Adult-Use Cannabis Dispensary Shutdown in Massachusetts 'Catastrophic' for Industry

After an unsuccessful lawsuit urging the state to allow adult-use operators to serve customers during the COVID-19 pandemic, attorneys and retailers note financial losses for industry and lack of access for customers.

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In a week, Gov. Charlie Baker’s executive order shutting down nonessential businesses in response to the coronavirus pandemic is scheduled to expire in Massachusetts, but owners of adult-use cannabis dispensaries, which have been closed since March 24, are bracing for the possibility of another extension or restrictions to how they can operate once the shutdown is lifted.

Most licensed cannabis businesses have been able to continue sales in legalized markets in the U.S.—with some restrictions to maintain social distancing—as states continue to attempt to mitigate COVID-19. However, Massachusetts has been the state-level exception, as it drew the line between medical and adult-use businesses. Those operating under the medical program have been deemed essential, while adult-use retailers were given 24 hours’ notice to shut down.

“[Massachusetts] is really an outlier in terms of how the governor has responded to COVID with respect to the cannabis industry,” says Adam Fine, a partner at the national cannabis law firm Vicente Sederberg, which represented a group of cannabis companies and a military veteran who filed a lawsuit in response to Gov. Baker’s emergency orders. “Unlike liquor stores and unlike a lot of other sectors, [adult-use cannabis companies] really were treated differently. …It’s about as catastrophic as you can get for their businesses. They were forced to shut down with very little notice in a highly regulated industry after they had already implemented social distancing.”

Fine added that businesses are worried about employee retention, as it can be very expensive to hire and train people with the requirements in the cannabis industry. Plus, there is no federal safety net for the cannabis industry, although lawmakers have introduced a bill to grant state-licensed cannabis businesses access to COVID-19 emergency funding. 

“Marijuana remains illegal under federal law, which means these bailouts and small business loans are not available to these businesses,” he says. “The businesses were already adapting, and the market was taken out from under them.”

Massachusetts Superior Court Judge Kenneth Salinger ultimately denied the plaintiffs’ emergency for a preliminary injunction April 16. Ellen Rosenfeld, president of the family-owned, vertically integrated CommCan, the lead plaintiff in the case, said although she was unsure of the chances of winning the lawsuit, she felt it was important to protest the governor's decision.

“We were hopeful with our argument, especially after the governor was overturned on the vape ban,” Rosenfeld said, referencing the state judge ruling that Gov. Baker lift the ban of medical cannabis vaping products instituted during the outbreak of vaping-associated illnesses that began this past summer. (Ultimately, the Massachusetts Cannabis Control Commission stepped in and quarantined all vaping products.)

However, Rosenfeld said she was encouraged by Judge Salinger’s written decision. “The judge could have said, you know what, these marijuana companies could not possibly protect us, and they should be shut down, but that wasn’t it at all.”

Gov. Baker had indicated that his primary concern was that people from nearby states would travel to adult-use cannabis stores in Massachusetts during the state of emergency, leading to crowds, long lines and thwarting social distancing efforts and contributing to the spread of COVID-19. Before the shutdown, statewide adult-use cannabis sales had reached $157 million in 2020. 

“Plaintiffs make a convincing showing that there may be other ways to address these concerns that would allow adult-use marijuana establishments to restart their businesses without harming public health or safety—for example by temporarily limiting non-medical marijuana sales to Massachusetts residents who have ordered in advance and arrive during an assigned time-slot, authorizing adult-use retail stores to make curbside deliveries of their products just like medical marijuana treatment centers, and requiring other measures to ensure that customers and workers keep a safe physical distance apart,” Judge Salinger noted in his decision. “Nonetheless, the governor was not legally required to implement a different alternative or ensure that his emergency closure orders impose the smallest possible economic burden on adult-use marijuana establishments.”

CommCan is licensed under both the medical and adult-use program, and Rosenfeld implemented several protective measures at both the Millis and Southborough dispensaries, including giving staff masks and gloves, disinfecting surfaces what felt like “1,000 times a day,” discontinuing tablet menus and marking "xs" on the floor indicating six-foot distances using painters tape. They also quickly pivoted to offering curbside pickup after the Cannabis Control Commission allowed this option during the outbreak and are hoping to have home delivery up-and-running as soon as possible. She said the fact that she can only sell under the medical program and not adult use feels arbitrary.

Although the medical and adult-use store in Millis and the medical-only store in Southborough can remain open, the largest sales by far have been from the adult-use side, which she launched in November 2019.

