Case 1:20-cv-00107-NT Document 1 Filed 03/20/20 Page 1 of 12 PageID #: 1
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MAINE
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`NPG, LLC d/b/a Wellness Connection,
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` AND
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`Wellness and Pain Management
`Connection, LLC
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` Plaintiffs
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`v.
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`Department of Administrative and
`Financial Services, State of Maine,
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` AND
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`Kristine Figueroa in her official
`capacity as Commissioner of the
`Department of Administrative and
`Financial Services, State of Maine,
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` Defendants.
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`Civil Action No.
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`INJUNCTIVE RELIEF SOUGHT
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`COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
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`NPG, LLC, d/b/a Wellness Connection and Wellness and Pain Management
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`Connection, LLC, file this Complaint for Declaratory and Injunctive Relief against the
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`Department of Administrative and Financial Services (“Department”) and Kristine
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`Figueroa, in her official capacity as Commissioner of the Department, as follows:
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`SUMMARY OF CLAIM
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`The adult use marijuana industry is about to launch in Maine and is
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`1.
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`expected to be highly lucrative. The legal marijuana industry is quickly growing
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`nationwide, with retail sales reaching $12 billion last year. In Maine, the medical
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`15345256.1
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MAINE
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`NPG, LLC d/b/a Wellness Connection,
`
` AND
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`Wellness and Pain Management
`Connection, LLC
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` Plaintiffs
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`v.
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`Department of Administrative and
`Financial Services, State of Maine,
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` AND
`
`Kristine Figueroa in her official
`capacity as Commissioner of the
`Department of Administrative and
`Financial Services, State of Maine,
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` Defendants.
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`Civil Action No.
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`INJUNCTIVE RELIEF SOUGHT
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`COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
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`NPG, LLC, d/b/a Wellness Connection and Wellness and Pain Management
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`Connection, LLC, file this Complaint for Declaratory and Injunctive Relief against the
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`Department of Administrative and Financial Services (“Department”) and Kristine
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`Figueroa, in her official capacity as Commissioner of the Department, as follows:
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`SUMMARY OF CLAIM
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`The adult use marijuana industry is about to launch in Maine and is
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`1.
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`expected to be highly lucrative. The legal marijuana industry is quickly growing
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`nationwide, with retail sales reaching $12 billion last year. In Maine, the medical
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`Case 1:20-cv-00107-NT Document 1 Filed 03/20/20 Page 2 of 12 PageID #: 2
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`marijuana market is now the state’s third largest industry, reaching retail sales of $111.6
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`million last year.1 And Maine’s adult use marijuana market is expected to be even
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`larger. The Bangor Daily News has reported that “industry experts expect adult-use
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`marijuana businesses to take off quickly, in many cases displacing the already lackluster
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`market for medical marijuana.” Lori Valigra, How the first year of Maine’s recreational
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`marijuana market will likely roll out, Bangor Daily News (Jun. 17, 2019).
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`2.
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`Though Maine’s adult use marijuana industry is expected to create
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`significant economic opportunities, a state statute reserves these opportunities in large
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`part for four-year Maine residents, to the exclusion of non-residents. Under 28-B
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`M.R.S. § 202(2) (the “Residency Statute”), non-residents are prohibited both from
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`receiving adult use marijuana licenses and from owning a majority of any Maine
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`company that holds an adult use license.
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`3.
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`The purpose of the Residency Statute is to discriminate against non-
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`residents. The Department of Administrative and Financial Services has declared on its
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`website that Maine’s marijuana program is designed to “[e]nsure that economic
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`opportunities afforded by marijuana legalization is [sic] available chiefly for the citizens
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`of Maine.”
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`4.
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`The Residency Statute violates the dormant Commerce Clause of the
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`United States Constitution by explicitly and purposefully favoring Maine residents over
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`non-residents. Before legal sales of adult use marijuana begin in Maine, the Court
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`should enjoin the Defendants from enforcing the Residency Statute. This is the only
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`1 See Penelope Overton, State’s medical marijuana market much bigger than anyone realized, Portland
`Press Herald (Feb. 24 2019).
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`way to ensure that residents and non-residents alike, including Plaintiffs, are able to
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`participate in Maine’s adult use marijuana industry.
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`5.
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`If its enforcement is not enjoined, the Residency Statute will also harm
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`businesses owned by Maine residents who plan to participate in the program by
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`arbitrarily limiting the universe of available investors and business partners available to
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`these businesses. This impacts larger businesses like NPG, LLC, but also smaller Maine
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`businesses that are looking for financial assistance from family members and
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`acquaintances residing beyond Maine’s borders.
