How Article 78 Affects Cannabis Businesses In New York

The New York State Office of Cannabis Management and the New York State Cannabis Control Board are both governmental bodies whose actions are subject to challenge in appropriate circumstances. Cannabis industry participants, whether they are applicants or licensees, can use Article 78 proceedings to challenge final determinations of these bodies or unlawful policies adopted in violation of the State Administrative Procedure Act. 

Indeed, Article 78 proceedings have been used to:

• Challenge the Cannabis Control Board’s rule that if a license applicant seeks a waiver of the distance requirement between adult-use dispensaries in the public convenience and advantage, and that waiver is denied, their license application will be denied.
  
• Challenge the rule that a majority owner could only receive a majority interest in one adult-use retail dispensary license during the review of cannabis license applications submitted in the 2023 licensing window.
  
• Challenge certain marketing and advertising regulations that were not promulgated in accordance with the State Administrative Procedures Act.
  
• Challenge denials of adult-use license applications.
  
• Challenge the improper withholding of documents that should have been provided under New York’s Freedom of Information Law (FOIL).

How does Article 78 litigation differ from other kinds of litigation?

Article 78 proceedings differ from ordinary litigation in several key ways.

• First, they are resolved much more quickly than normal lawsuits.
• Second, there is a very short window in which to bring them. Unlike many lawsuits, which can typically be brought 3-6 years after the claim arises, an Article 78 proceeding must be brought within 4 months of the governmental body’s final determination. 
• Third, unlike a normal lawsuit, they require the party bringing the lawsuit to submit evidence and affidavits upon filing; there is not typically discovery (i.e., the exchange of documents, taking of testimony, etc.).
• Fourth, a litigant may be entitled to recover their reasonable attorneys’ fees in connection with the Article 78 proceeding. This differs from normal litigation, where attorneys’ fees are not typically recoverable.