A person wearing a protective mask out of concern about the coronavirus enters CommCan, a recreational and medical marijuana dispensary, in Millis, Mass., Thursday, April 9, 2020. A group of marijuana dispensaries have sued Massachusetts Gov. Charlie Baker over his decision to shutdown recreational pot operations in an effort to slow the spread of the virus. The lawsuit filed Wednesday asks the court to allow recreational pot shops to reopen, saying the closure will cause serious harm to the industry. (AP Photo/Steven Senne)
April 16, 2020
Massachusetts' adult-use cannabis industry will have its day in court Tuesday, as a group of local companies push to have their shops designated as essential businesses amid the ongoing coronavirus pandemic.
Massachusetts Gov. Charlie Baker issued an executive order in late March that extended the closure of nonessential businesses, which in Massachusetts includes adult-use cannabis shops, until May 4. The order does not include medical marijuana dispensaries, which are allowed to continue operating.
Baker has argued that keeping the businesses operational during the pandemic would attract customers from states where adult-use cannabis is still illegal, and further spread the virus.
"If we make recreational marijuana available, we are going to have to deal with the fact that people are going to come here from all over the place, across the Northeast, and create issues for us with respect to the fundamental issue we are trying to solve for here — which is to stop the spread," Baker said at a press conference.
'Essential' Medical Marijuana vs. Adult Use
The move prompted backlash from the cannabis industry in Massachusetts, which is the only state to distinguish between medical cannabis distributors and adult-use retailers when determining which businesses to keep open. Santa Clara County, California, which encompasses San Jose, Palo Alto, and Cupertino, among other cities, took similar action on the local level. But statewide, California, Colorado, Illinois, Nevada, and Washington have all deemed both adult-use and medical cannabis businesses to be "essential." Oregon and Michigan have guidelines that permit their local cannabis industries to continue to function.
The decisions were lauded as victories at the time by industry operators, who said that governments' decisions to permit cannabis businesses to operate gave the entire industry more legitimacy. The same rules didn't apply in Massachusetts — and several companies are mounting a fight.
Five cannabis companies and an Iraq War veteran who takes adult-use marijuana for medical reasons banded together to file a lawsuit against Gov. Baker, alleging his decision to close down adult-use dispensaries was irrational for a host of reasons, not least of which is that liquor stores and medical cannabis shops are permitted to continue operating.
"People haven't been able to quite accept that people use marijuana for medical purposes without being a patient. So when they look at these [recreational] stores they still attach a stigma to marijuana use and they deem it to not be essential," said Brandon Kurtzman, partner at the Boston office of cannabis-focused law firm Vicente Sederberg, which is representing the plaintiffs.
Medical Users Who Shop Adult-Use
Representing customers in the suit is Stephen Mandile, a veteran who sustained numerous serious injuries while serving in Iraq. Mandile turned to cannabis to wean himself off a pharmacy of drugs prescribed to treat the chronic pain and PTSD that still plague him. The suit states that medical shops are too far from his home to be convenient, so he relies on nearby adult-use retailers, according to a copy of the lawsuit uploaded by Law360.
Although Mandile's own situation seems to be primarily one of convenience, he founded a nonprofit to help other veterans who want to use cannabis medicinally. It's a high stakes proposition for veterans, because cannabis use puts them at risk of losing federal benefits. Many of them choose to buy adult-use cannabis, instead of medical, in order to keep their use under the radar.
It's not an uncommon situation in legalized markets across the country, where many cannabis users who would qualify for medical marijuana choose not to register out of convenience or fear, said Curaleaf CEO Joe Lusardi. Curaleaf did not participate in the lawsuit, but the multistate operator runs four dispensaries and retail shops in Massachusetts and works closely with Veterans Cannabis Project to fight for veteran access to medical marijuana
"A lot of people use the adult-use market to buy cannabis for medical needs. They use the adult-use market because they can do it discreetly without fear of being tracked in a government database," said Lusardi. "There are a tremendous amount of veterans who use that channel, and are frankly being discriminated against as a result of not being able to access cannabis legally."
Spike in Medical Marijuana Applications
Massachusetts medical marijuana applications have surged since adult-use was shut down. The Cannabis Control Commission reported 1,300 new medical marijuana patient registrations in the 10 days between March 23 and April 1, compared with 500 new registrations in the 10 days before that, according to WBUR.
