N.Y. Comp. Codes R. & Regs. tit. 9 § 133.25

Current through Register Vol. 46, No. 43, October 23, 2024

Section 133.25 - [Effective until 1/7/2025] Actions Relating to Unlicensed Activities

(a) The office may, without notice, conduct site visits, inspections or investigations of: any person, as defined in subdivision 40-a of section 3 of the Cannabis Law, cultivating, processing, distributing, selling or offering for sale cannabis, cannabis product, cannabinoid hemp or cannabinoid hemp extract product, or any product marketed or labeled as such in this state, or engaging in an indirect retail sale, without obtaining the appropriate registration, license, or permit therefor; any premises; and any affiliated vehicles owned, leased or utilized by such person; and all records, including, but not limited to, financial statements and corporate documents, samples, photographs, videos, recordings, papers, books, documents, records, payrolls, accounts, correspondence, electronic communications and information, devices, supplies, and any other information to examine. Such site visits, inspections or investigations may include interviews of individuals, including, but not limited to, employees, contractors, managers, supervisors or any other persons whom the office has determined are involved in the financing, management, or operation of a business engaged in unlicensed activity or subpoenas to compel the production of papers, books, documents, records, payrolls, accounts, correspondence, electronic communications, devices, supplies, and other tangible things. Such premises shall be subject to site visits, inspections or investigations by the office, by the duly authorized representatives of the office, by any peace officer acting pursuant to their special duties, or by a police officer when requested by the office to support office activities authorized by the Cannabis Law and this Part. For the purposes of this section, the board delegates to the office's Director of Enforcement the authority to formally deputize investigators and other personnel from other agencies to conduct such site visits, inspections or investigations pursuant to this section for limited duration, in its discretion.

(1) A person shall not destroy, damage, alter, tamper with, remove or conceal potential evidence of a violation under this subdivision, attempt to do so, or ask or encourage another person to do so. Such destruction, damaging, altering, tampering, removing, or concealing, or attempts or encouragement to do the same, creates a presumption that such evidence was inculpatory.

(2) The office shall document their findings in an internal inspection report.

(b) In response to a violation of this Part, any provision of the Cannabis Law, and other related regulations, the office is authorized to take enforcement action or impose sanctions upon a person found to be engaging in unlicensed cannabis activities in violation of the Cannabis Law, this Part, or any other laws, rules or regulations.

(1) Sanctions may include, but are not limited to, civil penalties, fees or fines, suspension, cancellation, or revocation of a license, debarment, non-renewal, a stop order to cease all licensed activity, seizure or quarantine of product, and referral to law enforcement or regulatory entities, or any combination thereof. Any final determination affirming a finding of continued unlicensed activity by a licensee following issuance of an order to cease unlicensed activity shall include an order revoking any licenses issued by the office currently held by such licensee.

(2) Nothing in this Part shall limit the application of any other remedies, enforcement actions or sanctions applicable pursuant to the Cannabis Law, this Part, or any other laws, rules or regulations.

(c) The office may issue a notice of violation and order to cease unlicensed activity to any person, as defined in subdivision 40-a of section 3 of the Cannabis Law, who is cultivating, processing, distributing or selling cannabis, cannabis product, cannabinoid hemp or cannabinoid hemp extract product, or any product marketed or labeled as such in this state, or engaging in an indirect retail sale, without obtaining the appropriate registration, license, or permit therefor.

(d) In the event that the office issues a notice of violation and order to cease unlicensed activity to a person:

(1) that person must cease all cannabis or cannabinoid hemp related activity as described in subdivision (a) of this section;

(2) the office may seize any cannabis, cannabis product, cannabinoid hemp or cannabinoid hemp extract product, or any product marketed or labeled as such, and any material, equipment, or instrumentalities, including paraphernalia and packaging, used in the creation, production, packaging, or maintenance of such products, found in the possession of a person engaged in the conduct described in subdivision (a) of this section provided that:

(i) the person shall be notified of the seizure;

(ii) a signed receipt shall be issued which states the date and time of the inspection, the items seized, their approximate weight, quantity, and physical description;

(iii) the office shall maintain documentation of the chain of custody of seized items; and

(iv) upon determination that the detention of the items seized are no longer necessary to ensure compliance with applicable regulations, the person shall be notified of that determination and the items may be returned to the licensee, as applicable. The person shall acknowledge, in writing, receipt of the seized items at the time of such return;

