LLC v. NEW YORK STATE CANNABIS CONTROL BOARD TREMAINE WRIGHT FELICIA REID (2026)

Recitation, as required by CPLR 2219(a) in review of Petitioner's Article 78 proceeding and Intervenor Better States Order to Show Cause to intervene in this proceeding:

PAPERS NUMBERED

Petition, Notice of Petition, Exhibits and Memorandum of law NYSCEF #1-9

Amended Petition Affirmation, Exhibits, and

Memorandum of Law NYSCEF #16-22

Better States Order to Show Cause, affidavits, Exhibits NYSCEF #23-41

and Memorandum of Law

Respondents Opposition, Exhibits, and Memorandum of law NYSCEF #45-50

Better States Answer, Exhibits, and Memorandum of Law NYSCEF #56-75

Petitioner's Reply to Respondents Answer NYSCEF #51-52

Petitioner's Reply to Better States Answer NYSCEF #78

Stipulation Consenting to relief sought in OSC to Intervene NYSCEF #79

Upon review of the foregoing papers and after oral argument, the Decision and Order on Petitioner's Article 78 Petition, motion sequence number 001, and Intervenor Better States LLC's order to show cause, motion sequence number 002, is as follows:

Procedural History

On May 29, 2025, Petitioner BUDIES, LLC (hereinafter "Petitioner" or "Budies, LLC") commenced this Article 78 proceeding seeking an Order to annul or vacate Respondents' New York State Office of Cannabis Management, (hereinafter "OCM"), New York State Cannabis Control Board, (hereinafter "CCB"), Tremaine Wright in her official capacity as former Chair of the New York State Cannabis Control Board, and Felicia A.B. Reid in her official capacity as former acting Executive Director of the New York State Office of Cannabis Management (collectively "Respondents") decision to rescind the location approval and associated proximity protection for Petitioner's dispensary location at 589 Metropolitan Avenue, Brooklyn, New York. On June 13, 2025, Petitioner amended the Petition seeking an Order:

(1) Pursuant to CPLR section 7803(3), vacating and/or annulling Respondents' April 8, 2025, decision sent by email from OCM, rescinding the location approval and proximity protections granted to Petitioner on December 13, 2024, for a cannabis dispensary at 589 Metropolitan Avenue, Brooklyn, New York, on the grounds that such determination was arbitrary and capricious, an abuse of discretion, affected by error of law, and/or made in violation of lawful procedure, or alternatively, pursuant to CPLR 7803(2), on the grounds that such determination was made in excess of Respondents' jurisdiction or based on the doctrine of equitable estoppel; and

(2) Restoring the location approval and proximity protection previously afforded to Petitioner on December 13, 2024, for its location at 589 Metropolitan Avenue, Brooklyn, New York; or

(3) In the alternative, awarding Petitioner damages incurred in reasonable reliance of the approval received on December 13, 2024, including without limitation lease obligations, nonrefundable deposits, professional fees, and related costs and expenses, in an amount to be determined by the Court but in excess of $1,000,000.00;

(4) Awarding Petitioner attorneys' fees, costs, and disbursements; and

(5) Granting Petitioner such other, further, and different relief as the Court may deem just and proper.

On September 3, 2025, Better States LLC moved by order to show cause, to intervene as a respondent in the within proceeding and submit opposition to the Petition. On February 13, 2026, Respondents filed opposition to the Petition by form of an Answer. On March 9, 2026, the Court issued an Interim Order adjourning the proceeding to allow opposition to Better States' motion and for it to file an answer to the petition.

Background History

The Marijuana Regulation and Taxation Act (hereinafter "MRTA") was enacted on March 31, 2021, in part, to regulate, control, and tax marijuana, also known as cannabis where it created and charged OCM and CCB with regulatory oversight and management of the adult-use marijuana market, including licensing of dispensaries.