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`PARTIES AND JURISDICTION
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`6. Wellness and Pain Management Connection, LLC (“WPMC”) is a Delaware
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`Corporation. More than 95 percent of WPMC’s membership interests are owned by
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`non-Maine companies which are, in turn, largely or entirely owned by non-Maine
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`residents. WPMC has been a long-term and significant investor in Maine’s medical
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`marijuana program. If the Residency Statute did not exist, WPMC would apply for adult
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`use licenses. It has not applied, however, because doing so would be futile for WPMC as
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`long as the Residency Statute remains in effect. Unless enforcement of the Residency
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`Statute is enjoined, WPMC will be unable to receive an adult use license in Maine.
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`WPMC will thus be deprived of significant and valuable business opportunities due
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`solely to a Maine law that specifically targets non-Maine companies like WPMC for the
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`explicit purpose of advantaging Mainers.
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`7.
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`NPG, LLC d/b/a Wellness Connection (“Wellness Connection”) is a Maine
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`company that has applied for multiple licenses to operate in Maine’s adult use
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`marijuana market. It is majority owned by Northeast Patients Group d/b/a Wellness
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`Connection of Maine, which owns four of the eight registered dispensaries in Maine’s
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`medical marijuana program. Because 51 percent of Wellness Connection is currently
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`owned by Northeast Patients Group, with the other 49 percent being owned by a non-
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`resident corporation, Wellness Connection is unable to sell any additional equity to out-
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`of-state investors without violating 28-B M.R.S. § 202(2). Unless the Residency Statute
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`is enjoined, Wellness Connection will be harmed by this limitation on its ability to sell
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`equity and raise capital for its adult use marijuana operations. The Residency Statute
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`also decreases the value of Wellness Connection by significantly limiting the universe of
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`possible shareholders and investors in the company.
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`8.
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`The Department of Administrative and Financial Services is the
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`administrative department within the State of Maine responsible for implementing,
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`administering and enforcing Maine’s Marijuana Legalization Act, including the
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`Residency Statute. See 28-B M.R.S. § 104(1).
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`9.
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`Kristine Figueroa is the Commissioner of the Department. Kristine
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`Figueroa and the Department are collectively referred to as the “Department” in this
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`Complaint.
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`10.
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`This Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331
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`since Wellness Connection and WPMC have asked it to rule that Maine’s Residency
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`Statute violates the United Stated Constitution.
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`MAINE’S RESIDENCY STATUTE IS UNCONSTITUTIONAL
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`11.
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`Adult use marijuana has been legal in Maine since 2016, when Maine
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`voters approved Maine Question 1, An Act to Legalize Marijuana. Now, four years later,
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`sales of recreational marijuana are about to begin.
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`12.
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`Since the 2016 referendum, the launch of Maine’s adult use marijuana
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`program has been delayed by political back-and-forth in Augusta. In 2018, the
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`legislature significantly amended the Marijuana Legalization Act (Maine Rev. Stat. Title
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`28-B, Ch. 1) and created the regulatory framework necessary for adult use sales,
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`including the Residency Statute.
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`13.
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`The Residency Statute, 28-B M.R.S. § 202(2), explicitly privileges four-
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`year Maine residents over residents of other states. The statute provides:
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`2. Resident. If the applicant is a natural person, the applicant must be a
`resident. If the applicant is a business entity:
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`A. Every officer, director, manager and general partner of the business
`entity must be a natural person who is a resident;
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`B. A majority of the shares, membership interests, partnership interests
`or other equity ownership interests as applicable to the business entity
`must be held or owned by natural persons who are residents or
`business entities whose owners are all natural persons who are
`residents.
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` A
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` resident is defined by the Marijuana Legalization Act as follows:
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`Resident. “Resident” means a natural person who:
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`A. Has filed a resident individual income tax return in this State pursuant
`to Title 36, Part 8 in each of the 4 years prior to the year in which the
`person files an application for licensure under this chapter. This
`paragraph is repealed June 1, 2021.
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`B. Is domiciled in this State; and
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`C. Maintains a permanent place of abode in this State and spends in
`aggregate more than 183 days of the taxable year in this State. 28-B
`M.R.S. § 102(48).
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`14.
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`In the spring of 2019, Maine’s Office of Marijuana Policy released rules to
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`govern the industry; these rules, in final form, took effect later in 2019. 18-691 C.M.R.
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`Ch. 1 – Adult Use Marijuana Program. The rules incorporate the statutory residency
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`requirements, id. § 2.3.1(B), and allow the Department to “require information to verify
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`that business structures, loans, franchise agreements, royalty agreements and other
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`legal arrangements are not being used to circumvent licensing requirements including
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`without limitation residency requirements….” Id. § 2.5.1(A).
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`15.
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`The Residency Statute, and the related state regulations, explicitly
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`discriminate against residents of other states, and are thus precisely the type of state
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`laws that are prohibited by the dormant Commerce Clause of the U.S. Constitution. See
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`U.S. Const. Art. I, § 8, Cl. 3.