(3) the office may require that any books and records of all transactions involving the sale cannabis product and security, tracking, record keeping, record retention and surveillance systems, relating to all cannabis at every stage of acquiring, possession, manufacture, processing, sale, delivery, transporting, testing or distributing, be turned over to them for inspection, examination, or audit;

(4) the office may affix a copy of such notice of violation and order to cease unlicensed activity on the front window, door, or exterior wall of the location where such activity is taking place. The notice and order shall be within five feet of the front door or other opening to such location where customers enter from the street, at a vertical height no less than four feet and no more than six feet from the ground or floor. When an establishment does not have a direct entrance from the street, the person shall permit the office to post such notice of violation and order to cease unlicensed activity at its immediate point of entry in a place where potential customers or members of the public are likely to see it;

(5) such notice of violation and order to cease unlicensed activity shall not be removed, altered, covered, or defaced in any way except when authorized by the office. Any removal of such notice of violation and order to cease unlicensed activity shall constitute a violation of these regulations and shall be punishable by a fine of up to $5,000 in accordance with subdivision 1 of section 16 of the Cannabis Law;

(6) the person served with such notice of violation and order to cease unlicensed activity shall also permit the office to affix one or more warning notice at or near the front door or other opening to such location where customers enter from the street advising the public that the business is ordered to stop the unlawful activity and of the public health and safety concerns relating to illicit cannabis;

(7) such warning notice shall not be removed, altered, covered, or, defaced in any way except when authorized by the office. Any removal, alteration, cover or defacement in any way of the warning notice constitutes a violation of these regulations and shall be punishable by a fine of up to $5,000 in accordance with subdivision 1 of section 16 of the Cannabis Law.

(e) Having been served with the above-mentioned notice of violation, order to cease and warning notice pursuant to Cannabis Law section 138-a, without an order to seal pursuant to Cannabis Law section 138-b, any person, as defined in section 3, subdivision 40-a of the Cannabis Law, who is cultivating, processing, distributing, selling or offering for sale cannabis, cannabis product, cannabinoid hemp or cannabinoid hemp extract product, or any product marketed or labeled as such in this State, or engaging in an indirect retail sale, without obtaining the appropriate registration, license, or permit must submit a verified affidavit of compliance attesting that the person has ceased the activity constituting the violation and, if applicable, complied with the office's order to cease within 10 business days of service of a blank verified affidavit of compliance on such person.

(1) Such verified affidavit of compliance shall be completed by the business owner, signed under penalty of perjury, and mailed to the office via certified mail to the mailing address referenced on the notice of violation within 10 business days of service of the blank verified affidavit of compliance upon such person.

(2) Failure to submit the verified affidavit of compliance within the timeframe required by subdivision (e) of this section will result in the rebuttable presumption of continued unlicensed business activity and subsequently subject said place of business and/or the owner/principal of the business to ongoing daily penalties of $20,000 per day pursuant to section 132 of the Cannabis Law for each day after the date of the notice of violation and order to cease unlicensed activity until such verified affidavit of compliance is submitted to the office. If a verified affidavit of compliance is submitted and thereafter the business and/or the owner/principal of the business is in violation of any section of the Cannabis Law sections 101, 125, or 132, a rebuttable presumption of continued unlicensed business activity will have been established and said place of business and/or the owner/principal of the business will be subject to ongoing daily penalties of up to $20,000 per day pursuant to section 132 of the Cannabis Law for each day after the date of the notice of violation and order to cease unlicensed activity.

(f) The office may issue an order to seal the building or premises of any business engaged in unlicensed activity pursuant to Cannabis Law Section 138-b with an immediate effective date upon a finding of an imminent threat to the public health, safety and welfare and only if no part of the area to be sealed is used in part as a residence or is zoned for residential use, and the unlicensed activity is more than a de minimis part of the business activity.

(1) The following factor(s) provide prima facie evidence that imminent threat to public health, safety, and welfare exists for purposes of an order to seal:

(i) documented sales to minors;

(ii) unlicensed processing of cannabis products at the building or premises;

(iii) the person engaged in the unlicensed activity engaged in violent, tumultuous, or other behaviors indicating expressed intent to not comply with the office's order to cease the unlicensed activity;

(iv) documented presence of unlawful firearms at the building or premises;

(v) proximity of the building or premises to schools, houses of worship, or public youth facilities;

(vi) products deemed unsafe based on reports of illness or hospitalization; or

(vii) cannabis products not tested or labeled lawfully in accordance with the Cannabis Law, including unlicensed out-of-state products cannabis products offered for sale and not tested or labeled lawfully.

