Metrc continues to pursue Tag Purchase Agreements despite court order

One year after originally reporting about Metrc’s Tag Purchase Agreements being sent to Missouri medical marijuana licensed facilities, Metrc continues to send facilities purchase agreements that directly contradict both the original RFP and the rulings of Missouri courts.

In April 2019, the Office of Administration awarded Metrc a contract to provide track and trace services for the state’s medical marijuana program. The request for proposal that vendors responded to called for firm, fixed pricing – designed to be inclusive of all costs intended to be charged for the bidder’s seed-to-sale tracking solution to function for both internal and external users.

After Metrc was awarded the contract in April, BioTrack protested the award with OA, contending Metrc’s offerings did not meet the requirements of the contract, citing Metrc’s inclusion of variable costs among other issues.

In May of 2019, OA rejected BioTrack’s protest, writing in the Protest Determination Letter: “The RFP required that all prices to be charged by the vendor for its contractual obligations be included in the proposal’s Exhibit A. The proposal accepted by the Division did not include variable prices in its Exhibit A. That proposal, therefore, did not propose to authorize Metrc to charge variable prices – to licensees or to the State – for the vendor’s contractual obligations. And the resulting contract between Metrc and the State does not authorize Metrc to do so.”

In September 2019, four months after being awarded the contract and three months after BioTrack’s protest was dismissed, Metrc filed suit against the state, asking the court to clarify their ability to charge and collect the same fees BioTrack had previously protested, and the State had emphatically assured licensees would not exist.

In January 2020, Judge Dan Green rejected Metrc’s motion, writing: “Accordingly, it is hereby ORDERED AND ADJUDGED that judgment issued in favor of Respondents on all claims in the Petition and that, under Contract No. CR191827001, Metrc is not entitled to request or receive compensation from non-state entities for the RFID tags.”

In June 2020, as the first of Missouri’s licensed facilities began to request commencement, licensees began receiving Tag Purchase Agreements.

Metrc spokesperson Bronwyn Flores told Greenway at the time, “The only difference between Missouri and the other 13 U.S. jurisdictions in which we operate is that Missouri licensees will contract directly with Metrc for their tag orders,” Flores continued. “Licensees should continue to expect the same high quality and low cost of our tags. Metrc tags are produced through our patented process, designed to meet the unique environmental conditions for marijuana cultivation, manufacturing, and retail. Since licensees aren’t responsible for printing their own tags, they can focus on their core business and avoid large costs, such as printing equipment, supplies, and labor to assemble, test, and input tracking tags,” Flores continued. “This is all handled by Metrc to keep the costs to licensees affordable and proportional to the size of their business.”

But unlike the other jurisdictions where Metrc had previously operated, in Missouri, Metrc was expressly forbidden by court order and the terms of their contract from collecting such fees. Metrc told Greenway in June that the company believes the purchase agreements operate within the terms of Judge Green’s order.

“Our approach complies with Judge Green’s order and supports the successful launch of Missouri’s medical marijuana market,” Flores said. “We are compliant with the ruling, which effectively prevents Metrc from collecting tag fees from licensees as part of our contract with the state. Instead, we are working directly with licensees to create individual contracts between their business and ours. These contracts with licensees are separate and distinct from our contract with the state.”

In addition to Metrc, Greenway reached out to OA at the time regarding the Metrc-provided tag purchase agreement. In June, OA told Greenway the state was aware of the tag purchase agreement but was not aware of any entity agreeing to purchase from Metrc. OA disagreed with Metrc’s assessment of compliance with the purchase agreement.

“That Judgment is currently on appeal in the Missouri Court of Appeals, Western District, Case No. WD83565, but has not been stayed or overturned at this time,” OA spokesman Chris Moreland said at the time. “Further, the contract at Section 3.18 provides that:

‘Except for payment as set out in this contract, the contractor and its personnel shall not accept any collateral gift, payment, commission, or other direct benefit arising from or connected to performance under this contract.’

“OA is unaware that any entity has agreed to such a tag purchase agreement with Metrc, but if Metrc has such agreements, they are in conflict with the contract language and the interpretation of the contract in the Judgment.”

“If a breach occurs, OA will consult with its counsel and the Attorney General’s office as to available options,” OA’s Moreland said. “The contract with the State of Missouri, as interpreted by the court, requires Metrc to provide to licensees the seed to sale tags at no additional charge beyond the firm, fixed contract price with the State.”

