Challenging State and Local Cannabis License Denials: Current Trends and Issues
Guest post by Robert Becher, Chairman of Quinn Emanuel’s Cannabis Litigation Practice Group, and Carrie James, Associate
Applicants denied licenses or permission to operate a cannabis-related business have challenged unfavorable determinations in a variety of ways. One common basis for challenging the denial of a license or other form of permission to operate a cannabis business (“cannabis license”) has been to argue that the rules governing the grant of licenses were applied in an arbitrary and capricious manner. Litigants have also challenged cannabis license decisions by alleging that the process was corrupt. This article focuses on some of the more common challenges to cannabis license decisions and what can be learned from the outcomes to date.
Challenges Alleging Arbitrary and Capricious Application of the Licensing Scheme
Many lawsuits challenging decisions granting or denying cannabis licenses include a claim that the government department empowered to grant or deny cannabis licenses (the “department”) applied the statutory scheme and/or its own rules in an arbitrary and capricious manner. The arbitrary and capricious standard varies by jurisdiction but generally seeks to determine whether the department lacked sufficient justification for its actions and/or decisions based on the facts and circumstances of the case. Cases applying this standard have involved issues such as whether a successful applicant provided all of the required paperwork to qualify for consideration or whether a department considered sufficient evidence prior to denying a license.
Of the cases that have been appealed, the courts often have sided with the department over a disappointed applicant. Although the court decisions to date have focused on compliance with the state and local statutory schemes, they have given substantial deference to the relevant department’s interpretation of the statutory scheme, except where such interpretation conflicts with