An Albany Supreme Court justice has rejected a petition to stop five new companies from manufacturing and dispensing medical marijuana across New York state, lodged by five other companies already in the medical marijuana business. The decision clears the way for the new companies to move into a highly regulated market that opened after legislators passed the Compassionate Care Act in 2014.

An association of five for-profit entities that were already state-authorized to manufacture and dispense medical marijuana levied in 2017 what Justice W. Brooks DeBow called a hybrid declaratory judgment/Article 78 proceeding. The action aimed to stop the new group of five from entering the market, and the existing group of five argued that the plain language of the Compassionate Care Act—found at state Public Health Law § 3365 (9)—permanently limited to five the number of manufacturing companies that could be sanctioned by Department Health of Commissioner Howard Zucker.

But the additional five companies, each wanting to enter the market, combined to intervene in New York Medical Cannabis Industry Association's action against the Department of Health and Zucker. They argued that any limitation in the statutory language on Zucker was temporary. What's more, the five companies—Citiva Medical, Fiorello Pharmaceuticals, New York Canna, PalliaTech NY and Valley Agriceuticals—pointed to other language in the statute that they said made it clear Zucker could authorize additional manufacturers.

DeBow quoted from the statute in his Dec. 28 opinion while making clear that, on its face, the statute included seemingly contradictory language. He then looked to legislative history and the legislative intent in reaching a decision that said the association had not shown that Zucker, who last summer had authorized the new group of five manufacturers, had acted beyond the scope of his powers, or in an ultra vires way.

The applicable Public Health Law statutory provision, quoted in the opinion in New York Medical Cannabis Industry Association, Inc. v. New York State Department of Health, 2848-17, reads: “The commissioner shall register not more than five registered organizations that manufacture medical marijuana with no more than four dispensing sites wholly owned and operated by such registered organization. The commissioner shall ensure that such registered organizations and dispensing sites are geographically distributed across the state. The commission may register additional registered organizations.”

DeBow wrote that “despite the clearly inconsistent provisions in Public Health Law § 3365 (9), plaintiff/petitioner has not demonstrated that the plain language of that provision or the provisions of the CCA as a whole, or other legislative history demonstrates a legislative intent to permanently cap the number of medical marijuana ROs at five.”

He added that, “thus, plaintiff/petitioner has not demonstrated that the conduct of defendants/respondents [Zucker and the Department of Health] in registering more than five ROs was an ultra vires act.”

In reaching his decision, DeBow also pointed out that the legislative history of the CCA “provided little guidance.” But he looked to an Assembly floor debate in 2014 about the proposed statute, and noted that “in this colloquy, the sponsor of the bill acknowledged that the commissioner had unbridled discretion to register additional ROs in the event the market for medical marijuana demanded more product, which could be done by increasing supply through additional manufacturer ROs.”

Jerome Levy, a partner at Duane Morris in Manhattan and counsel for one of the new five companies, Fiorello Pharmaceuticals, said in an interview that “the decision will allow us [the new companies] to begin to set up our grow facilities and our dispensaries” in different areas of the state.

He added that “the judge's decision is completely acceptable to us. We feel that there's no basis in the law for limiting the number of organizations to five—that the law does say that [the] commissioner has the power to add more ROs.”

“By adding this second group of five,” he continued, “it will allow more dispensaries to be placed more evenly around the state leading to more access for people in need.”

Jennifer Kavney Harvey, a partner at Couch White in Albany who represented the association, could not be reached for comment. C. Harris Dague, a special counsel for state Attorney General Eric Schneiderman, represented the Department of Health and Zucker. The Attorney General's Office did not return a request for comment.