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`16.
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`The State of Maine cannot show a legitimate local purpose for the
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`Residency Statute, since the State has been clear that the purpose of the Residency
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`Statute is to advantage Maine residents. Indeed, the Department has admitted on its
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`website that Maine’s adult use marijuana program is designed to “[e]nsure that
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`economic opportunities afforded by marijuana legalization is [sic] available chiefly for
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`the citizens of Maine.”2
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`17.
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`The State of Maine has also acknowledged that the Residency Statute is
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`intended to discriminate against non-residents and limit their ability to participate in
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`Maine’s market. The Director of the Office of Marijuana Policy, for example, has told
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`the Boston Globe that Maine “was lucky enough to be able to learn from other states,
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`where we saw big companies coming in, gobbling up the industry, and pushing out small
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`businesses and locals. We’re doing our best to ensure that doesn’t happen here.” Dan
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`Adams, Maine is finally moving ahead with recreational marijuana – and Mainers
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`will be the first to profit, The Boston Globe (May 8, 2019).
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`2 Draft Adult-use Marijuana Rules – Public Feedback, Department of Administrative and Financial
`Services, State of Maine, https://maine.gov/dafs/services/ marijuana/rulemaking/feedback (Apr. 22,
`2019 – no longer available online).
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`18.
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`The real effect of the Residency Statute will be to stifle Maine’s adult use
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`marijuana program by severely restricting the flow of investment into the State. This
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`will mean that Maine’s marijuana businesses will not be able to access the capital
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`necessary to build a vibrant, viable, and successful industry.
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`19.
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`The Department recently began accepting license applications for Maine’s
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`adult use marijuana program. The application process is designed to enforce the
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`Residency Statute. As one example of how the Department is enforcing residency
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`requirements, applicants must complete a “Maine Owner Residency Attestation” and
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`swear, under penalty of perjury, that they meet the requirements of the Residency
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`Statute. This means that since WPMC is not a resident, it is not even able to complete
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`an application for an adult use license.
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`20.
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`The Department has not yet issued a final marijuana license to any
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`applicant. Nor has an adult use marijuana establishment begun operations in Maine.
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`21.
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`Because it has no other choice under the current statute, Wellness
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`Connection has tailored its corporate structure to the requirements of the Residency
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`Statute. It is 51 percent owned by a Maine company (Northeast Patients Group) that is
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`entirely owned by Maine residents. In this form, Wellness Connection has applied for
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`multiple adult use marijuana licenses with the Department.
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`22.
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`The 51 percent of Wellness Connection that is owned by Maine residents is
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`valuable, but in order to continue to comply with the Residency Statute, Wellness
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`Connection cannot sell any portion of this 51 percent to investors outside of Maine. This
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`restriction significantly narrows the universe of potential equity holders and prevents
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`Wellness Connection from selling any additional equity to its existing non-Maine
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`partners.
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`23.
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`The Residency Statute largely shuts WPMC out of Maine’s adult use
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`marijuana market because WPMC is not a Maine company and so cannot be a licensee,
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`regardless of how capable and qualified it would otherwise be to hold a license. Being a
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`non-resident, in and of itself, is disqualifying. WPMC cannot even own a controlling
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`stake in a licensee; it can, at most, be a minority owner.
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`24.
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`If the adult use market launches with the Residency Statute still in effect,
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`both WPMC and Wellness Connection will be damaged, as they will each be unable to
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`take full advantage of the economic opportunities available at the program’s inception,
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`and WPMC will be flatly prohibited from receiving any licenses.
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`COUNT I
`U.S. Const. Art. I, § 8, Cl. 3, 42 U.S.C. § 1983
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`25.
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`Plaintiffs reallege the preceding paragraphs as if fully set forth herein.
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`26.
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`The U.S. Constitution prohibits state laws that discriminate against
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`citizens of other states. “[D]iscrimination simply means differential treatment of in-
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`state and out-of-state economic interests that benefits the former and burdens the
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`latter. If a restriction on commerce is discriminatory, it is virtually per se invalid.”
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`Oregon Waste Sys., Inc. v. Dep’t of Envtl. Quality of State of Or., 511 U.S. 93, 99 (1994).
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`See also, e.g., Fulton Corp., 516 U.S. at 331; Tennessee Wine & Spirits Retailers Ass’n,
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`139 S.Ct. at 2461 (“if a state law discriminates against out-of-state goods or nonresident
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`actors, the law can be sustained only on a showing that it is narrowly tailored to advance
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`a legitimate local purpose”).
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`27.
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`A state law that discriminates against interstate commerce on its face
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`“invokes the strictest scrutiny of any purported legitimate local purpose and of the
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`absence of nondiscriminatory alternatives.” Hughes v. Oklahoma, 441 U.S. 322, 337
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`(1979). See also Camps Newfound/Owatonna, Inc. v. Town of Harrison, Me., 520 U.S.
