Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 1 of 10 PageID #: 1
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MAINE
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`Northeast Patients Group d/b/a
`Wellness Connection of Maine,
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` and
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`High Street Capital Partners, 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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`Northeast Patients Group d/b/a Wellness Connection of Maine (“Wellness
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`Connection”) and High Street Capital Partners, LLC (“High Street”), file this Complaint
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`for Declaratory and Injunctive Relief against the Department of Administrative and
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`Financial Services (the “Department”) and Kristine Figueroa, in her official capacity as
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`Commissioner of the Department, as follows:
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`SUMMARY OF CLAIM
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`1.
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`Maine’s medical marijuana market has been around since 2011 and
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`recently became the state’s third largest industry, reaching retail sales of $111.6 million
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MAINE
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`Northeast Patients Group d/b/a
`Wellness Connection of Maine,
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` and
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`High Street Capital Partners, 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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`Northeast Patients Group d/b/a Wellness Connection of Maine (“Wellness
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`Connection”) and High Street Capital Partners, LLC (“High Street”), file this Complaint
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`for Declaratory and Injunctive Relief against the Department of Administrative and
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`Financial Services (the “Department”) and Kristine Figueroa, in her official capacity as
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`Commissioner of the Department, as follows:
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`SUMMARY OF CLAIM
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`1.
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`Maine’s medical marijuana market has been around since 2011 and
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`recently became the state’s third largest industry, reaching retail sales of $111.6 million
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 2 of 10 PageID #: 2
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`last year.1 The industry is divided into two categories of businesses, both of which can
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`operate retail stores and sell marijuana to patients: caregivers, which are smaller in scale
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`and serve fewer patients, and dispensaries, which are larger businesses serving more
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`patients. There are only eight dispensaries in Maine, which accounted for $26.3 million
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`of the $111.6 million in total sales in 2019, while Maine’s approximately 2,600 caregivers
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`sold the remaining $85.3 million. Id.
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`2.
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`Broadly speaking, dispensaries are subject to more regulations and
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`oversight than caregivers, but can also grow and sell more marijuana than caregivers.
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`Dispensaries can grow an unlimited amount of marijuana under state law, while
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`caregivers are restricted in the number of plants they can grow at any one time. Cf. 22
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`M.R.S. §§ 2428 & 2423-A(2).
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`3.
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`Though dispensaries can grow and sell more marijuana, and make more
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`money than caregivers as a result, there’s a catch. Under Maine law, dispensaries must
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`be owned and controlled exclusively by Maine residents. See 22 M.R.S. § 2428(6)(H).
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`4.
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`The self-evident purpose of the residency requirement is to discriminate
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`against non-residents such as Plaintiff High Street, a prospective out-of-state investor,
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`and to exclude them from the economic opportunities available to medical marijuana
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`dispensaries in Maine. The residency requirement harms both non-residents and Maine
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`dispensaries, such as the four dispensaries operated by Plaintiff Wellness Connection, by
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`arbitrarily limiting the universe of potential investors and business partners available to
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`these businesses.
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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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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 3 of 10 PageID #: 3
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`5.
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`The residency requirement should be struck down because it violates the
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`dormant Commerce Clause of the United States Constitution by explicitly and
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`purposefully favoring Maine residents over non-residents.
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`PARTIES AND JURISDICTION
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`6.
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`Plaintiff High Street Capital Partners, LLC, is a Delaware limited liability
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`company that wholly owns NPG, LLC, Wellness Connection’s sister company involved in
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`Maine’s adult use marijuana industry. High Street is entirely owned by residents of
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`states other than Maine. High Street would purchase all of the equity in Wellness
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`Connection if the residency requirement for dispensaries did not prohibit it from doing
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`so.
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`7.
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`Plaintiff Northeast Patients Group d/b/a Wellness Connection of Maine
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`owns four of the eight registered dispensaries in Maine’s medical marijuana program.
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`For its first decade of operations, Wellness Connection operated as a mutual benefit
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`non-profit corporation without any equity ownership, as required by Maine law. In
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`2020, state law changed and allowed dispensaries to become for-profit companies.
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`Wellness Connection converted to a for-profit corporation in March 2020 and is now
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`owned by three Maine residents. Wellness Connection would be wholly owned by High
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`Street if the residency requirement did not prohibit that arrangement. Unless the
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`Department is enjoined from enforcing the residency requirement, Wellness Connection
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`will be harmed by the limitation on its ability to sell equity to High Street or any other
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`non-resident. The residency requirement also decreases the value of Wellness
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`Connection by significantly limiting the universe of possible shareholders and investors
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`in the company.
