Quick v. Ill. Dep't of Fin. & Prof'l Regulation

• Citation: 468 F.Supp.3d 1001
• Decision Date: 23 June 2020
• Docket Number: Case No. 19-cv-7797
• Parties: Brothella QUICK, et al., Plaintiffs, v. ILLINOIS DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

468 F.Supp.3d 1001

Brothella QUICK, et al., Plaintiffs,

v.ILLINOIS DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, et al., Defendants.

Case No. 19-cv-7797

United States District Court, N.D. Illinois, Eastern Division.

Signed June 23, 2020

Michael I. Kanovitz, Jonathan I. Loevy, Loevy & Loevy, Chicago, IL, for Plaintiffs Brothella Quick, BQ Enterprises, Inc.

Jonathan I. Loevy, Loevy & Loevy, Chicago, IL, for Plaintiff Crystal Clear Compassionate Care, Inc.

Michael D. Arnold, Illinois Attorney General's Office, Chicago, IL, for Defendants.

MEMORANDUM OPINION & ORDER

MARY M. ROWLAND, United States District Judge

Plaintiffs seek a license to open a medical marijuana dispensary. Their application for a license was denied and they brought suit against the Illinois Department of Financial and Professional Regulation ("IDFPR") and Brett Bender, the head of the medical cannabis program for IDFPR. Before the Court is Defendants’ motion to dismiss. (Dkt. 8). For the reasons stated below, the motion [8] is granted as to Defendant IDFPR and denied as to Defendant Bender.

BACKGROUND

Plaintiffs Brothella Quick, Crystal Anderson, and Maria Davis are three entrepreneurs who applied for dispensary licenses under Illinois’ Compassionate Use of Medical Cannabis Act, 410 ILCS 130/1 et seq. (the "Act"). The individual Plaintiffs formed companies to hold the dispensary licenses: BQ Enterprises Inc., for Ms. Quick, and Crystal Clear Compassionate Care Inc., for Ms. Anderson and Ms. Davis. Plaintiffs’ briefing notes the relevant experience in the healthcare industry for each Plaintiff. Each individual Plaintiff identifies as an African American woman, and Plaintiffs assert that African American women were, as a group, "entirely excluded from program [sic] when IDFPR awarded the licenses." (Dkt. 15, 3).

According to Plaintiffs, the Act authorized up to 60 licenses for dispensaries, and the Act obligated IDFPR to issue as many licenses as there are qualified applicants. 410 ILCS 130/115(a). The Act states:

The [IDFPR] may not issue less than the 60 registrations if there are qualified applicants who have applied with the [IDFPR]. The organizations shall be geographically dispersed throughout the State to allow all registered qualifying patients reasonable proximity and access to a dispensing organization.

410 ILCS 130/155(a). The Act does not specify the process for geographically distributing dispensary locations but authorized IDFPR to adopt rules and procedures for applicants and for geographic diversity.

IDFPR created a plan to distribute 60 licenses among 43 districts. 68 Ill. Adm. Code § 1290.20. More populous districts received multiple licenses, while other districts received only one. Id. Pursuant to the newly promulgated rules, IDFPR required applicants to pick one of these districts for each application. 68 Ill. Adm. Code § 1290.50(a). Applicants were also required to prove that they controlled compliant property in the specified district. 68 Ill. Adm. Code § 1290.60(a) (16-17, 19). Defendants note that, pursuant to their rules, applicants could submit one application per district and could submit separate applications for up to five districts. 68 Ill. Adm. Code § 1290.40(a)(3), (5), (6). If more than one separate application was submitted, the applicant was required to pay the application fee for each submission and comply with all other requirements for each submission. Id. Once an applicant was selected to receive a license, they were further required to complete a registration process. 68 Ill. Adm. Code § 1290.100. IDFPR rules allowed for a registered dispenser to relocate to another location within the same district, if IDFRP approved the move. 68 Ill. Adm. Code § 1290.140(a).¹

Applicants received a license in a specified district in one of two instances. First, if the number of qualified applicants did not exceed the number of allocated licenses, then each qualified applicant would receive a license. (Dkt 5 ¶¶ 28-29); 68 Ill. Adm. Code § 1290.40(a)(11). For those districts with more qualified applicants than licenses, the IDFPR would hold a competition based on a points-scoring process. Id.

Plaintiffs allege that they timely completed their applications before the September 22, 2014 deadline, and their applications complied with all of the Act's requirements. (Dkt. 5 ¶ 36). IDFPR completed its scoring process and announced licenses in 2016. Plaintiffs did not receive a license. (Id. at ¶¶ 5-6). Plaintiffs first allege that the district and scoring process "proved problematic." (Dkt. 15, 4). They claim that there were many diverse applicants like Plaintiffs who did not receive a license: "It is a matter of public record that IDFPR's process resulted in almost all of the licenses going to companies majority-owned by white men." (Id. ; Dkt. 5, ¶ 7).