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`564, 581 (1997)(strict scrutiny of a law that facially discriminates against non-residents
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`“is an extremely difficult burden, so heavy that facial discrimination by itself may be a
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`fatal defect”).
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`28.
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`The Residency Statute discriminates on its face against non-residents.
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`29. WPMC is harmed by the Residency Statute because the law explicitly
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`targets WPMC as a non-resident, prevents WPMC from obtaining any adult use
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`marijuana licenses, and limits WPMC’s economic opportunities in Maine’s marijuana
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`industry.
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`30. Wellness Connection is also harmed by the Residency Statute because the
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`law limits its ability to sell equity to non-residents or raise capital from non-residents.
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`The Residency Statute also devalues Wellness Connection by significantly limiting the
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`universe of potential investors in the company.
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`31.
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`The Residency Statute does not have a legitimate local purpose. The
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`Department has been explicit that the purpose of the Residency Statute is to benefit
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`Mainers over non-residents.
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`32.
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`Injunctive and declaratory relief are needed to resolve this dispute
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`between the Department and the Plaintiffs, who have adverse legal interests, because
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`the Residency Statute violates the United States Constitution and subjects Plaintiffs to
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`serious, concrete, and irreparable injuries.
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`COUNT II
`U.S. Const. Art. I, § 8, Cl. 3, 28 U.S.C. §2201
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`Plaintiffs reallege the preceding paragraphs as if fully set forth herein.
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`33.
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`34.
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`Plaintiffs Wellness Connection and WPMC have taken the position that
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`the Residency Statute violates the dormant Commerce Clause of the United States
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`Constitution and is thus unenforceable.
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`35.
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`The Residency Statute directly harms Wellness Connection and WPMC.
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`36.
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`The Department has taken the position that the Residency Statute is
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`enforceable and is enforcing the Residency Statute through the licensing process for
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`Maine’s adult use marijuana program.
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`37.
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`An actual controversy exists between Plaintiffs and the Department as to
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`whether the Residency Statute is enforceable. WPMC, as a non-resident, is currently
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`unable to complete an application form and is disqualified from obtaining a license due
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`to its status as a non-resident, despite having been a fixture in Maine’s marijuana
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`program since 2012. Wellness Connection is unable to sell any additional equity to out-
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`of-state investors, which hinders its ability to raise capital, and is currently unable to
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`apply for a license in its preferred equity structure.
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`38. Declaratory and injunctive relief are needed to resolve this dispute
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`between the Department and the Plaintiffs.
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`39. Under 28 U.S.C. §2201 the Court has the power to declare the rights of the
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`parties.
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`WHEREFORE, Plaintiffs request that this Court enter judgment:
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`A) declaring that the Residency Statute violates the United States
`Constitution;
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`B) preliminarily and permanently enjoining the Department of
`Administrative and Financial Services from implementing, enforcing,
`or giving any effect to the Residency Statute;
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`C) granting such other and further relief as the Court deems just and
`proper.
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`___/s/ Matthew Warner___________
`Matthew S. Warner, Maine Bar No. 4823
`Jonathan G. Mermin, Maine Bar No. 9313
`Attorneys for NPG, LLC d/b/a Wellness
`Connection
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`Preti Flaherty Beliveau & Pachios LLP
`One City Center
`P.O. Box 9546
`Portland, ME 04112-9546
`207.791.3000
`mwarner@preti.com
`jmermin@preti.com
`
`
` _/s/ Michael D. Traister_____________
`Michael D. Traister, Esq.
`Murray Plumb & Murray, P.A.
`75 Pearl Street, P.O. Box 9785
`Portland, ME 04101-5085
`207.773.5651
`mtraister@mpmlaw.com
`
`Thomas O’Rourke (PA 308233)
` Cozen O’Connor
` 1650 Market Street, Suite 2800
` Philadelphia, PA 19103
` 215-665-5585
` tmorourke@cozen.com
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`Pro hac vice application forthcoming
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`March 20, 2020
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`Attorneys for Wellness and Pain
`Management Connection, LLC
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`CERTIFICATE OF SERVICE
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`I hereby certify that on March 20, 2020, I electronically filed the Complaint for
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`Declaratory and Injunctive Relief with the Clerk of Court using the CM/ECF system
`which will send notification of such filing(s) to the counsel of record.
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` __/s/ Matthew Warner___________
`Matthew S. Warner, Maine Bar No. 4823
`Attorneys for NPG, LLC d/b/a Wellness
`Connection
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`Preti Flaherty Beliveau & Pachios LLP
`One City Center
`P.O. Box 9546
`Portland, ME 04112-9546
`207.791.3000
`mwarner@preti.com
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`March 20, 2020
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`12
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