David Marquez likes representing the underdog.
With 31 years as a foreclosure defense attorney under his belt, he says he’s used to fighting “against the establishment.” But this summer he’s gearing his Long Island practice up for a completely new kind of legal battle. Any day now, the New York State Department of Health will select five companies out of the 43 hopefuls that applied for licenses to grow medical marijuana. That means “38 pissed-off companies” may have a bone to pick with the state. And Marquez wants to be their go-to lawyer.
With the licensing application costing, in some cases, upwards of a million dollars, he suspects losing companies may want to know why they haven’t been chosen. “Listen, If you believe you’ve been discriminated against in the licensing process, come see us,” Marquez says.
Legal challenges to the license awards would not be unprecedented: Other states that have issued medical grow licenses have faced several lawsuits claiming favoritism, errors, and lack of transparency.
In the year since Governor Cuomo signed the Compassionate Care Act to legalize medical marijuana in New York, legislators and the Department of Health have been slowly working to finalize regulations, release the grow license application, and, ultimately, select the winning licensees. The highly anticipated application was released without any prior notice at the end of April and was scheduled to remain open until the end of May. When the application proved too difficult to complete within a month, the Department of Health extended the due date by a week — until June 5.
In addition to the hefty price tag of the application itself (for starters, there’s a $10,000 application fee and a $200,000 fee if selected), its 33 complicated pages asked for background checks on all employees, financial documents, a “seed to sale” tracking system, architectural blueprints, and even a list of all equipment used at the marijuana grow facilities, right down to staplers. Experts say that under normal circumstances, the application would have taken at least three months to prepare.
“I found it peculiar they only gave applicants one month to do this,” says Marquez. “Much to my chagrin, whoever was putting in a licensee application must have anticipated this going back to November.” That was when the last East Coast Marijuana Business Conference and Exposition was held; the most recent was this past June at the Jacob K. Javits Convention Center. For those who hadn’t been preparing for months before the application was even released, their chances of completing a successful application — or completing it all — were slim. In fact, while 43 companies ultimately submitted applications, that number fell well below the estimated 300 that showed initial interest and were expected to apply. Among those 43 companies were Kannalife, spearheaded by entrepreneur Dean Petkanas, and Citiva Medical, owned by Josh Stanley, the self-proclaimed “cannabis ambassador” from Colorado.
With only five licenses to be awarded, it’s not a fair playing field, says Scott Greiper, president of Viridian Capital & Research, who counsels emerging cannabis companies. “The reality of supply and demand leans to the benefit of the wealthy and those with political influence.”
Assemblyman Richard Gottfried, who fathered the Compassionate Care Act, says that without any formal process that asks the state to justify how it arrived at its decision, the licensing competition could set up a “very dangerous system” leading to accusations of favoritism and improper influence.
That’s what Marquez is banking on.
“There’s certainly going to be room, at the very least, for questioning,” he says. “Where do we draw the line between an ‘arbitrary and capricious’ decision versus a decision that’s rationally based?” For instance, Marquez suggests, if all five licenses go to companies that are not minority-owned, some losing companies may be able to make claims based on discrimination. These issues could lead to judicial review or agency review over the state’s decision, Marquez adds.
The first step toward achieving transparency is for losing companies to request an explanation from the state health department as to how their applications differed from those that won. “If I put $2 million into an application, I don’t want some bullshit letter from the Department of Health and a one-paragraph answer as to why I didn’t get the license,” says Marquez. “If the answer is anything less than extremely detailed, people are going to have questions and want to answer those questions before they walk away licking their wounds saying, ‘Well, I tried.’ ”
Marquez says his strategy in most cases would likely begin with a request under New York’s Freedom of Information Law asking for the details of the winning licensees’ applications. Those not selected could then make comparisons between their applications and those of the winners — and possibly find grounds indicating they also might have won. A judge could rule that the losing applicant be awarded an additional license or be compensated for damages. “Do we find a situation where there was undue influence?” Marquez says. “And does that company deserve that license granted to be revoked, or is it just a matter of showing there was an opportunity for another potential purveyor that was equally qualified?”
Marquez has sent each company a letter congratulating it on its submission. The letter publicizes Marquez’s law practice and his eagerness to defend not only the losers, but also the winners if they later run into legal trouble. “I’m not picking one side over the other,” says Marquez, who supports medical marijuana legalization. “I want to represent everybody. I want to make sure this works.”