Better States and Everyday Dispensary's Application History

On September 25, 2022, Pablo Velez, principal of Better States submitted a Conditional Adult- Use Retail Dispensary license application for Better States and was granted a provisional license on July 19, 2023. On November 14, 2023, Mr. Velez submitted an Adult-Use Retail Dispensary license application for another one of his companies, Everyday Dispensary LLC.

On December 20, 2023, OCM informed Mr. Velez, based upon its Supplemental Policy Guidance  ¹ a license could not be issued for more than one applicant and requested a decision as to which application he wanted OCM to process. On December 27, 2023, Mr. Velez informed OCM he was withdrawing the Better States license application, and they should process the application for Everyday Dispensary LLC application.(NYSCEF Doc. 46). On January 9, 2024, without seeing Mr. Velez's December 27, 2023, email, OCM replied to Mr. Velez notifying him that because he did not make a choice in a timely manner, Everyday Dispensary's application was being withdrawn. On January 12, 2024, Mr. Velez emailed OCM and reiterated he wanted Better States application withdrawn and they should proceed with processing Everyday Dispensary's application. (NYSCEF Doc. 46).

Pursuant to OCM policy, once applicants receive a provisional license, they must then move on to the post-selection application process to secure a location. On October 29, 2024, despite Mr. Velez's previous election to withdraw its license application, Better States applied to OCM for the dispensary location approval for 539 Metropolitan Avenue. OCM approved Better States application on November 12, 2024 and granted it proximity protection which prevented another dispensary from opening within a minimum of 1,000 feet, pursuant to Part 119.4 of Title 9 of New York Code Rules, and Regulations (9 NYCRR 119). Final approval would commence upon Better States' satisfactory completion of its post-selection application. However, on December 11, 2024, Better States received a notification stating:

The approval of proximity protection for the proposed location [539 Metropolitan Avenue, Brooklyn, New York] has been rescinded for the following reason(s): On January 12, 2024, you requested to withdraw your CAURD application (OCMCAURDP-2023-000213) to proceed with the Adult-Use Application (OCMRETL-2023-001214). On October 29, 2024, you submitted the location 539 Metropolitan Ave, Brooklyn, NY 11211, via the post-selection application OCMCAURDP-2023-000213. This location was given proximity protection in error, as no additional submissions can be accepted via the withdrawn application.

Petitioner's Application History

On September 22, 2022, Petitioner Budies LLC submitted a CAURD application, and was granted a provisional license on July 19, 2023. On March 13, 2024, Petitioner began submitting its post- selection application. On December 3, 2024, Petitioner executed an 11-year lease one block away from the Better States location at 589 Metropolitan Avenue, Brooklyn, New York and on December 5, 2024, Petitioner submitted the lease as a proposed dispensary location. On December 13, 2024, Petitioner received notice from OCM of approval and the granting of proximity protection for its proposed dispensary location.

On April 8, 2025, Petitioner received notification from OCM that its approval for the location was issued in error and was rescinded and offered Petitioner three options; to request a Public Convenience and Advantage exception, apply for a new location, or withdraw its application.

Also, on April 8, 2025, Better States received notification from OCM restoring its proximity protection for its location at 539 Metropolitan Avenue. On April 28, 2025, OCM's Supplemental Policy Guidance which precluded an applicant from having two license applications pending simultaneously, was invalidated.

Article 78 Petition

OCM issued Petitioner location approval and proximity protection on December 13, 2024, stating its application met all distance and proximity requirements. This approval precluded OCM from approving any other retail dispensaries within 1,000 feet of 589 Metropolitan Avenue, however, just four months later the approval was rescinded without explanation. Petitioner argues Respondents' April 8, 2025, rescission of the location approval and proximity protection was issued without prior notice, explanation or opportunity to be heard on OCM's decision, was arbitrary and capricious, an abuse of discretion, and/or violation of lawful procedure, not supported by substantial evidence, and beyond its jurisdiction.