At that time, Metrc’s Tag Purchase Agreement read :

“F. Metrc and the Procurement Office have Contrasting views on what the State Contract provides with respect to the Metrc Tags. In that regard and in response to a Petition For Declaratory Judgment sought by Metrc, a Cole County Judge issued an order (“the Court Order”) stating that “under Contract No. CR191827001, Metrc is not entitled to request or receive compensation from non-state entities for the RFID tags.”

(That reference to “RFID tags” is a reference to the Metrc Tags hereunder.)

G. Although Metrc has filed a Notice of Appeal of the above Court Order, Metrc believes it has acted in good faith in to satisfy all of its contractual obligations under the State Contract; and Metrc likewise believes it has been doing everything it feasibly can do to cooperate with the Department to perform the State Contract, and that the METRC System is now ready to accept licensees.”

In the year since that time, however, Metrc’s appeal has been heard and the appellate court has affirmed the decision of Judge Green.

Meanwhile, Metrc continues to operate under the shelter of purchase agreements, and neither the Department nor OA have issued any additional statement in regards to Metrc’s Tag Purchase Agreements despite clear language from both Judge Green’s initial decision and the appellate court restricting Metrc’s ability to take any additional payment apart from their contractual agreement with the State.

The judgment issued by Judge Green, and affirmed in appeals, states: “The Plain and Unambiguous Terms of Metrc’s Contract Prohibit it from Charging Industry Participants for RFID Tags.”

§2.16.3 and 3.18 of the RFP, stated that under the resulting contract, the winning bidder would not be entitled to any payments other than those specified in its pricing proposal, and would be prohibited from taking any additional payments “arising from or connected to performance under this contract.”

Further, in the judgment, the court declares, “Metrc is barred from charging industry participants for its RFID tags.”

Greenway reached out to Metrc for comment and inquired about how licensees may operate without signing the Tag Purchase Agreements, Metrc did not issue a statement or respond to provided questions.

In letters being sent currently, nearly six months after the appellate court’s decision, a Metrc representative writes:

“As you may or may not know, Metrc’s specific track-and-trace system works by adhering recyclable RFID tracking tags to cannabis plants and products. Just as Metrc had been doing prior to the Court of Appeals ruling, Metrc is continuing to enter into separate contracts with licensees for the sale of RFID tags. The sale of such RFID tags by Metrc to the licensees is based upon those separate contracts, not upon the State Contract. In light of this, we are currently doing everything we can to ensure licensees properly gain access to Metrc and can begin reporting in the system. In order to do so, we ask you review and return a signed Tag Purchase Agreement (attached) for your business along with the respective licenses associated with your business in Missouri, which can be listed as license numbers under Purchaser Affiliate(s). We will be happy to have a call with you to field any questions, and walk through the tag order process and agreement. Please let me know if you have any questions, and we can set up time to make sure you are ready to take the next steps in Metrc.”

Attached with the letter is an updated Tag Purchase Agreement with revised wording, part of which states,”The agreement also states that “Pursuant to the State Contract, Metrc is to provide to the State and persons licensed by the State (“Licensees”) which include Purchaser: (i) certain computer software for registration, training, and reporting purposes; and (ii) a radio frequency identification (“RFID”) system to track and trace medical marijuana.”

Sections F and G of the recitals now read:

“F. Metrc and the Procurement Office have contrasting views on what the State Contract provides with respect to the Metrc Tags. In that regard and in response to a Petition For Declaratory Judgment sought by Metrc, a Cole County Judge issued an order (“the Court Order”) stating that “under Contract No. CR191827001[sic], Metrc is not entitled to request or receive compensation from non-state entities for the RFID tags.” (That reference to “RFID tags” is a reference to the Metrc Tags hereunder.)

G. Although Metrc appealed the above Court Order to the Missouri Court of Appeals, which affirmed the trial court’s judgment, Metrc believed and continues to believe that it has acted in good faith in its efforts to satisfy all of its contractual obligations under the State Contract. Metrc likewise believes it has been doing everything it feasibly can do to cooperate with the Department in performing the State Contract, and the METRC System has been accepting Licensees and continues to do so.”

Relevant and important to note is that METRC asserted in its response to BioTrack’s bid protest that, “the functioning of the RFID aspect of the Metrc system [is] dependent upon the RFID transponder inlays incorporated into the tags by the proprietary system Metrc has developed. It is not possible for Metrc’s RFID component to efficiently function in the manner described in Metrc’s response to the RFP with any other potential supplier of RFID tags.”

Rachael Herndon contributed to this story.