(2) Nothing in paragraph (1) of this subdivision should be construed to limit these factor(s) to be used solely for the basis for an Order to Seal, nor should they be construed to be the sole factors in which the office may use to determine that an imminent threat to public health, safety, and welfare exists.

(3) Before issuing an order to seal, the office will confirm that the area to be sealed is a commercial space and that no part of the area to be sealed is zoned for or lawfully used as a residence, and will note same on the order to seal.

(4) The office will assess whether unlicensed activity within a building or premises is more than de minimis as indicated by one or more of the following factors and will note any such factor(s) on the order to seal:

(i) signs or symbols, indoors or out, advertising the sale of cannabis or otherwise indicating that cannabis is sold on the premises;

(ii) information shared in any advertisements or other marketing content in connection with the unlicensed business activity and any direct or indirect sales of cannabis or other conduct in violation of the Cannabis Law;

(iii) the volume of illicit cannabis products on site; and

(iv) the variety of illicit cannabis products on site.

(5) Notwithstanding the factors listed in subdivision (f)(1) of this section and the restriction set forth in subdivision (f)(3) of this section, the office may issue an order to seal with an immediate effective date upon a second or subsequent inspection in which unlicensed activity is confirmed to be continuing more than 10 calendar days after a notice of violation and order to cease unlicensed activity was previously issued by the office, provided that the office has previously provided notice that the business premises may be subject to an order to seal if upon a subsequent inspection the office finds that the violation has not been abated as required by subsection 13(a)(ii) of Cannabis Law 138-a.

(g) In the event that the office issues an order to seal with immediate effect:

(1) The office will deliver any order to seal to the owner of the business or other person of suitable age and discretion in actual or apparent control of the premises at the time of the inspection and will post the order to seal at the building or premises that have been sealed, secured and closed. The order will remain in effect pending a hearing and final determination of the board, or until such order is vacated by the office. An order to seal will explicitly state the procedures to request an emergency hearing on the order to seal within seven (7) calendar days and the right to have the emergency hearing on the order to seal held within three (3) business days of a request.

(2) The office will mail a copy, by certified mail, of any order to seal issued by the office or board within five (5) days following issuance of such order to any address for the owner of the business to the extent such address is provided by the person to whom such order to seal was delivered and to the person in whose name the real estate affected by the order is recorded in the office of the city register or the county clerk, as the case may be, who will be presumed to be the owner thereof. Such mailing will constitute notice to the owner and will be deemed to be complete upon such mailing by the office.

(3) The office will post a copy of the order to seal in a conspicuous place or upon one or more of the principal doors at entrances of such premises where the unlicensed activity is being conducted, maintained, or permitted. In addition, the office will affix, in a conspicuous place or upon one or more of the principal doors at entrances of such premises, a printed notice that the premises have been closed by order of the board, and the name of the officer or agency posting the notice.

(4) Such posted order to seal and secure padlock or other device used to seal the premises or building shall not be removed or mutilated. Any removal or mutilation of such posted order to seal or secure padlock or other device used to seal the premises or building in any way while it remains in force shall constitute a violation of these regulations and shall be punishable by a fine of up to $5,000 in accordance with subdivision 1 of section 16 of the Cannabis Law.

(5) Any order to seal issued by the office of the board pursuant to these procedures shall be effective for one (1) year from the later of the posting of the order or the date of the judgment regarding the order to seal. An order to seal may only be removed by the office or local law enforcement acting pursuant to local law consistent with this Part.

(h) Emergency hearings for orders to seal.

(1) To request an emergency hearing on an order to seal, respondent must follow the procedure noted on the order to seal and must request an emergency hearing within seven (7) calendar days of the date of the order to seal. If respondent fails to request such emergency hearing within seven (7) calendar days, then respondent waives the right to an emergency hearing pursuant to this section and will be entitled to a regular hearing pursuant to section 133.10 of this Part.

(2) At the time of requesting an emergency hearing on an order to seal and as a condition to proceeding with such emergency hearing, the respondent must provide the information required by the verified statement of ownership information set forth in section 133.15 of this Part. No emergency hearing on an order to seal will be scheduled until the respondent submits the verified statement.

(3) If the respondent requests an emergency hearing on an order to seal and provides a verified statement of ownership pursuant to section 133.15 of this Part at the time of requesting a hearing, the Office of Administrative Hearings will schedule an emergency hearing on the order to seal only with an administrative law judge to be held within three (3) business days of a request for such emergency hearing, unless otherwise adjourned by agreement of the parties.