Petitioner argues that on December 11, 2024, Better States withdrew its CAURD application and proximity protection for a dispensary in the nearby area, therefore, there was no application pending in this area which would have prevented OCM from approving Petitioner's application. Further, Petitioner states it relied on OCM's approval and signed an eleven year (11) commercial lease for 589 Metropolitan Avenue which became effective on December 13, 2024, resulting in Budies LLC incurring debt for the premises including rent of over five million dollars as well as fees of over three-hundred thousand dollars for architects, designers, developers, contractors, and insurance.

Petitioner argues OCM's decision was conclusory and unsupported by any explanation other than the application was approved in error. Petitioner further argues it was not afforded prior notice or an opportunity to be heard before OCM unilaterally rescinded approval, as its counsel communicated directly with OCM's associate counsel regarding Petitioner's request to challenge the agency's determination but was only offered three options, to identify a new location, request, a "public convenience and advantage" ("PCA") waiver for its existing location, or request reconsideration of the location removal by the Cannabis Control Board ("CCB"). The options, Petitioner argues, were a substantial risk to Petitioner of losing its provisional license resulting in significant financial harm.

Respondents argue the determination to rescind Petitioner's location approval was rationally based and should not be disturbed by the court because when there are two applicants with proposed dispensary locations within 1,000 feet of each other, proximity protection is awarded to the applicant who applies first, provided they comply with OCM regulations and procedures. Here, Respondents argue Better States was first to apply for proximity protection in the area and although they regrettably had to rescind Petitioner's proximity protection, OCM did not exceed its jurisdiction and the decision was not arbitrary and capricious, an abuse of discretion, in violation of lawful procedure, or affected by error of law. Respondents state that due to the unique facts of this matter and its failure to communicate with Better States regarding its application status and to ensure fairness to Mr. Velez, it determined that priority should be given to Better States. Respondents cite OCM's Frequently Asked Questions guide that informs the public and describes the OCM process, where applications are filed within the same proximity area, the applicant who filed first would receive priority. Respondents argue OCM's recission was compelled by regulations promulgated by CCB, which granted them authority under the New York Cannabis Law ("NYCL") and precluded authorization of two dispensaries within 1,000 feet of each other.

In response to Petitioner's argument it was not provided with prior notice or an opportunity to be heard, Respondents contend Budies LLC was told prior to recission in March 2025 that its application was in jeopardy and was offered options to maintain its proximity protection and license, including a waiver which would have granted it an exception and allowed Budies LLC and Better States to coexist within 1,000 feet of each other. However, Petitioner refused to file an application for the exception or waiver, forcing OCM to choose between Petitioner and Better States, which was first to file an application.

In opposition, Better States argues it proceeded with the second phase of the application process under the belief its license application remained valid based on OCM's January 9, 2024, letter. Better States contends OCM did not state during the time they were corresponding that its provisional license was voided or revoked and its silence on the status of Better States license served as confirmation its provisional license remained active and in good standing. On December 11, 2024, Better States received notice from OCM rescinding its site approval and proximity protection, however, its proximity protection remained on OCM's publicly available local map placing other applicants on notice and preventing another dispensary from being approved within 1,000 feet. On April 8, 2025, OCM reinstated Better States' proximity protection for 539 Metropolitan Avenue, Brooklyn, New York.

Better States further argues the circumstances surrounding the issuance of proximity protection to Petitioner is suspect because Better States protection was publicly available on OCM's Legal Online Cannabis Activities Locater Map beginning November 12, 2024, and remained, however, Petitioner signed a lease for its location on December 3, 2024, before it received its alleged approval on December 13, 2024. Therefore, Petitioner acted in bad faith because it knew or should have known that Better States' dispensary was already awarded proximity protection in that area, and granting Budies LLC, the requested relief would reward Petitioner's bad faith while penalizing Better States which has made substantial financial investments and good faith efforts to open an adult-use retail dispensary.

