AHC overturns DHSS decision on two cultivation licenses for Heya

Administrative Hearing Commission Commissioner Sreenivasa Dandamudi ordered two licenses be granted to the Heya license group for cultivation facilities, reasoning that if Heya’s applications had been originally scored consistently, they would have ranked in the top 60 scored applications.

“…the facts in this case demonstrate that the Department’s grading process produced inconsistent scores between identical or nearly identical responses to application questions submitted by different applicants, which is inconsistence with the applicable regulations and the Department’s scoring guide,” reads the decision, which further declared that Heya met their burden of proof for being entitled to a license – and that the Department did not persuade the AHC otherwise.

The State of Missouri determined prior to the application period that it would grant constitutional minimums for licenses at 60 cultivation licenses, 86 manufacturing licenses, and 192 dispensary licenses. Since originally awarding licenses at the end of 2019 and early 2020, dozens of licenses have changed from the original awards, including merged licenses for Department-presumed duplications and new awards to replace deactivated and surrendered licenses.

“The decision is very well reasoned,” said Heya attorney Charles Hatfield. “They put a lot of work into this decision – the basic analysis is what we’ve been saying for a long time. The whole basis of the Commissioner’s decision is identical answers, identical scores.”

These are the first appeals to be granted by the AHC. Other appeals so far have been denied, failing to result in a license decision overturn.

Both appeals, officially decided on February 23, 2021. are generally on both appeals for the cultivation facility applications located in Excello and Kirksville, both located in Northeast Missouri.

Beyond the conclusion that the scoring was inconsistently special, Dandamudi concluded further that the Department “bizarre”-ly delegated constitutional responsibilities without involved oversight.

“Finally, in a bizarre claim, the Department argues that it is not authorized to rescore Heya Excellos’ application because it delegated away its constitutional and regulatory scoring responsibility to a private contractor, Wise,” reads page 18 of the decision. “As such, the Department continues, this Commission is not authorized to rescore Heya Excello’s application because we exercise the same authority as that granted to the Department. Therefore, the Department contents, by delegating away this Commission’s constitutional and regulatory authority to exercise that responsibility.”

“It is cause for concern that a government agency claims it has handed over its constitutional responsibility to a private contractor without further checks and balances,” concludes the decision. “…The contract entered into between the Department and Wise is outside of existing law and does not bind us in applying the law or, more specifically, in scoring the questions at issue in this case.”

The Department could appeal the decision to the circuit court.

“The department is disappointed with the decisions, as we believe there was sufficient evidence to sustain the denial of the licenses,” the Department said in a statement.  “These decisions are very narrow in regard to applicability. We are reviewing the decisions and considering whether to appeal.”

The decision has been applauded by industry groups and thought leaders.

“Today’s AHC ruling demonstrates that Missouri’s medical marijuana program is operating exactly how voters intended when 66% of the state voted in favor of Amendment 2,” said MoCannTrade Executive Director Andrew Mullins. “Missouri voters supported a merit-based system that awarded a minimum of 348 facility licenses, the second-most of any medical marijuana-only state, to the absolute best applicants. The constitutional amendment then gave unsuccessful applicants two different avenues for recourse, first at the AHC and then in circuit court, if they disagreed with DHSS’s decision on their application.

“With more than 83,000 Missouri patients with medical marijuana cards, more than $28 million in revenue generated to the state so far, and nearly $2 million in weekly medical marijuana sales statewide, the Missouri industry is poised for significant growth in 2021,” Mullins continued. “The ability for the AHC to consider these administrative appeals on a case-by-case basis is another sign of the program’s growth and another example of Missouri voters getting it right.”