By Sean Badgley
Let’s face it; Washington’s experiment is messy. One can see the mess in the fight in Olympia over integrating medical, or Seattle’s new focus on cracking down on dispensaries, or the fact that our model is not proving popular in the states that have followed us in legalization.
As I write this, the Liquor and Cannabis Board lists 688 licensees. The pace is rather abysmal. By the time this article is published, the LCB will have made a determination one way or another for approximately 20% of applicants, including those removed from the process. The LCB puts the onus on the applicants.
“Some of them are making too many changes in too short a period of time,” one investigator lamented to me. This quote was part of a conversation where an investigator wanted to impose an unrealistic deadline on an applicant who had spent tens of thousands of dollars readying a location, made all the necessary disclosures, and was scheduled for final inspection. Then the county declared a moratorium.
The company’s financial backer pulled out and the applicants were forced to find a new location. They succeeded in that, and were days away from finalizing a formal, written lease agreement. However, the investigator set a deadline that was several days prior to the lease signing.
The investigator would rather eliminate an application than provide the applicant one more week to shore up a lease agreement meant to last five years. When I pressured the investigator about the decision, he responded that “We’re all getting a lot of pressure from above to move the applications out of the process … one way or another.”
If the applicant fails to provide certain materials, the Liquor and Cannabis Board issues an intent-to-deny notice, the administrative kiss of death. So, what can applicants do when they miss the deadline?
First, they face an administrative proceeding. Applicant facing an administrative proceeding will want to talk to an attorney who’s familiar with Initiative 502 and/or state administrative law. It also means that if you do decide to fight it, you’ll be arguing against a lawyer from the Attorney General’s office.
It must be noted that some applicants probably ought to be denied. There comes a point when it’s rational to cut losses, regardless of the industry. However, there are reasonable circumstances that may cause a short-term delay in business, which would be relatively easy for an applicant to overcome in the absence of a deadline.
The good news is that if you decide to fight the Liquor and Cannabis Board, you are entering a well-defined process. Anyone who’s contacted the board with any frequency realizes there are no set-in-stone procedures for applicants. There are reliable patterns, but very few actual rules.
By contrast, the entire intent-to-deny process is mostly out of the Liquor and Cannabis Board’s control. Applicants are exposed to the defined rules of administrative proceedings, and can make their case in front of someone more neutral than a stressed-out, suspicious LCB investigator getting pressure from his or her boss to churn through applications.
The other redeeming factor of the process is that the LCB has likely issued thousands of deadlines.
For the staff lawyers at the Attorney General’s office, the case load is probably immense. Since this is new territory all the way around, every case has the potential to require novel legal research.
It’s easy to imagine a conversation between the Attorney General’s office and an attorney representing one of the applicants, who points out that there were several “irregularities” with the way the LCB treated the client. The lawyer might off-handedly mention how unfortunate it was that the agency couldn’t extend the deadline, because the client is now fully prepared to go through the application process. Now that the wheels are in motion, it’s probably a better argument to focus on whether the LCB did its job right, the lawyer might say.
If the Attorney General’s office had the power to settle the case, might it be tempted to do so, rather than squaring off with another lawyer over a process that everyone recognizes was a debacle, all the while with a complicated caseload piling up quickly. Might the path of least resistance be to simply tell the LCB that it should proceed with the application as planned?
This is the advantage of the procedural process. With the LCB out of the picture and the Attorney General’s office likely to be inundated with intent-to-deny proceedings, the attorneys have some power to do something an investigator cannot. Anyone who’s gotten a speeding ticket and pleaded guilty to having a “defective headlamp,” despite having perfectly functional headlights has witnessed the importance of judicial efficiency.
Should applicants be put through all this? Of course not. Yet this business is not for the faint of heart, and if an applicant can muster one more fight with the LCB, their license application may live to fight another day.
Sean Badgley is a Washington attorney who’s been working in the recreational cannabis industry for more than two years. He is the founder of C3 Law Group and can be reached at email@example.com.