Court dismisses some claims against Illinois cannabis dispensary licensing authority and allows others to proceed regarding 5 unissued licenses still outstanding under Illinois’s medical cannabis law.

We’d previously written about this case when the complaint was filed challenging the failure to award some of Illinois’s still unawarded medical cannabis dispensary licenses and discussed what the implications were given that medical cannabis dispensaries are allowed to sell recreational cannabis from their current dispensaries and granted an additional license to open a second adult use recreational cannabis facility in Illinois under illinois’s Cannabis Regulation and Tax Act.

Back when the initial licensing round was occurring, there were up to 60 medical cannabis dispensary licenses available, but the Illinois Department of Financial and Professional Regulation only issued 55. Recently, several applicants that were not awarded licenses back during the initial round sought to change their addresses and move regions to get licenses in regions that were not awarded in the initial round of licenses awarded under the medical cannabis dispensary program.

These applicants for Illinois dispensaries were denied those new licenses under the changes and they sued. The State of Illinois filed a motion to dismiss which was briefed (you can read the briefs in this marijauna dispensary issue below). 

In rendering its opinion, the court described the Plaintiffs’ claims as follows:

Plaintiffs claim that IDFPR treated Plaintiffs differently than (at least) five other applications who had received licenses.2 According to Plaintiffs, “[a]t least five of those [55 original winning applications] became eligible for a dispensary license only because IDFPR allowed them to change the address proposed dispensary location.” (Dkt. 5 ¶ 7). Plaintiffs claim that at least three companies were allowed to change to a new address within the district in which they applied, and two were allowed to change to new districts. (Id. at ¶¶ 31-35). Notably, Plaintiffs claim that IDFPR allowed these changes after the deadline for submission of the applications.(Id.). The crux of Plaintiffs’ allegations is that IDFPR Plaintiffs are entitled to a license because IDFPR was required to issue all 60 licenses. 

In assessing the plaintiffs’ allegations, the court did find that under the law, they’d plausibly pled that the cannabis dispensary license process in Illinois met the requirements for granting them a property interest in those medical Illinois cannabis dispensary licenses – basically that they’d met criteria in pleading that elements of the award of a license vest them with an interest and that the state lacks discretion in this particular instance for the award:

The Court is persuaded that Plaintiffs have alleged a property interest in the license. Defendants’ arguments are better suited for summary judgment. Accepting Plaintiffs’ allegations as true and construing the facts in the light most favorable to Plaintiffs as we must at this stage, Plaintiffs have sufficiently alleged a nondiscretionary system providing for a valid entitlement. They have further alleged that they have met all predicate requirements for a license: they hold compliant property, they are qualified applicants, and there are no other qualified applicants for their requested districts. At this early stage, Plaintiffs’ claim may proceed. 

With regard to the claims that were dismissed – the gist of the reasons for dismissing did not involve the merits of the assertions made by plaintiffs about the lack of fairness and problems in the award process, but rather in their ability to sue the department and not the individual directors/officers of the department.

For some reason the plaintiffs’ brought the § 1983 complaint against the department and not its directors or the other individuals making the decisions (besides a single defendant medical examiner) and the court dismissed the claims against the department as § 1983 claims need to be brought against individuals acting under color of state law in depriving citizens of their rights.

The court similarly rejected the injunction claims brought against the department and not individual directors (in Illinois the professional regulation division has cannabis dispensaries) under administrative review law.

The court did allow the claims against the one individual sued in his official capacity, the head of the Illinois medical cannabis program. The plaintiffs sued for injunctive relief and not monetary relief and the court’s determination – based on cases cited and law applied regarding claims against those acting under the authority of state agencies – followed the same line of logic it described in denying the claims against the state agency because it failed for not being a claim against the individuals working for or acting on behalf of that agency:

Defendant [head of the Illinois medical cannabis program] fits squarely within the Young exception. [Head of the Illinois medical cannabis program]is a state official sued in his official capacity. (Dkt. 15, 15). Plaintiffs clarified that they do not seek any damages from [head of the Illinois medical cannabis program] in his official capacity, only injunctive relief. (Id.). That Plaintiffs’ complaint alleges an ongoing violation of federal law—Defendants’ violation of due process—is beyond dispute. Plaintiffs’ requested relief is “properly characterized as prospective.” Ameritech Corp., 297 F.3d at 587. Count I seeks a declaration that [head of the Illinois medical cannabis program] improperly refused to award Plaintiffs a license, and Count II seeks an injunction prohibiting [head of the Illinois medical cannabis program] from awarding any other applicant a license for the Plaintiffs’ requested districts. Count I and Count II are thus properly characterized as prospective and properly brought against Defendant [head of the Illinois medical cannabis program].

There was also an issue raised as to whether administrative review of the licensing decision was available and the court found it had jurisdiction to determine the claim and review the administrative determination.

The court granted the plaintiffs the chance to amend their complaint. Presumably as the issue of suing IDFPR and not the directors is easily remedied.

• You can read the decision from the court here on these issues related to Illinois medical cannabis dispensary licensing.
• You can read the memorandum in support of the motion to dismiss these claims against the processes used in awarding Illinois’s medical cannabis dispensary licenses that the state filed here.
• You can read the response in opposition to this motion to dismiss here.
• The reply brief is here.