Confidentiality takes center state in appeal struggle

All Missouri medical marijuana facility applicants were emailed Friday mid-day by the state’s regulatory program saying their presumed confidential applications may have been compromised by the Administrative Hearing Commission, the executive judicial panel tasked with license appeals.

“In all of the appeals from denials and conditional denials of applications for medical marijuana licenses (dispensary, manufacturing, and cultivation), the Department has resisted disclosing information from your application and others,” reads the letter from the Department of Health and Senior Services Section for Medical Marijuana Regulation leaders. “That resistance is based on the promise you received, in Article XIV, that your application would be ‘confidential.’”

This letter comes within weeks of the Section reaching out to applicants for feedback on the handling of confidentiality by the courts and within days of DHSS filing a suit in Cole County against the Administrative Hearing Commission.

“As most people know, there were many more applicants than there were medical marijuana facility licenses,” said Lyndall Fraker, Director of the Section for Medical Marijuana Regulation, in that request for guidance. “Some of those applicants are now pursuing their competitors’ business and proprietary secrets through the appeal process. It’s our responsibility to implement the Constitution, and we want to be sure we’re doing exactly that.”

The September 4 emailed letter came days after the Section for Medical Marijuana Regulation filed suit in the Cole County Circuit Court in an effort to prohibit the “disclosure of information submitting in other applications.”

“To further defend the constitutional protection regarding confidentiality of information from your application and others, the Department is seeking a writ of prohibition, asking the circuit court for Cole County to prohibit the AHC from requiring disclosure of information submitting in other applications, such as yours,” reads the letter from SMMR to all 2,163 facility application groups. “That petition is pending as 20AC-CC00327. The Department is also seeking stays of AHC cases where the confidentiality question is now at issue.”

The writ, filed by DHSS on September 1, asks the Cole County court to grant a stay of relief for the state, which does not wish to release third-party applications to the AHC. The third-party applications being referred to by appellants were voluntarily provided.

The writ between DHSS and the AHC can be read in full below.

Groups and group counsels tell Greenway that concern like this is atypical, that courts are equipped and familiar with how to handle sensitive documents, whether they include proprietary, financial, security, schematics, or other delicate information.

Facility groups are calling the Department’s suit misleading and false.

Three groups were named in the letter to applicants as being the cause of the concern: Heya Kirksville, Verdant Creations Missouri, and King Garden Midwest.

The majority of the writ is centered around the motion granted to Heya for the release of third-party applications for the purpose of authentication so they may be entered as evidence in the appeal. The other two appeals were granted the same motion by the same AHC commissioner.

At least one of these groups explained to Greenway that they asked the Department to verify the authenticity of other applications the group was given by other applicants and provided to the court as part of their evidence in their pending appeal.

“This petition challenges the constitutionality of an order issued by Commissioner Sreenivasa Rao Dandamudi of the Administrative Hearing Commission that compels the Department to produce in discovery confidential information belonging to third-party applicants that the Missouri Constitution prohibits the Department from producing,” reads the writ, provided in full below. “The challenged order originated in a proceeding in which the petitioner, Heya Kirksville Cultivation, LLC (“Heya Kirksville”), challenged the Department’s denial of Heya Kirksville’s application for a medical marijuana cultivation license.”

To be clear, third-party applicant groups have willingly and knowingly provided their own applications in full to other appellant application groups who wish to use the other group’s applications as evidence to prove application scoring inconsistencies. Application groups claim that the inconsistencies – often called “arbitrary and capricious” – prevented the group from receiving all the licenses they are entitled to.

Though the Department contests the value of the applications themselves in the writ, the appellants seek to have the Department verify that the applications they were given – and wish to use as evidence in their own appeals – are real. It is not typical for sensitive evidence, such as a license application, to be made public.

“…you can expect that your application—including its most sensitive aspects—will be disclosed and become public,” reads the letter, signed by Section Director Lyndall Fraker and Deputy Director and Counsel Amy Moore.

“In other words, the AHC has determined that unsuccessful applicants can, on appeal, gain access through discovery tools to all aspects of all other applications—or at least other applications for the same type of license – dispensary, manufacturing, or cultivation,” continues the SMMR letter.

The orders referenced by SMMR were entered in the cases of Heya Kirksville Cultivation, Verdant Creations Missouri, and King Garden Midwest. These three groups are named in this letter that was sent to the over 2,000 applicants.

The Department emailed Greenway after the original publishing of this article online, clarifying that their stance is rooted in the constitutional framework of the program.

“Regarding the interpretation of the confidentiality provision, the language in the constitution requires DHSS to ‘maintain the confidentiality of reports or other information obtained from an applicant,'” said Lisa Cox, spokesperson for DHSS. “The applications contain information such as business practices and trade secrets that fall under this provision. Releasing confidential business information to the public or competitors would violate the text of the constitution. ”

The Section concludes by appealing to applicant groups, saying, “If you wish to be heard on the issue of the confidentiality of your application materials and other information submitted to DHSS, or have any questions about this notification, please contact our Office of the General Counsel.”

It is possible applicant groups could join or support the suit filed by SMMR hoping to prohibit them from verifying the authenticity of outside applications.

Stinson partner Chuck Hatfield, representing applicant group Heya – who was both awarded and denied licenses, sent a letter to SMMR counsel Moore in response to the letter referenced above and available in full below.

“Today I received a copy of the attached letter DHSS sent to all medical marijuana license applicants, which falsely advises applicants that as a result of certain AHC rulings they can ‘expect that [their] application—including its most sensitive aspects—will be disclosed and become public.’ Your letter further suggests that this outcome is a direct result of actions my client has taken,” Hatfield writes on behalf of Heya.

“These statements are at best misleading and at worst blatantly false,” Hatfield, who previously served as chief of staff to the state attorney general, continues. “Heya Kirksville has never asked DHSS to produce to it copies of other applicants’ submissions. What it has requested is that DHSS admit the authenticity of documents Heya Kirksville already possesses (including application answers submitted by other facilities under common ownership or that voluntarily provided parts of their applications to my client). As we’ve previously explained (and the AHC has agreed), DHSS’s objections to this simple, routine discovery are legally baseless.”

Other industry lawyers second the conclusions drawn by Hatfield. It is unsure what, if any, strategy the play has in DHSS’s role in the license appeals.

“DHSS’s letter would be charitably characterized as misleading, if not properly characterized as a scare tactic using false information,” Hatfield concludes. “We ask that you withdraw it and clarify to applicants that no one has asked for the information to become publicly available.”

Read Hatfield’s letter to the Section in full below.

The Department emailed Greenway a statement regarding the Hatfield letter.

“Regarding Chuck Hatfield’s letter, there is nothing false or misleading in the Department’s notice to medical marijuana facility applicants,” wrote Lisa Cox, DHSS spokesperson. “We do not know the intent of his clients, but the letter is not about his client’s intent. The letter was to notify applicants that the discovery methods utilized in several cases could result in confidential application information being made public, without affording interested parties notice that their information is sought by their economic competitors. The normal litigation practice to get such information would be to subpoena other business owners directly and give them an opportunity to respond. It is unusual for litigants to seek closely-held data of Missouri citizens from the government directly, as is being done here. The letter was necessary to advise applicants of this real threat.”

Over 2,100 individual facility applications were filed in Missouri. There are over 840 individual facility license appeals before the Administrative Hearing Commission. The appeals process is outlined in Missouri’s constitutional program framework, allowing any denied applicant the right to appeal licensing decisions to the AHC.

Writ
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Letter from DHSS to all applicants
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Hatfield response letter on behalf of Heya
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