Sales are steady at the Southborough store, but losing adult-use hit Millis hard. Only 10% of her customers, and therefore sales, are medical patients at that location. However, the average medical patient sale has doubled, she says.

“I still have the cultivation facility. I’m still growing the same plants,” Rosenfeld says, adding that she has about 90 employees between the cultivation and manufacturing and the dispensaries. “I can’t shut the lights off, the heat, the air conditioning. My bills are going to be the same.”

However, there have been some encouraging days: in the two weeks before adult-use stores were ordered to close, Rosenfeld says there were some days she saw more than a thousand customers, and sales doubled. She’s also seeing more medical patients at the Millis store, with about 10 to 15 new patients a day.

The first week after Gov. Baker issued the order to close adult-use stores, from March 23 to April 1, the state's Cannabis Control Commission reported that it received more than 1,300 new patient registrations, which was an increase of 158% from the previous 10-day period.

But Brandon Kurtzman, a partner with Vicente Sederberg who also represented the plaintiffs, said not all adult-use customers who are using cannabis for medical purposes will seek access through the medical program.  

“Everybody was concerned about the fact that closing down the recreational market means that people that rely on the recreational market for cannabis for medical purposes are no longer able to have access to it,” Kurtzman says. “That is really the big concern and why Stephen Mandile joined as a plaintiff. As a veteran who uses cannabis for medical purposes and through his philanthropic work raising awareness about veterans and marijuana use, Mr. Mandile has personal knowledge of veterans who rely exclusively on adult-use marijuana establishments to obtain medical marijuana because they are reluctant to register as medical marijuana patients due to fears that doing so may deprive them of their federal benefits.”

The second concern, Kurtzman says, was the financial impact on the dispensaries. On April 7, the Cannabis Control Commission, in an amended cease-and-desist order, noted that adult-use retail, cultivation and manufacturing facilities could sell their product to medical dispensaries. Those operating cultivation and processing facilities in the adult-use program had been able to “designate necessary staff to maintain their cultivation and product manufacturing operations.” But by law, medical cannabis companies in Massachusetts must be vertically integrated, so that wasn’t really a realistic option for adult-use operators, Kurtzman says.  

“Because medical dispensaries are vertically integrated and cultivate, manufacture, and sell their own products, they are less likely to need to purchase wholesale products from the adult-use market,” Kurtzman says.

Plus, Kurtzman also pointed to an updated COVID-19 guidance with frequently asked questions from the Cannabis Control Commission, released April 24, stating that these transfers cannot occur until the commission implements a process for this.

"Needed medical supply chain transfers are subject to certain conditions and attestations established in the Commission’s First Amended Cease and Desist Order issued on April 7, 2020. The Commission is developing further direction and guidance on the required form and manner necessary to demonstrate medical supply need. No transfers can be made until that process is established," the commission noted in the document. 

“And [selling product to medical operators] would not be possible for one of the plaintiffs, The Green Lady, who is on Nantucket, because she cannot transport marijuana over federal waters to the mainland," Kurtzman said. The [attorney general's office], in its opposition to the plaintiff’s action, argued that this mitigating factor could provide significant economic benefit to the adult-use industry, but in reality, it doesn’t seem as though it has benefited anyone, at all.”

Although Rosenfeld, like others, is hopeful she’ll be able to resume adult-use sales on May 4, she predicts the shutdown will be extended. In an interview with Boston's NPR affiliate WGBH on April 24, Gov. Baker said, “So point number one: You really can't make a decision to reopen until you get past the surge, OK."

There are nearly 55,000 confirmed cases in the state, and 1,590 new cases were reported April 26. However, that number of new daily cases has been trending down since April 23, when 3,079 cases, the highest daily total so far, were reported.

When asked if they would appeal the decision if the shutdown order is extended past May 4, Fine says that he and Kurtzman are discussing options with their clients but hope there are other solutions for adult-use retailers.

“It is unfortunate that the court felt constrained to uphold the governor’s decision to close adult-use cannabis stores. As acknowledged in the ruling, this has made life more challenging for medical cannabis patients who have relied or do rely on the adult-use market,” Fine and Kurtzman said in a statement in response to Judge Salinger’s decision. “We were pleased, however, that the court rejected the Governor’s stated rationale for closing these establishments by stating he could ‘lawfully’ limit adult use cannabis sales to Massachusetts residents. As the plaintiffs in this case review their legal options, we hope the governor will follow the legal option before him to re-open adult-use cannabis stores with a temporary ban on sales to non-residents."


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