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 4 of 10 PageID #: 4
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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 Medical Use of Marijuana Act, including the
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`residency requirement for dispensaries. See 22 M.R.S. § 2422-A.
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`9.
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`Kristine Figueroa is the Commissioner of the Department. She and the
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`Department are collectively referred to as the “Department” in this 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 High Street have asked it to rule that Maine’s residency
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`requirement for dispensaries violates the United States Constitution.
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`MAINE’S RESIDENCY STATUTE IS UNCONSTITUTIONAL
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`11. Maine has had a medical marijuana industry since 2011, but it wasn’t until
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`2019 that Maine law permitted medical marijuana dispensaries to operate as for-profit
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`businesses. When the legislature changed the law governing dispensaries to allow them
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`to have equity owners, it required that 100 percent of these owners (in addition to all
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`officers and directors) must be Maine residents.
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`12.
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`The residency requirement for dispensaries, 22 M.R.S. § 2428(6)(H),
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`explicitly privileges Maine residents over residents of other states. The statute provides
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`that “all officers and directors of a dispensary must be residents of this State.” Id.
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`13.
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`“Officers and directors” is broadly defined by Maine’s Medical Use of
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`Marijuana Act to include anyone owning any portion of a dispensary:
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`6-B. Officer or director. “Officer or director” means, when used with
`respect to any nonprofit, for-profit or other organization governed by this
`chapter, a director, manager, shareholder, board member, partner or other
`person holding a management position or ownership interest in the
`organization.” 22 M.R.S. § 6-B.
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 5 of 10 PageID #: 5
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`And “resident of the state” is defined by the law as “a person who is domiciled in the
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`State.” 22 M.R.S. § 2422(13-B).
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`14.
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`The residency requirement for dispensaries and the related state
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`regulations explicitly discriminate against residents of other states, and are thus
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`precisely the type of state laws that are prohibited by the dormant Commerce Clause of
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`the U.S. Constitution. See U.S. Const. Art. I, § 8, Cl. 3.
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`15.
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`The State of Maine cannot show a legitimate local purpose for the
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`residency requirement, because its self-evident purpose is to discriminate against non-
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`residents and reserve the enormous economic opportunities available to dispensaries for
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`Maine residents.
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`16.
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`The residency requirement for dispensaries is cut from the same cloth as
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`the residency requirement in Maine’s adult use marijuana law. See 28-B M.R.S.
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`§ 202(2). The Department agreed earlier this year to stop enforcing the adult use
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`residency requirement because, in the Department’s words, the residency requirement
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`“is subject to significant constitutional challenges and is not likely to withstand such
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`challenges.” See NPG, LLC, et al. v. Dep’t of Admin. and Fin. Servs., et al., Stipulation of
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`Dismissal, Civil Action No. 1:20-cv-00107-NT (May 11, 2020). The residency
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`requirement for medical marijuana dispensaries is no different, as it also explicitly
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`discriminates against non-residents.
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`17.
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`The residency requirement for dispensaries is also akin to, but worse than,
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`the City of Portland ordinance challenged by High Street earlier this year that
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`discriminated against non-residents when awarding retail marijuana licenses in
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`Portland. This Court preliminarily enjoined the City from applying the two residency-
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`related criteria in its licensing matrix, finding that “the dormant Commerce Clause likely
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 6 of 10 PageID #: 6
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`restricts the City’s licensing of marijuana retail stores” and that “the City is unlikely to
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`succeed in justifying the residency preference in its points matrix.” NPG, LLC d/b/a
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`Wellness Connection v. City of Portland, Docket No. 2:20-cv-00208-NT at 23-24 (D.
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`Me., Aug. 14, 2020). The residency requirement being challenged here is worse than the
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`Portland ordinance because it bans non-residents altogether.
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`18.
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`The residency requirement in Maine’s medical marijuana law is stifling
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`dispensaries’ ability to operate within Maine’s medical marijuana program by restricting
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`the flow of investment into the State.
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`COUNT I
`U.S. Const. Art. I, § 8, Cl. 3, 42 U.S.C. § 1983
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`19.
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`Plaintiffs reallege the preceding paragraphs as if fully set forth herein.
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`20.
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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., Tennessee Wine & Spirits Retailers Ass’n v. Thomas, 139 S.Ct. 2449, 2461
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`(2019) (“if a state law discriminates against out-of-state goods or nonresident actors, the
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`law can be sustained only on a showing that it is narrowly tailored to advance a
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`legitimate local purpose”).