Second, Plaintiffs claim that IDFPR did not award all 60 licenses; it only issued 55. (Dkt. 5, ¶ 15). In four of the districts, no qualified applicants submitted information confirming control of compliant property, and for one of the districts, there were fewer qualified applicants than allotted licenses. (Id. ). Plaintiffs allege that IDFPR's failure to issue at least 57 licenses is a violation of the Act, because there were at least two additional qualified applicants, the Plaintiffs, beyond the 55 that the IDFPR selected. (Dkt. 5 ¶ 16). IDFPR rules provide for such a scenario, stating: "If the Division determines that a District has no qualified applicants or fewer qualified applicants than authorized registrations, the Division shall post a notification on the Division's website detailing the dates of the next open application period." 68 Ill. Adm. Code § 1290.4(a)(13). Based on this rule, Plaintiffs waited for IDFPR to announce a new application period. As of the date of Plaintiffs’ brief, IDFPR had not yet posted a notification for how it intended to award the additional five licenses.

In 2019, Illinois passed a law giving special rights to the holders of the 55 medical marijuana licenses. Each license holder would automatically receive two additional licenses; one to sell recreational cannabis at the same location as the medical dispensary, and one to open another recreational cannabis dispensary at a site of their choosing. 410 ILCS 705/15-15, 15-20. The license holders had 60 days to complete the necessary paperwork to receive this benefit. Afraid of missing this additional benefit, both BQ Enterprises and Crystal Clear obtained property in a district where there were no qualifying applications during the 2014 application period. Plaintiffs then filed paperwork to change the address of their proposed dispensaries on their 2014 application to new properties situated in one of the five districts in which a dispensary has not been licensed. On November 6, 2019, IDFPR issued a letter refusing to allow Plaintiffs to change the address on the grounds that there was no open application period at that time. All parties acknowledge that this letter was likely written by Defendant Bender. (Dkt. 16, 10).

Plaintiffs claim that IDFPR treated Plaintiffs differently than (at least) five other applications who had received licenses.² According to Plaintiffs, "[a]t least five of those [55 original winning applications] became eligible for a dispensary license only because IDFPR allowed them to change the address proposed dispensary location." (Dkt. 5 ¶ 7). Plaintiffs claim that at least three companies were allowed to change to a new address within the district in which they applied, and two were allowed to change to new districts. (Id. at ¶¶ 31-35). Notably, Plaintiffs claim that IDFPR allowed these changes after the deadline for submission of the applications. (Id. ). The crux of Plaintiffs’ allegations is that IDFPR Plaintiffs are entitled to a license because IDFPR was required to issue all 60 licenses.

Defendants contest whether Plaintiffs were indeed qualified applicants entitled to a license, claiming that Plaintiffs did not comply with IDFPR's stated rules. IDFPR maintains that its rules did not permit Plaintiffs to change locations without filing another application during an open application period. As noted above, there has not been an open application period since the original 2014 period. And for the 2014 application period, Plaintiffs did not file an application in the new district and did not pay the separate application fee. (Dkt. 16, 9) ("They did not apply for, or pay the application fee for, the districts they are now seeking years later, and there has been no subsequent active application round at any time relevant to the complaint."). IDFPR additionally notes that the applicants identified by Plaintiffs who were permitted to change locations were in the process of registering their licenses. (Dkt. 9, 7). The IDFPR rules concerning license holders allowed relocation during the registration process. Plaintiffs, on the other hand, did not yet have a license and thus could not seek relocation under those rules.

Plaintiffs sue seeking administrative review of IDFPR's November 2019 decision in Count I and bring a § 1983 procedural due process claim³ in Count II.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6) ; Gen. Elec. Capital Corp. v. Lease Resolution Corp. , 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a motion to dismiss, the Court accepts as true all well-pleaded facts in the Plaintiff's complaint and must "construe the complaint in the ‘light most favorable to the’ plaintiff." Zahn v. N. Am. Power & Gas, LLC , 847 F.3d 875, 877 (7th Cir. 2017) (quoting Bell v. City of Chi. , 835 F.3d 736, 738 (7th Cir. 2016) ). However, the Court is not "obliged to accept as true legal conclusions or unsupported conclusions of fact." Hickey v. O'Bannon , 287 F.3d 656, 658 (7th Cir. 2002).

"To survive a motion to dismiss, a complaint must contain sufficient factual...