Illinois’ adult-use cannabis licensing process has been littered with legal challenges, and High Haven, a female- and minority-owned company based in the state, is just one of several business hopefuls embroiled in litigation to secure licenses to operate in the state’s billion-plus-dollar cannabis industry.
In an Aug. 10 order, a judge allowed the company, represented by Saul Ewing Arnstein & Lehr LLP, to participate in a “corrective lottery” designed to recreate the odds that High Haven would have faced had it not been excluded from the Illinois Department of Financial & Professional Regulation’s (IDFPR) original lotteries in 2021 to award 185 adult-use dispensary licenses.
High Haven subsequently won five retail licenses and is now in the process of raising capital to launch its operations in the state, where the company also holds adult-use cannabis infuser and transporter licenses.
“The case against the IDFPR has been a very long and hard-fought battle,” Casey Grabenstein, partner at Saul Ewing and lead attorney on the case, tells Cannabis Business Times.
And the battle isn’t over yet—High Haven is also pursuing litigation to secure a craft grow license that it was initially denied, but that the team argues it is rightfully entitled to based on the ruling in the dispensary lawsuit.
Illinois regulators initially announced in May 2020 that 75 adult-use cannabis retail licenses would be available. In September 2020, they revealed that 21 social equity applicants, as defined in the state’s Cannabis Regulation and Tax Act, were selected from a pool of more than 1,660 applications to participate in a lottery to win one—or multiple—of the 75 adult-use dispensary licenses.
Litigation promptly ensued, and Gov. JB Pritzker’s administration established a process for unsuccessful applicants to amend and resubmit their applications, or to ask regulators to rescore them if they believed a mistake was made during the initial scoring process.
In July 2021, Pritzker’s office announced that the state would award 185 total adult-use dispensary licenses—the 75 original licenses in addition to the 110 new ones—in a series of three lotteries last summer.
More litigation ensued, and the retail licenses were left in limbo as the lawsuits—which were eventually consolidated into one—made their way through the legal system.
High Haven’s journey began in 2019, when the team initially set out to apply for adult-use cannabis craft grow, retail, infuser and transporter licenses in Illinois.
“They were stringent applications,” says Mahjabeen Sulemanjee, High Haven’s co-owner and CEO. “It was a tough process for us to compile all of the documents necessary to make sure that we were being as accurate as possible. We knew that the Illinois licenses were in high demand. We knew lots of people were going to be applying for them. We wanted to make sure that we did everything we could to secure these licenses. We had the right team and we had created a company and a business plan that we thought was a very good and successful business model.”
Even after revising some of the deficiencies that state officials pointed out within its applications, High Haven’s scores were insufficient to land in the licensing lotteries the state had organized.
In denying High Haven’s application from participating in the dispensary licensing lottery, IDFPR officials claimed the company did not meet the social equity requirements outlined in Illinois’ adult-use cannabis legalization statute, Grabenstein says. The main point of contention, he adds, was that one of High Haven’s owners had a cannabis paraphernalia conviction rather than a cannabis possession offense.
The High Haven team sought legal counsel and ultimately ended up in the long-running lawsuit that consolidated litigation from several applicants who were denied access to the lotteries.
‘We Continued to Move Forward’
High Haven argued in its lawsuit that the IDFPR’s interpretation of the application scoring was incorrect under Illinois law, Grabenstein says.
“We continued to move forward,” Sulemajnee adds. “We had one barrier after another, and we continued to find success.”
In an appeals court ruling last month, Judge Celia Gamrath sided with the company and ordered the corrective lottery, opening the door for High Haven to win the retail licenses.
“Judge Gamrath deserves a lot of credit for her handling of this litigation with respect to this corrective lottery that was conducted,” Grabenstein says. “Essentially, Illinois has this two-step process—you have to meet the application criteria, and then you have to win a lottery. And those lotteries had already occurred. So, the question before the court was how do we go back in time and put people back into the lottery? I thought the judge really came up with a creative solution to have this corrective lottery, which was designed to create the odds that would have existed had High Haven been in the original lotteries.”
Sulemanjee says “it was one trial or tribulation after another,” but High Haven is better for it.
“It is a good feather in our cap for a young organization like ours to understand litigation in this space so well,” she says. “It sets us apart because we have a competency and understanding of what these laws are and a competency with operations. In my past life, I worked for an MSO and we were able to set up [in] 11 states [with] 40 dispensaries and 11 cultivations, so we really understand the business quite well. We’re just thrilled that we have an opportunity to do it for ourselves.”
