Illinois State Reps Host Conference Announcing Developments in Federal Cannabis Litigation for Pending Dispensary License Lottery

Illinois Social Equity Dispensary Licenses

CHICAGO – State Representative Kathleen Willis, D-Addison and La Shawn K. Ford, D-Chicago, held a news conference via The Medical Cannabis Community on Sunday, September 13, 2020, at 1030 a.m. to announce significant developments in pending federal cannabis litigation dealing with the state’s dispensary license lottery.

The federal lawsuit was filed against the state’s Department of Financial and Professional Regulation (IDFPR), which regulates cannabis dispensaries, and Bret Bender, deputy director of the Cannabis Control Section in the department. The suit alleges that IDFPR’s decision to move forward on a lottery to award licenses without giving the “unsuccessful applicants any opportunity to challenge their ineligibility is unconstitutional, and cannot be permitted.”

Watch The Live-Steam Recording

Complementing the virtual video conference, State Rep. Kathleen Willis and La Shawn K. Ford submitted an open letter to Governor JB Pritzker, requesting his attention and proposed steps to move forward. The letter reads:

“September 13, 2020
The Honorable J.B. Pritzker
Governor
Thompson Center, 16^th Floor
100 West Randolph
Chicago, Illinois 60601

Dear Governor Pritzker:

So many in our Illinois community were excited and energized about the economic opportunities presented by the legalization of cannabis, particularly given your Administration’s pledge to ensure equity in the industry. For too many of my constituents, however, that excitement has now turned into frustration and bitter disappointment with the way the law has been carried out. As we suspect you have heard from many others, virtually no one is happy with how this is unfolding. Now, the issue is stuck in litigation in the federal court, where it could remain for years.

We propose a way forward; a solution that should satisfy most people. We have already secured a pledge from the attorney pursuing the federal lawsuit that he will dismiss his case in exchange for some extremely reasonable measures that will ensure that the process is fair to all applicants. If you and the Illinois Department of Financial Professional Regulation and state lawyers sign off on this proposed solution, the license lottery can proceed quickly, likely within a month, without any possibility of federal injunction.

When we passed the Act, one of the motivating goals was to ensure that the “little guys” would have a chance to win these license competitions. To level the playing field for people trying to break in, the Act rewarded social equity applicants with additional points, reduced their application fees, and established a fund to finance any winners.

Among the most important equalizing provisions, however, was a deficiency notice procedure whereby applicants would be provided an additional opportunity to make corrections if they fell short.

Traditionally, insiders win these contests, because they have the most industry knowledge (or can afford to hire the people that do). By providing for a 10-day cure period after notification of any deficiencies, we helped social equity applicants compete. (410 ILCS 705/15‑30(b)). The dispensary application itself says:

“If the Division receives an application that is deficient in any respect, the Division will issue a deficiency notice via e‑mail to the primary and alternate contacts identified on the application form. The applicant will have 10 calendar days from the date the deficiency notice is sent to submit the information requested….”

In practice, the Department sent these deficiency notices during the Summer grading process. To take an example, one applicant received a deficiency notice and 10-day opportunity to cure the defects that stated as follows:

            “The application did not include the requirement for a description of the features that will provide accessibility as required by the ADA.

            The application did not include the requirement for a description of the air treatment systems that will be installed to reduce odors.

            The application did not include the required statement that the issuance of a license will not have a detrimental impact on the community in which the applicant wishes to locate.”

To be clear, the applicant that received this deficiency notices was given the opportunity to fix these mistakes and achieve the perfect score necessary for inclusion in the lottery.

The problem is, plenty of applicants did not receive any such opportunity. Many did not learn that their applications were deemed insufficient until they received notice on September 3 that they did not win.

Another deeply troubling concern is the apparent inconsistencies in the way scores were calculated. Teams that submitted identical exhibits sometimes received different scores. Some of them were deemed perfect, whereas the same document submitted by other teams did not score the maximum points, disqualifying them from the lottery. The same was true for identical exhibits submitted by the same teams in different regions: the same team received perfect scores in some regions but was disqualified in others with the exact same exhibit.

As it stands, there is no process to challenge any of this. Teams that identify these errors or inconsistencies literally have no recourse. And if things had proceeded as scheduled, the lottery would have already happened, and their legitimate grievances would have been nullified and moot.

We believe that neither the letter nor the spirit of the Act has been followed. We simply cannot accept that teams who can show they would have qualified for the lottery but for the Department’s own scoring errors are nevertheless excluded from participating.

