marijuana courier" that would allow an operator to charge a fee to make deliveries from CCC-licensed retailers and dispensaries.

The CCC also intends to launch delivery with a period of exclusivity for participants in its Social Equity Program and certified economic empowerment applicants.

The Cannabis Business Association sent its own letter to the CCC last week to offer its "strong support" for the CCC's draft regulations and two-pronged delivery structure.

"Providing these two delivery license types will increase opportunities for equity in the Massachusetts cannabis industry, while providing a new business outlet for existing dispensaries and cultivators, while satisfying consumer demand that is currently being met by the illicit market," David O'Brien, the industry group president and CEO, wrote. "If we do not provide equal opportunities now for those who have been disproportionately harmed by cannabis prohibition, we will miss a rare opportunity to create an equitable adult-use cannabis industry in Massachusetts."