Illinois’ regulations give adult-use licensees 180 days to secure property. From there, the High Haven team plans to begin architectural design work and build out its storefronts.
“For the next six to 12 months, potentially even 14 months, High Haven will be eyeballs deep in construction, in design and build, and securing properties and making sure we’re servicing areas that we know need cannabis accessibility,” Sulemanjee says, adding that she hopes at least one of High Haven’s dispensaries will open in 2023.
The company is also currently in the process of building out facilities for its infuser and transporter licenses.
The Fight Continues
While High Haven has successfully won its legal fight to secure adult-use cannabis retail licenses in Illinois’ lucrative market, another battle rages on to win a craft grow license.
The Illinois Department of Agriculture (IDOA) issued the first round of craft grow licenses last year, and state law required the department to award the second round of licenses by Dec. 21, 2021.
Unsuccessful applicants then filed litigation to challenge the licensing process, and subsequent court orders mandated that the additional licenses could not be awarded until the lawsuits were resolved.
Litigation is still pending, however; High Haven’s lawsuit challenging the craft grow licensing process has been consolidated with other claims against the IDOA, and the company is currently in motion practice before Judge Sophia Hall, the presiding judge of the Chancery Division, to see where the cases will end up.
The High Haven team believes it is entitled to a craft grow license based not only on its past applications, but also on Gamrath’s ruling in the dispensary lawsuit, which validated the company’s social equity status.
“Once we’re actually assigned [a judge], we anticipate getting a status hearing and then we’ll move forward in the pleadings space, which is the initial portion of any litigation,” says Gabe Judd, High Haven’s general counsel and chief compliance officer. “Then, from there, we’ll see where we can go. We have a plan in place, but you have to be able to move with the punches as you go through any of these lawsuits.”
‘Laboratories of Legalization’
As states continue to legalize and regulate cannabis for medical and adult-use purposes, Judd says they are “laboratories of legalization,” trying out new policies and ways to adjust to the constantly evolving industry.
“Really, I think it’s a learning curve for each state,” Sulemanjee adds. “Each state is going to have its fair share of litigation. … We see other issues that are happening, whether it’s on how people are qualifying or what scoring looks like. … We’re seeing this pattern. It’s crying out for federal legalization to some extent.”
In the meantime, Sulemanjee says regulatory agencies or councils specifically focused on cannabis regulation and licensing—particularly social equity licensing—could help ease the burden on broader state agencies and streamline the licensing process.
“Some of the states do have very robust commissions or councils that they’ve created that are focused just on this,” she says. “In Illinois, it’s slightly different. We have IDFPR and the Department of Ag, two larger entities that have many, many other responsibilities, as well, and they also take on the responsibility of the cannabis industry. The cannabis industry is so robust and has such a large undertaking that it’s almost necessary that you have a commission or council that specifically focuses on that. … That sometimes can help with limiting things like litigation.”
Murky application guidelines and the overall complexity of state-level regulations also highlight the need for proper legal counsel and a focus on compliance within cannabis operations, Sulemanjee adds.
“We need to understand these laws [and] we need to operate within the laws of each state, which is a very tedious thing to do when you’re a multistate operator,” she says. “If you’re operating in three, four states, each one of your team members, each one of your SOPs, each one of your inspections, each one of your construction projects, each one of the things you do, from potentially your cash handling to delivery, … has to be separated out. So, you’re not just running one organization; you’re running multiple organizations within multiple states with multiple regulations. It is challenging, and it’s labor-intensive and capital-intensive.”
While the craft grow case continues to make its way through the legal system, Sulemanjee and her team are focused on launching High Haven’s transporter, infuser and retail operations in Illinois’ market.
“It’s exciting to see diversity come to Illinois,” she says. “It’s exciting to see people like us joining this space. … We’ve had to fight for all odds, and we really are the underdog that’s had to prevail through all this. It’s just a very exciting time for us. We’ve got some great plans.”
Sulemanjee and her team are identifying consumers’ needs and ways High Haven’s products and services can best serve them, as well as exploring on-site consumption and entertainment options for their retail outlets.
“We’re very fortunate,” Judd says. “We have a very strong team. We have great partners. Casey and Saul Ewing [are] phenomenal outside legal counsel. We’re very fortunate that all the cosmic tumblers are falling into place. We’re forming a very strong team and we’re confident in where we’re going. We’re very blessed and we’re ready for the fight to continue.”