In reply to Better States' answer, Petitioner argues the matter is not moot simply because there is a newly enacted 500-foot proximity rule as opposed to the 1,000-foot rule in effect at the time of Budies LLC's application and the issue remains whether the rescission of the final determination was arbitrary and capricious. The Petition is also ripe because no further administrative action was required after Respondents' rescission inflicted immediate and concrete harm which arose from a sequence of errors by Respondents, including the improper acceptance of submissions on Better States' withdrawn application. Further, Better States' argument that Petitioner knowingly assumed the risk by executing a lease for property prior to receiving final approval, is misplaced because the lease, by its terms, only became binding upon issuance of location approval which it received on December 13, 2024. It is Better States, Petitioner argues, that proceeded at its own risk by leasing property, after withdrawing its application.

ANALYSIS:

Petitioner is requesting the Court determine whether OCM's on April 8, 2025, to rescind its proximity protection was arbitrary and capricious. Judicial review of administrative determination is limited to whether the action was arbitrary and capricious, an abuse of discretion, in violation of lawful procedure, or affected by an error of law. See CPLR 7803(3); Ford v. New York City Dep't of Corr., 247 AD3d 1026, 1028 (2nd Dept. 2026). The determination is arbitrary and capricious if it was made "without sound basis in reason or regard to the facts" Matter of Peckham v. Calogero, 12 NY3d 424, 431 (2009); Matter of Resto v. State of NY Dept. of Motor Vehs., 135 AD3d 772 (2nd Dept. 2016). "If the court finds that the determination is supported by a rational basis, it must sustain the determination even if the court concludes that it would have reached a different result than the one reached by the agency" Los Amigos Deli Bodega Hispana Corp. v. Bd. of Trs. of Inc. Vill. of Hempstead, 230 AD3d 1151, 1151—52 (2nd Dept. 2024) In applying the arbitrary and capricious standard, a court inquiry should be whether the determination under review had a rational basis. Matter of Halperin v. City of New Rochelle, 24 AD3d 768, 770 (2nd Dept. 2005); Matter of Manning v. New York State—Unified Ct. Sys., 153 AD3d 623 (2nd Dept. 2017). "Under this standard, a determination should not be disturbed unless the record shows that the agency's action was "arbitrary, unreasonable, irrational or indicative of bad faith." Matter of Cowan v. Kern, 41 NY2d 591, 599 (1977). "A determination is rational where it has 'some objective factual basis, as opposed to resting entirely on subjective considerations." Matter of Gorecki v. New York State Dept. of Motor Vehs., 201 AD3d at 803, quoting Matter of JSB Enters., LLC v. Wright, 81 AD3d 955, 956 (2011).

Courts must give judicial deference to rationally based agency determinations and afford those decisions substantial weight when those decisions are based upon the agency's expertise and supported by the record. Halloran v. NYC Employees' Ret. Sys., 172 AD3d 715, 717 (2nd Dept. 2019) The Court may not substitute its own judgment for that of the decision-making agency and must only ascertain whether the agency's determination was rationally based. Halloran v. NYC Employees' Ret. Sys., 172 AD3d 715, 717 (2nd Dept. 2019). In reviewing administrative determinations, a court may not simply overturn an agency's decision merely because it would have reached a different conclusion. Sullivan Cnty. Harness Racing Ass'n v. Glasser, 30 NY2d 269 (1972). An agency's action was found to be arbitrary and capricious when it failed to communicate, delayed notice, and admitted to a data-entry error. Matter of Resto v. State of NY Dept. of Motor Vehs., 135 AD3d 772 (2d Dept. 2016).

Here, on December 27, 2023, Better States withdrew its license application which included a proposed location application. On November 12, 2024, despite Mr. Velez's election to withdraw the application, OCM approved Better States' dispensary location at 539 Metropolitan Avenue and granted proximity protection. A month later, on December 11, 2024, OCM processed Mr. Velez's December 27, 2023, email withdrawing Better States' license application and informed him the application was deemed retroactively withdrawn and the proximity protection was conferred "in error." Two days after, on December 13, 2024, OCM granted Petitioner proximity protection for its proposed dispensary location at 589 Metropolitan Avenue. On April 8, 2025, Respondents rescinded Petitioner's proximity protection for the subject area, and reinstated Better States' application and proximity protection after concluding their recission was in error.