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`21.
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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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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 7 of 10 PageID #: 7
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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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`22.
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`The residency requirement for dispensaries discriminates on its face
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`against non-residents.
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`23.
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`The residency requirement for dispensaries does not have a legitimate
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`local purpose.
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`24. High Street is harmed by the residency requirement for dispensaries
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`because the law explicitly targets High Street as a non-resident, prevents High Street
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`from owning any portion of any dispensary in Maine, and limits High Street’s economic
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`opportunities in Maine’s medical marijuana industry.
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`25. Wellness Connection is also harmed by the residency requirement for
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`dispensaries because the law limits its ability to sell equity to non-residents or raise
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`capital from non-residents. Specifically, Wellness Connection wishes to become wholly
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`owned by High Street, but cannot do so because of the residency requirement. The
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`residency requirement also devalues Wellness Connection by significantly limiting the
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`universe of potential investors in the company.
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`26.
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`Injunctive and declaratory relief are needed to resolve this dispute
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`between the Department and the Plaintiffs because the residency requirement for
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`dispensaries violates the United States Constitution and subjects Plaintiffs to serious,
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`concrete, and irreparable injuries.
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`27.
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`Because this is an action to enforce Plaintiffs’ constitutional rights brought
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`pursuant to 42 U.S.C. § 1983, Plaintiffs should receive their reasonable attorney’s fees in
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`the case. See 42 U.S.C. § 1988.
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 8 of 10 PageID #: 8
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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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`28.
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`29. Wellness Connection and High Street have taken the position that the
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`residency requirement for dispensaries violates the dormant Commerce Clause of the
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`United States Constitution and is thus unenforceable.
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`30.
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`The Residency requirement directly harms Wellness Connection as the
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`owner of four dispensaries because it limits Wellness Connection’s ability to sell shares
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`to High Street or generally raise additional capital from new investors. It harms High
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`Street because it prevents High Street from purchasing equity ownership in these
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`dispensaries.
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`31.
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`The Department has taken the position that the residency requirement is
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`enforceable and is enforcing the residency requirement against Maine’s dispensaries.
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`32.
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`An actual controversy exists between Plaintiffs and the Department as to
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`whether the residency requirement for dispensaries is enforceable. High Street, as a
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`non-resident, is currently unable to obtain equity in any medical marijuana dispensaries
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`operating in Maine, despite its significant financial involvement with Wellness
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`Connection and its ownership of NPG, LLC, Wellness Connection’s sister company
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`involved in Maine’s adult use marijuana industry. Wellness Connection is unable to sell
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`any equity to High Street or any other out-of-state investors, which hinders its ability to
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`raise capital, frustrates its business plans, and harms it financially.
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`33. Declaratory and injunctive relief are needed to resolve this dispute
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`between the Department and the Plaintiffs.
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 9 of 10 PageID #: 9
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`34. 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 requirement for dispensaries, 22 M.R.S.
`§ 2428(6)(H), violates the United States Constitution;
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`B) enjoining the Department of Administrative and Financial Services
`from implementing, enforcing, or giving any effect to the residency
`requirement for dispensaries;
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`C) awarding Wellness Connection and High Street their attorney’s fees
`and costs pursuant to 42 U.S.C. § 1988;
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`D) granting such other and further relief as the Court deems just and
`proper.
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`December 17, 2020
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`___/s/ Matthew Warner___________
`Matthew Warner, Maine Bar No. 4823
`Jonathan G. Mermin, Maine Bar No. 9313
`Alexandra Harriman, Maine Bar No. 6172
`Attorneys for Northeast Patients Group d/b/a
`Wellness Connection of Maine & High Street
`Capital Partners, LLC.
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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
`aharriman@preti.com
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`9
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`Case 1:20-cv-00468-NT Document 1 Filed 12/17/20 Page 10 of 10 PageID #: 10
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`CERTIFICATE OF SERVICE
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`I hereby certify that on December 17, 2020, I electronically filed the Complaint
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`for Declaratory and Injunctive Relief with the Clerk of Court by electronic mail and will
`send notification of such filing to the counsel of record.
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` __/s/ Matthew Warner___________
`Matthew Warner, Maine Bar No. 4823
`Attorney for Northeast Patients Group d/b/a
`Wellness Connection of Maine & High Street
`Capital Partners, LLC.
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`10
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