(4) The administrative law judge holding the emergency hearing will render an emergency hearing determination on the order to seal only within four (4) business days of the conclusion of such emergency hearing. Following a determination on the order to seal, which shall be effective immediately, either party may request a hearing be scheduled on the underlying violations pursuant to sections 133.10(a) and 133.10(e) of this Part.

(5) Respondent's failure to appear at the emergency hearing on the order to seal will result in a default, and the order to seal will remain in effect for up to one (1) year unless otherwise vacated.

(6) If at any time a respondent submits evidence of sufficient quality and quantity to the office or the board pursuant to the process established by the office, including an affidavit and such other proof that the office or the board is satisfied that the unlicensed activity has been abated in its entirety, an order to seal will be vacated by the office or the board.

(7) Only with respect to cases involving an order to seal, if respondent vacates the building or premises subject to an order to seal issued by the office or board, or if the building owner provides evidence of sufficient veracity that the building or premises has been vacated, any action or proceeding filed in accordance with these procedures relating to such building or premises will be withdrawn by the office or the board without prejudice, and any order to seal will be vacated. Sufficient evidence may include an affidavit or affirmation under penalties of perjury that the landlord will not rent, lease, sublet or otherwise permit the building or premises subject to the order to seal to be used by future tenants for or in connection with the sale of cannabis or cannabis products without such tenant first providing proof that tenant has obtained a license from the office to engage in that activity, or the landlord will be subject to civil penalties under the New York Real Property Actions and Proceedings Law.

(8) An order vacating an order to seal will include a provision authorizing the office, or any police officer or peace officer who assisted with the execution of the order to seal, to inspect the building or premises without notice for the purpose of ascertaining whether or not the unlicensed activity has been abated. Notwithstanding the independent authority of any local law enforcement with respect to orders to seal, the office may request that any police officer or peace officer with jurisdiction to assist in the enforcement of an order vacating an order to seal.

(i) A party may request, or the office may initiate, an administrative proceeding to enforce an order to cease the unlicensed activity and order a financial penalty that the office assessed for the violation. The proceeding will be subject to articles 3 and 4 of the State Administrative Procedure Act and sections 133.10(a) and (e), 133.11, 133.12(a) and (c), 133.13, 133.14, 133.15(a) and (c), 133.16, 133.17, 133.18, 133.19, 133.20 and 133.21 of this Part. Any references to "licensee" in such sections shall be read to apply to persons subject to enforcement pursuant to this section.

(1) Notwithstanding subdivision (f) of section 133.10 of this Part and pursuant to subdivision 3 of section 17 of the Cannabis Law, the notice of hearing may provide for a hearing date on less than 45 calendar days' notice.

(2) After the hearing, the administrative law judge shall issue a decision based on the administrative law judge's findings of fact and conclusions of law. Such decision shall be final and binding when issued.

(j) In assessing the civil penalties under Cannabis Law section 132(1) or 132(1-a), an affidavit from a representative of the office, the office of the attorney general, or a local government, or a local police officer confirming the presence of conduct described in Cannabis Law section 132(1) or 132(1-a) following an inspection by the office after the office has ordered such conduct to cease shall be sufficient to establish a prima facie case that such conduct had been continuing for each business day between the initial inspection and the last observed or otherwise documented conduct.

(k) Any of the parties may appeal the administrative law judge decision within thirty (30) calendar days of receipt. Such an appeal shall be made by filing with the board, and serving on the other party or parties, a written memorandum stating the appellant's arguments and setting forth specifically the questions of procedure, fact, law or policy to which exceptions are taken, identifying that part of the administrative law judge's decision and order to which objection is made, specifically designating the portions of the record relied upon, and stating the grounds for exceptions. A party upon whom an adverse party has served an appeal may file and serve a memorandum in opposition and cross-appeal within 30 calendar days after such service. A response to a cross-appeal may be filed and served within 15 calendar days after service of the cross-appeal. The failure of any party to respond shall not be deemed a waiver or admission. The record on appeal shall consist of the evidentiary exhibits from and transcript of the hearing, and the memorandums of appeal, opposition, and cross-appeal. The board or the board's designee may, in their discretion, stay the effective date of the decision, and shall, based solely on the record on appeal, either confirm the decision in writing, make a written, superseding decision including a statement as to why they have not confirmed the administrative law judge's decision, or remand the matter to the administrative judge for additional proceedings.

N.Y. Comp. Codes R. & Regs. Tit. 9 § 133.25

Adopted New York State Register September 25, 2024/Volume XLVI, Issue 39, eff. 9/10/2024, exp. 1/7/2025 (Emergency)