Pursuant to OCM's policies and guidelines, Petitioner would not be permitted to move forward with its application for a dispensary in the area if the higher queued applicant's location, in this case, Better States, received proximity protection. However, Better States explicitly withdrew its application, and as of December 27, 2023, was no longer eligible for proximity protection. Therefore, Petitioner's proposed location application submitted on December 5, 2024, could proceed as there was no proximity conflict with Better States. Petitioner's application was the first in the queue to be processed, and no other applications were pending within 1,000 feet of Petitioner's proposed location to prevent OCM from approving Budies, LLC location. Respondents acknowledged it made errors in the processing of Petitioner's as well as Better States' applications including failure to timely read and process Mr. Velez's December 27, 2023, email withdrawing Better States' CUARD application and replacing it with Everyday Dispensary's application. Respondents also acknowledge OCM's failure to timely process Mr. Velez's January 12, 2024, email withdrawing Better States application in favor of Everyday Dispensary's.

Further, the agency's decision to rescind its award of proximity protection to Petitioner and to reinstate Better States' proximity protection in the vicinity is not supported by the record. First, Better States withdrew its application. Second, the approval and the reinstatement of Better States' application was in direct conflict with Respondents' Supplemental Policy Guidance,² in effect at the time, which prohibited an individual from having more than one license for a dispensary. Although Mr. Velez continued to upload documents to both license applications, he acknowledged he notified OCM that Better States' application was withdrawn and he was aware of OCM's policy that a person or company could not have two applications pending at the same time. This policy was in effect at the time Respondents rescinded Petitioner's proximity protection on April 8, 2025.

Better States also argues Respondents improperly processed Petitioner's application despite a preliminary injunction issued by the Court on December 12, 2024, In the matter of Rosedale Cannabis Dispensary, LLC et al. v. New York Cannabis Control Board et al., Index No. 909951-24 which precluded OCM from processing Budies LLC's application. However, on January 15, 2025, the court issued an Order superseding its December 13, 2024, decision, clarifying the applicability and scope of the preliminary injunction. In the January 15, 2025 decision, the Court ordered that an applicant who received written notice from OCM on or before December 12, 2024, confirming that applicant was granted a CUARD and/or provision license is considered a "licensee for the purpose of the December 12, 2024 Order, and that CCP and OCM could take any action regarding the final licensure and/or post-selection process of any such licensee who was granted a CUARD and/or provisional license on or before December 12, 2024. (NYSCEF Do. #46). Here, Petitioner  ³ was issued a provisional license on July 19, 2023, and therefore, Respondents were not enjoined from processing Petitioner's "post-selection" location application.

Accordingly, it is hereby,

ORDERED that Defendant-Intervenor's Order to Show Cause, motion sequence 002, to intervene and oppose the Petition is GRANTED on consent; and it is further,

ORDERED that Petitioner's Article 78 Petition is GRANTED, to the extent that Respondents'

decision dated April 8, 2025, is VACATED.

This constitutes the Decision and Order of the Court.

Dated: July 9, 2026

Brooklyn, NY

HON. NORMA J. JENNINGS, J.S.C.

FOOTNOTES

1.   This policy guidance was subsequently invalidated by Decision and Order in the matter of Rosedale Cannabis Dispensary, LLC et al. v. New York Cannabis Control Board et al., Index No. 909951-24.

2.   This policy guidance was invalidated on April 28, 2025, by Decision and Order in the matter of Rosedale Cannabis Dispensary, LLC et al. v. New York Cannabis Control Board et al., Index No. 909951-24.

3.   This application was approved under the entity name PL 221.55 LLC, which was subsequently changed to Budies, LLC

Norma J. Jennings, J.