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Empire Cannabis Clubs, a prominent and infamous staple in New York City that describes itself as “a concierge service dedicated to supplying the highest-end cannabis products at prices you can afford,” saw two of its locations raided yesterday by the state.
Officials seized property, a brief standoff took place between inspectors and club staff, and two of Empire’s owners, Lenore and Jonathan Elfand, were handcuffed.
Both were released within hours; Empire’s operations will return to “business as usual” tomorrow; and the company now has the legal battle it has expected – and craved – over the state’s approach to cannabis enforcement, said Empire attorney Steve Zissou Tuesday night.
Empire sprung up in September of 2021 “pursuant to the safe harbor provision of the MRTA,” Zissou wrote in a recent guest column. That provision, he said, “permits non-compensatory transfers of cannabis and the use of ‘property’ to facilitate such transfers.”
Though the Office of Cannabis Management sent Empire a cease-and-desist letter last summer, the agency was not involved in the raids on Tuesday. The enforcement was led instead by the Department of Taxation and Finance, Zissou said.
The attorney spoke with NY Cannabis Insider in-depth about his clients’ experience on Tuesday and what Empire plans to do next – in court.
This Q&A has been lightly edited for length and clarity.
Walk me through exactly what happened today.
Agents, police officers, whatever – it wasn’t clear right away who they were – showed up at two locations: at Chelsea, that was the first shop that was opened in September 2021; and then the Lower East Side shop.
Since it’s a private club, the employees are trained that if anyone shows up demanding entrance and they’re not a club member, or somebody seeking to join, they’re not allowed in. They’re supposed to call me or the owners.
That led to a standoff because the officials took the position that they didn’t need a warrant. Actually, it got even worse than that.
At first, there were members in the club who the agents claimed were being held as hostages. The club members said, ‘no, no, we’re perfectly fine, we’re happy in here,’ and that caused the agents to back down.
I said, ‘just have the agents call me, like they would normally do.’ They didn’t call. But they gave Lenore the name of an attorney at the Department of Taxation and Finance.
How’d that conversation go?
I was in court. My wife, Sally Butler, who’s also a lawyer and an attorney for Empire, made the call to her to say, ‘look, I know you need a warrant.’ The reaction she received sounded a lot like the Treasure of the Sierra Madre, essentially, ‘we don’t need no stinkin’ warrants.’
My wife is much more centered than I am. I tend to be a hot head on occasion. She said, ‘well, yeah, you do need a warrant: it’s a private club, we don’t sell cannabis, we pay taxes, and there’s a 21-and-older membership requirement.’
The attorney from the Department of Taxation said she’d have her team ‘arrest all the employees in the shops and charge them with obstruction of justice.’
There’s been a lot of fear among observers and folks in the legislature about creating this new police force that was created in the new regs. And this attorney really went full, ‘I’m going to lock up everybody.’
What happened next?
Jonathan and Lenore didn’t want the employees to get involved, so Jonathan went to one shop and Lenore went to another shop to take the hits, so to speak. To say, ‘you can’t come in without a warrant.’
And Lenore was promptly arrested and taken to the 7th Precinct.
For obstruction of justice?
Yes. Which on its face is going to give rise to a wonderful false arrest case.
Because again, the statute these officials claim to be complying with says, ‘if you’re denied entrance, you can go to a Supreme Court judge in the county where the shop is located and apply for permission to enter the premises.’ And of course they didn’t do that.
A few hours later, Lenore was given a desk appearance ticket with a date to return, and charged with obstruction of justice.
And Jonathan?
Jonathan was arrested. They went into the shop without a warrant. He had cuffs on for about half an hour, they helped themselves to whatever it is they thought they were authorized to take, then took the cuffs off Jon, and that’s it.
Did either of them learn any details about the reasoning behind the raid throughout the day?
While Lenore was in custody, one of the agents said to her, ‘we really only came because you’re not paying taxes.’ And Lenore says, ‘of course we’re paying taxes – we paid almost $3 million in taxes last year alone. And you know it because we have a tax ID number, we have signs in the shop saying taxes have to be collected.’
So that’s how the day has unfolded.
If OCM isn’t involved, is there no enforcement hearing?
That’s a good question. Why wasn’t OCM involved? They didn’t put any of those stickers on the shop. By tomorrow morning, I may know something different. But it does not seem like one of those hearing cases.
So there was no sticker put on the door?
No.
There’s no notice of a hearing?
Correct.
They didn’t seize products at one of the stores?
Correct.
And there are no fines, or talk of fines?
No.
So what was the purpose of this?
I have no idea.
What’s Empire’s legal argument going to be moving forward? Is it the false arrest lawsuit? Or are you planning on anything else?
No, maybe the false arrest will come later. But I do think the plan will probably include filing a lawsuit for a return of property on the ground that it was illegally seized. And I think that’s probably a cleaner way to get before a court of law as opposed to one of the administrative hearings. No lawyer ever wants to litigate a serious issue in an administrative tribunal first.
So I’d rather avoid that if possible. I think we’re going to probably use this as a vehicle to get into a Supreme Court sooner than later and have this issue decided.
Bring it on. We’re ready.
Is it your goal to get into the Supreme Court over seizure of product but ultimately have it out about enforcement overall?
Yeah, of course, I think the issue is going to be about the business model, and does it survive the legislation?
And if not, is Empire entitled to damages? And by that, I mean that when you pass a statute as they did with the MRTA, and folks rely on the statute – invest money, time, and effort building something – and then they change it two years later, there’s a concept known as detrimental reliance.
That’s when you rely on something to your detriment that the legislature then changes after acknowledging that your business model fits within the original law.
There are those considerations. Empire didn’t get started yesterday – they’ve been involved openly, notoriously, they weren’t hiding from anybody. They would speak to anyone. I’ve called OCM many times.
So, yeah, we’d like to litigate this issue sooner than later.
What’s going to happen tomorrow?
It’s business as usual tomorrow.