At a minimum, people must be given some opportunity to point out the errors for the Department’s consideration to ensure that we get this right. Nor can the competition legitimately end before all participants are given the same notice and opportunity to cure that was afforded to some. If some applicants received notice and an opportunity to cure, then all applicants should have been provided that opportunity.

These licenses are worth millions of dollars and would be life-changing for applicants who earned them. Almost 700 social equity applicant teams invested so much of their time and hard-earned dollars on this process. Believing the promises from your office that the process would be equitable, they dared to dream that they could participate in this exciting new industry. They have a right to be treated fairly.

For example, one of the plaintiffs in the federal lawsuit, Heartland Greens, is 100 percent African American-owned, mostly female, and led by Marquita Hollins, a military veteran. Residents of the City’s West Side, the group was brought together for this opportunity by a wrongfully incarcerated man who posted a notice in his neighborhood barbershop about investing into legal cannabis. Members include a Nutrition Educator at UIC, school board members, and employees of local community organizations.

This team received perfect scores on all measures but two. They were docked points for an exhibit that was deemed perfect when the same exhibit was submitted by other teams, and for an exhibit that they never had notice of deficiency or opportunity to cure that others were provided. Had they been provided that due process, they too would be eligible for the lottery.

To be clear, I am not contesting the right of the 21 selected teams to participate in the lottery, and I am not proposing that anything be taken from them. Provided there was no undue influence or insider information, they earned the right to participate, and should have it. But participation must also be open to others who legitimately qualified.

Given the weight of people’s collective expectations, this issue and the perception of unfairness is never going to just go away — if for no other reason, the litigation could linger for years. Should Illinois’ experience prove similar to that of New Jersey or Florida, the litigation could go on without end. Maryland, for instance, just completed a conflict-of-interest investigation into their licensing process that has delayed the issuance of licenses for many months.

While there is no perfect solution for the mess in which we find ourselves, we have a path for moving forward. We have spoken to counsel for the plaintiffs in the federal litigation and have secured his pledge to dismiss both the case and his request for an injunction. The proposed resolution is perfectly reasonable.

Any applicant that did not receive a deficiency notice for any exhibit should be given one, with the 10-day opportunity to cure anything that “is deficient in any respect,” as the application itself promises. As part of that deficiency process, applicants will be permitted to point out if they were graded incorrectly or inconsistently. After that, the applications will be scored, and the lottery can proceed.

While no solution is going to make everyone 100 percent happy, this one has several compelling advantages.

First, as stated, implementation of this statutory requirement will help level the playing field so that the industry is not dominated by insiders with specialized knowledge required for these applications. This will ensure that the Administration’s promises of true equity are backed by action.

Second, it should immediately end the litigation. The attorney handling the case has already agreed to this solution. While there is another case pending in state court, there is no reason to believe this solution would not satisfy the clients of that attorney as well. And if that case is not resolved, no judge is going to be inclined to grant relief where the State has already eliminated the heart of the problem.

If this solution is implemented, no lawsuits will have merit, and none will be able to get any traction in court. (And the Department could even consider requiring a waiver as a condition of participating in the proposed deficiency process.)

Third, it will undoubtedly increase the participation of true social equity applicants. I have already given you an example of a team that would qualify for the lottery if given the same opportunity to cure that was provided to others.

I have every confidence that this is exactly the kind of team the Administration wanted to see in the cannabis industry. Instead of disseminating 75 licenses to 21 teams (an average of three each), the distribution should be broader, which is part of the frustration with the situation.

Fourth, it can happen very quickly. Plaintiffs’ counsel has assured us that he will promptly dismiss the case. The deficiency notice period could start next week, and be completed well before the end of September. The lottery could occur as soon as the review is completed.

Finally, this agreed resolution will resolve most legitimate complaints. People are undoubtedly going to continue be unhappy if they don’t win. But the proper process will have been followed, and any unfairness remediated.

We look forward to discussing this with you further. We are also confident that our colleagues could get behind this as well. No one is opposed to a fair process. And no one believes that only 21 teams should receive licenses if in fact more should have been eligible. If process is made more fair, then we can more quickly advance the goals of the Act, including revenues for the State and equity for its citizens.

Sincerely,

Kathleen Willis                                                                            La Shawn K. Ford

House Majority Conference Chairperson                                State Representative”

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