A Pulaski County Circuit Court judge on Wednesday declared the Arkansas Marijuana Commission's scoring of cultivator applicants "null and void," preventing the commission from officially awarding cultivation licenses.
The order by Judge Wendell Griffen came in a complaint filed last week by Naturalis Health LLC of Little Rock, which accused the commission of conflicts of interest and violating the Arkansas Administrative Procedures Act and other rules in choosing the winners of the five available licenses for growing marijuana under the state's newly legal medical cannabis system. The complaint asked the court to prevent the commission from awarding the licenses.
More: See the Griffen's order here
Griffen's ruling on Wednesday declared that the commission's "licensing processes and decisions" violated Amendment 98 of the Arkansas Constitution, which voters approved in 2016 to allow legal medical marijuana sales. It also said the process violated "due process of law, resulted from improper procedure" and was arbitrary and capricious.
"Hence, the licensing decisions and rankings rendered by the Medical Marijuana Commission must not stand, and are, hereby, declared null and void," the order states.
It was unclear how Griffen's order would affect the operations of the commission, an independent body that is staffed and supported by Alcoholic Beverage Control at the state Department of Finance & Administration. Before Griffen issued his temporary order last week, the commission was scheduled to officially award cultivator licenses and was preparing to score applications for dozens of marijuana dispensaries.
"At this point, it would be premature to speak to the impact on specific functions of the [commission] as we must let this work through the proper channels," Scott Hardin, a spokesman for the state Department of Finance & Administration, said in an email. Hardin later added that, "A review of the order is underway to determine next steps regarding dispensary scoring."
Hardin referred questions about the ruling to the state attorney general's office, which said it was reviewing the court's order and discussing it with Mary Robin Casteel, director of the Alcoholic Beverage Control Administration, and "other affected state entities."
An attorney for Naturalis Health said the company was happy with the ruling. "We're very grateful for the judge's decision and look forward to what comes next," Jay Bequette told The Associated Press.
The order certainly delays the availability of medical marijuana to the public, a fact that Griffen lamented.
"Amendment 98 to the Constitution of Arkansas, an initiative by the people, exists because Arkansans want to provide medical marijuana to persons who suffer from chronic, debilitating, and life-threatening health challenges," he wrote. "The prospect that Arkansans must now endure more delay before gaining much needed access to locally grown medical marijuana should be unpleasant to anyone concerned about providing relief to people who suffer from serious illnesses."
The Arkansas Medical Marijuana Association, an industry trade group, said it backed a quick end to the dispute.
"The people of Arkansas voted in favor of the use of medical marijuana to treat certain health conditions," the AMMA said in a statement. "This delay is unfortunate and we strongly support a quick resolution of this matter."
In siding with Naturalis Health, Griffen said that:
- the Alcoholic Beverage Control Division, named as a co-defendant along with DF&A and the commission, "failed to verify assertions" in some of the applications.
- the commission violated its own rule "by failing to evaluate and score" whether people connected to applications were "affiliated with entities whose corporate status has been revoked for failure to pay franchise taxes."
- the commission's decision-making process was compromised by relationships between commissioners and applicants.
Previously: See Naturalis Health's original complaint.
The commission announced the top applications for cultivation facilities on Feb. 27. The companies who scored the highest and thus qualified for one of five available licenses were Natural State Medicinals Cultivation in Jefferson County, Bold Team LLC in Woodruff County, Natural State Wellness Enterprises of Jackson County, Osage Creek Cultivation in Carroll County and Delta Medical Cannabis Company Inc. in Jackson County.
Naturalis Health's conflict-of-interest challenge involved commissioners Travis Story and Dr. J. Carlos Roman.
In his order, Griffen said testimony and evidence showed that Story's law firm had represented Jay and Mary Trulove, owners of Osage Creek Cultivation, in legal matters unrelated to the marijuana business.
The order also said that Roman, a Little Rock pain management specialist and anesthesiologist, refers patients to Legacy Spine and Neurological Specialists, which was founded by Dr. Scott Michael Schlesinger, an owner of Natural State Medicinals Cultivation. And it pointed out that Roman scored Natural State Medicinals' application 30 points higher than the average score he assigned to the other applicants.
"The issue is not whether Commissioner Story and Commissioner Roman are actually biased, whether they received or expected to gain some benefit from Jay and Mary Trulove and Dr. Schlesinger, nor whether Jay and Mary Trulove and Dr. Schlesinger … actually gained or expected to gain some advantage or benefit over Plaintiff and the other applicants who seek cultivation facility licenses," Griffen wrote. "What matters is that a relationship exists … that suggests the 'appearance of bias' because Commissioners Story and Roman evaluated, scored, and ranked competing applicants for medical marijuana cultivation facility licenses at all.
"The well-established way to avoid that 'appearance of bias' in administrative decision-making is for the affected persons to avoid participation in agency decisions where their relationships with interested parties raise the 'appearance of bias,' even absent actual bias on their part."
Naturalis Health had unsuccessfully applied for a cultivator license. In its complaint, filed March 13, the company alleged that the commission's process for selecting the licensees were "arbitrary and capricious" and compromised by selective enforcement of commission rules, irregularities in scoring and conflicts of interest. The company has also said it wants an independent evaluator to rank the 95 license applications.
On March 14, Griffen issued a temporary restraining order blocking the commission from officially issuing cultivation licenses. Griffen heard testimony in the case Friday and had promised to make a decision by today on whether to allow the state to issue its first licenses for growing medical marijuana.
The state marijuana commission was scheduled to meet to officially award the licenses the day Griffen issued the temporary restraining order. It postponed the meeting.