The long-running dispute between a group of independent liquor distributors and state tax officials over the right to distribute recreational marijuana has finally reached Nevada’s Supreme Court, though an immediate answer to the dilemma likely won’t come immediately.
Though the two sides were originally scheduled to present oral arguments to the seven-member court on Wednesday, the state Department of Taxation voluntarily withdrew their appeal last week while the Independent Alcohol Distributors of Nevada (IADON) filed a separate request for an emergency injunction preventing the department from issuing distribution licenses to marijuana companies.
It’s the latest move in a battle that’s raged since mid-March between liquor distributors, the state taxation department and recreational marijuana dispensaries over the legal right to distribute the drug. As part of the 2016 ballot measure approved by voters, liquor licensees were given the first crack at distributing recreational marijuana for the first 18 months of sales, but with an explicit caveat that it could be broadened if the tax agency determined there was an insufficient number of distributors available.
Liquor distributors lost an appeal to the state’s tax commission last week and accused state tax officials of lacking proper due process in an earlier August hearing on the emergency regulations. The department has issued at least seven marijuana distribution licenses to liquor licensees since recreational marijuana sales began in July.
It was that process — which included the creation and adoption of “emergency” regulations backed by Gov. Brian Sandoval and approved by the state’s Tax Commission in July— that was the focus of IADON’s 27-page appeal requesting an emergency injunction prohibiting the department from issuing licenses to marijuana companies.
“It is obvious that the Department conducted the meeting in a manner that was designed only to support its pre-determined conclusion, rather than to provide even a modicum of fairness to challenge or rebut that conclusion,” attorneys for IADON wrote.
The group also challenged the notion of whether a dwindling marijuana supply constituted a sufficient “emergency” that would allow state regulators to go around normal regulatory processes and rush through emergency rules. The filing stated that most of the revenue from recreational sales flows to the state’s Rainy Day Fund, so a disruption in sales wouldn’t have a catastrophic impact on the state’s budget.
“The power to adopt rules that have the force of law, without any public notice or input from affected parties, is an extraordinary power that stands in stark contrast to normal legislative standards in America,” attorneys for IADON wrote. “It is therefore crucial that an actual, real emergency exist to invoke this enormous power.”
In a filing made by Attorney General Adam Laxalt’s office on behalf of the Department of Taxation, attorneys for the state argued that the liquor distributors were essentially asking the court to “judicially review” whether or not an actual emergency existed, and that Nevada state law afforded agencies “every presumption in its favor” in declaring emergencies.
The response also stated that an injunction was not needed because IADON would not suffer “irreparable harm” if licenses were issued to non-liquor wholesalers, and called any potential harm “entirely speculative.”
“And despite IADON’s repeated misrepresentations of the Initiative, to ‘regulate marijuana like alcohol’ does not mean there must be an independent wholesaler involved,” the filing stated.
Attorneys for IADON have until Friday to file a response to the state’s filing.
Updated on Sept. 11, 2017 to correct the fact that Nevada's Supreme Court has seven justices, not nine.