Legal battles ahead for Missouri’s Medical Marijuana Program
Editorial Insight
As the state begins the hiring process for additional counsel, publicly traded cannabis companies (PTC), multi-state operators (MSO), privately owned license seekers, large scale operations, and individual applicants are all preparing for the same thing – a legal battle.
Legal battles can have long lasting ramifications, none bigger than the prolonged delay of access for Missouri’s medical marijuana patients.
Around the country, companies are increasingly ready to bring lawsuits and litigation into their licensing application strategy. Emerging markets are wrought with overlapping and perplexing rules, conflated and sometimes opposing regulations, and often just enough loopholes to jump through. And in Missouri attorneys have already sent demand letters to the Department setting up for litigation on behalf of clients.
The strategy of litigating disputes with state regulators isn’t a new concept, and while seed-to-sale software providers Metrc and BioTrack aren’t applying for dispensary or manufacturing licenses – they are firmly entrenched in the middle of familiar territory as Metrc asks a judge to clarify their ability to charge additional fees, and BioTrack attempts to intervene.
In other markets, multiple marijuana business applicants have successfully captured licenses by filing lawsuits or appealing their respective states’ licensing decisions. In Florida, 17 of the 22 vertically integrated medical marijuana license holders won through legal challenges.
MSOs, PTCs, and vertical integrated operations who spent upwards of $100,000 in application fees alone, in some cases, and hundreds of thousands, for many, millions, more to: secure properties, hire application writers, pay consultants, travel, ensure compliance, and a litany of other tasks including hiring or securing legal counsel, the decision is practically made for them.
Why take a shot and walk away defeated when you can rebound and get a second chance when the price is often significantly less than what you’ve already invested?
In other states, license losers challenged under a belief that initial scoring was biased or corrupt, and while DHSS and the state of Missouri have seemingly done everything possible to ensure a fair and transparent process, there are concerns about the connection of Wise Health Solutions LLC, the winner of the scoring contract, to Oaksterdam University and Oaksterdam’s in-state connections, including sponsoring and co-hosting a series of “bootcamps” and “training courses” that were designed to boost applicants’ application writing ability, scores, and industry knowledge.
Experience says that MSOs and PTCs likely already built and budgeted appeals and litigation into their application strategy, PTCs would essentially be wasting money if they hadn’t, as the application itself calls for an accounting of owners and verification that none have a disqualifying felony offense.
In addition, MSOs and PTCs are more likely to have in-house counsel or retainers with attorneys eager to set precedent in a new market, and they may have even faced similar issues in previous states where they have already won licenses. Earlier this year Trulieve settled a lawsuit in Florida and, in doing so, won the right to open 49 dispensary facilities, 14 more than the maximum of 35. In August, when Surterra Wellness successfully petitioned the state of Florida to exceed the maximum of 35, officials agreed. Also in August, GTI won a medical marijuana cultivation license in Ohio after appeal. Meanwhile, a Pennsylvania company, Keystone ReLeaf, moved to invalidate the entire medical marijuana application process in the state, but don’t expect that to be the first step taken in Missouri. An appellate judge ruled that the company should have first sought a remedy with the state.
Missouri’s appeal process is laid out in the Emergency Rules issued earlier this year by the Department: (6) Appeals. (A) The following department decisions shall be appealable to the administrative hearing commission: 1. Denial, revocation, or suspension of licenses or certifications; and 2. Denial or revocation of patient, primary caregiver, patient cultivation, or facility agent identification cards. (B) Any person or entity entitled to appeal to the administrative hearing commission under this rule must file a petition with the administrative hearing commission within thirty (30) days after the date the department decision is sent to the person or entity. An untimely appeal will not be considered. (C) Notwithstanding the limits on licenses and certifications set forth in 19 CSR 30-95.050(1)(A), 19 CSR 30-95.060(1)(A), 19 CSR 30-95.070(1), and 19 CSR 30-95.080(1)(A)-(B), the department may grant additional facility licenses or certifications as a remedy to timely appeals when: 1. Ordered to do so by the administrative hearing commission or a court of competent jurisdiction; or 2. The department determines doing so in settlement of such an appeal best serves implementation of Article XIV, Section 1 of the Missouri Constitution.
How that fares for those out-of-state operators and conglomerates is yet to be seen, but we did see during the application phase that out-of-state experts struggled in Missouri, with different criteria, a restricted application form that brought about concise, clear answers – many consultants with years of experience and high win rates struggled to deliver on promises. Greenway saw more than a few consultants abandon ship in the final week of applications, leaving investors and applicant groups scrambling to tie loose ends.
While litigators and counsel struggle to contend with Missouri’s scoring and awarding – only time will tell, but as we have seen in Florida, Ohio, Arkansas, and Nevada, lawsuits are the new back up plan.