Lack of patient access is one of the primary drivers behind the backlash to orders like Gov. Baker's and similar action in Santa Clara County, Calif. Despite an executive order from California Gov. Gavin Newsom designating cannabis dispensaries as "essential" across the entire state, Santa Clara handed down its own, stricter requirements. The order, which limits access to cannabis shops to medical customers only and requires recreational customers to use delivery instead, has proved frustrating for industry operators and difficult — if not impossible — for authorities to enforce.
Dennis O'Malley, CEO at Caliva, which operates two retail shops in Santa Clara County and one in Long Beach, said it was overly fussy to distinguish medical from recreational cannabis in California, where it has been legal to purchase adult-use cannabis since January 2018. O'Malley worried rules limiting patient and customer access would drive customers back to California's stubborn black market.
"The worst-case scenario is that you're turning to some unproven delivery service. You go on Weedmaps, you don't know if they're unlicensed or licensed, you're trying something new because you can't get it from your normal source," O'Malley said.
Under pressure from state authorities, Weedmaps, essentially a Yelp of the cannabis world, announced in August 2019 it would require license numbers from companies looking to list on its site. Beginning January 1, 2020, the company removed thousands of noncompliant listings for illegal and unlicensed dispensaries.
The restrictions in Santa Clara haven't held up well since they first appeared on the FAQ page of the county's public health order website. The language of the requirement is sparse and fails to define what constitutes a medical customer. Santa Clara County Executive Officer Jeff Smith even said that absent a clear means of enforcement the order would operate via the honor system.
Caliva for its part has chosen to interpret the restrictions as requiring in-store customers to provide a medical reason for purchasing cannabis, rather than showing an official medical card. Staffers are, however, offering customers the opportunity to apply for a medical card in-store. The company's shops, O'Malley added, are also adhering to proper social distancing guidelines and introducing a number of features, like senior and veteran shopping hours and cashless and contactless purchases through a partnership with Hypur.
Another Hit to the Industry
Customer access aside, there are compelling financial reasons for the cannabis industry to fight to keep the doors of its adult-use retail shops open. Back in Massachusetts, business at New England Treatment Access (NETA), a subsidiary of Parallel that operates several shops in the state, has been cut down by at least 80 percent since Baker forced the closure of adult-use dispensaries. NETA was not among the companies to participate in the lawsuit against Baker.
As of early April, Parallel Massachusetts had managed to avoid laying off or furloughing employees by putting them to work producing hand sanitizer for local health care providers. But Amanda Rositano, the regional president, said that if the situation drags on much longer, the company will have to make hard decisions.
"We are hopeful there might be reconsideration of the state designating adult-use as an essential service. Across the industry we are all being faced with really difficult decisions as to what to do next given these restrictions that are in place," Rositano said.
Although the outbreak of COVID-19 hasn't been easy for any industry, it has been especially devastating for cannabis. The nascent industry was slowly regaining its footing after a challenging 12 months marked by a disappointing adult-use rollout in markets like Canada and California, a rout in the capital markets, and a crisis related to illicit market vape products that sickened more than 2,800, killed close to 70 and gouged consumer appetite for vape products.
In Massachusetts, particularly, the rollout of adult-use cannabis has been long and labored. It took two years from the time Massachusetts residents voted to legalize adult-use cannabis in November 2016 for the first recreational shop to open. Since then, the state's Cannabis Control Commission has approved licenses on a rolling basis.
Just before the outbreak, Curaleaf's Lusardi said, the program was starting to show meaningful growth.
"The program was actually starting to show significant promise in Q1. The Cannabis Control Commission is getting more stores licensed and activated," Lusardi said. "But obviously now this kind of throws a wet blanket on the whole affair until we get past this crisis."
As a large cannabis company, Curaleaf has less to fear from the moratorium than smaller companies. Lusardi empathizes with those operators who "poured their life savings into opening an adult-use store in Massachusetts only to shut down."
Of course, Vicente Sederberg's Kurtzman plans to see to it that it doesn't come to that. His firm is arguing its case against Gov. Baker Tuesday afternoon in hopes Judge Kenneth Salinger will grant the industry some immediate relief.
"It could be an uphill battle if the judge just wants to look at it with respect to a very rigid interpretation of the law and not look into...what the damages have been and truly comparing it to other stores that have been deemed essential," Kurtzman said. "I like our chances if the judge is going to take everything into account."
The hearing kicks off at 2 p.m. ET at Suffolk Superior Court. Should the judge rule against them, Kurtzman said his clients might consider an appeal, but it will depend on the timing of the nonessential shutdown, which for now is set to lift May 4.
Updated April 16 to clarify that Weedmaps updated its policy in 2019 to require companies doing business on the platform to provide license numbers.