82 F.4th 572
7th Cir.2023Background
- Illinois enacted the Cannabis Regulation and Tax Act in 2019 authorizing up to 500 dispensary licenses and a point-based allocation for the first 75 (later expanded to 185 in 2021).
- The Department awarded large residency-based bonus points to applicants (Illinois residency or 51% owner residency during each of the prior 5 years), producing many perfect scores and requiring lotteries by region.
- By September 2021 the Department conditionally allocated 185 first-round licenses (after statutory amendments and three lotteries); issuance was stayed pending state-court litigation.
- Plaintiffs Juan Finch Jr. and Mark Toigo, non-longtime Illinois residents who did not apply by the January 2020 deadline, sued in March 2022 under the dormant Commerce Clause and sought a preliminary injunction to halt issuance of the 2021 licenses and to enjoin the pending 2022 licensing process.
- The district court found plaintiffs likely to succeed on the merits and possibly irreparably harmed, but denied a preliminary injunction after balancing equities (plaintiffs’ delay and severe harm to third‑party licensees); it also held the 2022 challenge unripe because the rulemaking was not final.
- The Department issued the 2021 licenses after the district ruling; the later-finalized 2022 rule removed the residency preference.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a preliminary injunction should block issuance/unwinding of the conditionally allocated 2021 licenses based on a dormant Commerce Clause challenge | Residency points discriminate against out‑of‑state economic interests and likely violate the dormant Commerce Clause; irreparable harm will follow without injunctive relief | Plaintiffs delayed suit; unwinding would severely harm third‑party reliance interests and disrupt an extensive administrative/judicial process | District court: found likelihood of success and possible irreparable harm but denied PI on equitable grounds (plaintiffs’ delay; harm to licensees). Appellate court affirmed denial and treated issuance as largely moot. |
| Whether the court should enjoin the then-pending 2022 licensing rulemaking | The proposed 2022 rule also favored Illinois residents and should be enjoined to prevent similar constitutional injury | The 2022 rulemaking was not final; challenge is unripe because the rule could change or remove residency provisions | District court: challenge unripe; no injunction. Department later finalized the rule without residency preference. |
| Whether issuance of the 2021 licenses moots plaintiffs’ appeal or precludes corrective relief (e.g., a new lottery) | Effective relief is still possible (court could order a corrective lottery or unwind allocations) | Issuance largely moots PI relief; even if court could order corrective relief, equitable considerations (plaintiffs’ delay; reliance) preclude unwinding | Appellate court: issuance largely moots the appeal; to the extent relief remains theoretically possible, equitable factors foreclose unwinding. |
Key Cases Cited
- Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) (establishes the dormant Commerce Clause balancing test)
- Regan v. City of Hammond, 934 F.3d 700 (7th Cir. 2019) (applies dormant Commerce Clause principles)
- Finch v. Treto, 606 F. Supp. 3d 811 (N.D. Ill. 2022) (district court opinion denying preliminary injunction)
- Cassell v. Snyders, 990 F.3d 539 (7th Cir. 2021) (standard and deference for preliminary injunction review)
- Speech First, Inc. v. Killeen, 968 F.3d 628 (7th Cir. 2020) (preliminary injunction threshold requirements)
- A.B. ex rel. Kehoe v. Housing Authority of South Bend, 683 F.3d 844 (7th Cir. 2012) (mootness of injunction after the challenged event occurs)
- In re Bullock, 986 F.3d 733 (7th Cir. 2021) (appeal mootness principles)