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Cases to Watch: Applicant Sues to Block Ohio from Using Racial Preferences in the Award of Commercial Marijuana Licenses

Posted by on Friday, December 15, 2017 in News, Updates.

In the book, I discuss the lack of racial diversity in the state-licensed commercial marijuana industry, as well as the measures states have adopted to boost minority participation in that industry (pages 454, 520-25). There are several steps states could take to improve diversity, but one of the most direct is to employ some form of racial preferences in the award of commercial marijuana licenses. Indeed, Maryland expressly adopted racial preferences for its medical marijuana licensing system back in 2014 (page 454). However, Maryland’s licensing board abandoned those preferences in 2015 (before awarding any licenses) after the state Attorney General’s Office opined that the preferences would likely violate the Equal Protection Clause of the Fourteenth Amendment (see pages 522-525).

Undeterred (or perhaps unaware of the Maryland developments), Ohio incorporated racial preferences into its own medical marijuana licensing system in 2016. The relevant provision of the Ohio statute (RC section 3796.09(C)) requires the state licensing board (the Department of Commerce) to

“issue not less than fifteen per cent of . . . licenses to entities that are owned and controlled by . . . . [persons who] are members of one of the following economically disadvantaged groups: Blacks or African Americans, American Indians, Hispanics or Latinos, and Asians.”

In 2017, the Department received applications from 36 firms that met the state’s minimum qualifying criteria. The Department then scored and ranked those applications based on their business, operations, quality assurance, security, and financial plans. (The book discusses scoring systems for licensing on pages 446-447. Ohio’s scoring rubric is similar to those of other states and can be found here.) In November 2017, it proceeded to award 12 provisional cultivation licenses. The winners included the top 10 scoring firms, but also applicants ranked 14th and 23rd, respectively.

Now, one unsuccessful applicant (PharmaCann) is suing the Department under 42 U.S.C. Section 1983, claiming that the Department’s decision violated the Equal Protection Clause of the 14th Amendment. PharmaCann was the 12th highest scoring applicant, and it claims that the Department passed it over in favor of the two lower ranking firms (who apparently met the definition of “economically disadvantaged”) to fulfill what is describes as a “racial quota” (complaint, page 5) system established by the Ohio statute quoted above. It is asking an Ohio court to block the Department from applying RC 3796.09(C) and to order it to give one of the challenged licenses to PharmaCann.

The full complaint can be found here. An article from describing the suit can be found here. This could be a very important case. As noted above, Maryland’s licensing authority abandoned racial preferences after the State Attorney General’s Office suggested the use of them would be unlawful, so Ohio’s program will likely be the first to be tested in court. The court’s decision could have important ramifications in Ohio and elsewhere for how the states seek to boost minority participation in the licensed marijuana industry.

On a related noted, I’ve organized and will be moderating a Hot Topics panel at the AALS conference in San Diego: The Promise and Pitfalls of the Marijuana Justice Act. (For more information on the MJA, see this earlier post here.) We have a great panel assembled, and much of our discussion will focus on the racial justice issues surrounding marijuana law. If you’ll be at the AALS, please come to the panel. It will be held on Wednesday, January 3, from 1:30-3:15 pm (pacific time), at the Marriott Marquis San Diego Marina, Marina Ballroom E, South Tower/3rd Floor.

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