Arkansas’ Alcoholic Beverage Control Division is moving to strip the medical marijuana license of River Valley Relief Cultivation after a Pulaski County Circuit Court judge said in a stunning ruling last week that the license was granted on the basis of a fatally flawed application.
RVRC owner Storm Nolan got the state’s eighth and final cultivation license from the state Medical Marijuana Commission even though he had dissolved the business actually listed on his application long before licensing, Circuit Judge Herbert Wright Jr. wrote in his decision late Thursday.
The ABC and the MMC “are taking the necessary steps to revoke the cultivation license at issue,” wrote Kate Donoven, senior assistant attorney general, in a Monday letter to Wright. “If the Court should have any questions, please let me know.”
The Medical Marijuana Commission is scheduled to meet Thursday to address the licensing case.
The licensing reversal favored 2600 Holdings of Little Rock, doing business as Southern Roots Cultivation, which had sued claiming it should have rightfully won the license. The state’s cultivation licenses are worth millions of dollars, and are poised to multiply in value if Arkansans pass a constitutional amendment legalizing adult-use marijuana. The amendment would give all current medical cannabis cultivators and dispensaries matching licenses for the bigger recreational market.
Late Monday, state spokesman Scott Hardin said the ABC, which inspects marijuana facilities and enforces state rules, much as it does for liquor business licensees, was working to address the judge’s order. Hardin works for the Arkansas Department of Finance & Administration, parent agency to ABC. He didn’t immediately return a call for comment Tuesday morning.
Hardin said that he couldn’t go into details because the case is still active, but he wrote in a Monday email that the “ABC is initiating the steps required to comply with the judge’s order.”
Wright, in his ruling, took particular aim at the ABC, which he found oddly determined to grant a license to Nolan despite application irregularities that resulted in a $15,000 state fine. The judge wrote that the ABC and DF&A had acted “unreasonably, unlawfully, and capriciously” by awarding a cultivation license Nolan’s River Valley Relief Cultivation in 2020. He ordered the state to “take all steps necessary to remedy” violations in Nolan’s license application, but said he lacked authority to strip away the license. The lawsuit sought revocation of River Valley’s license and for it to be granted to Southern Roots.
Nolan, a Fort Smith hotelier and entrepreneur, has invested millions in his grow operation but he has never been a party in the case. Wright rejected his plea to intervene last week, ruling Nolan had waited too late to join the case, already more than two years old. The defendants were the commission, ABC and DF&A.
Nolan has declined several opportunities to speak for the record, but argued that he paid his fine and that the application’s faults were minor in context of a state licensing system that has spawned lawsuits and allegations of outright bribery.
But Wright’s ruling said an extensive record showed that the state knew Nolan’s application was “nonconforming” and expressed curiosity as to why so many accommodations were made for Nolan, despite concerns and protests being repeatedly raised from the beginning of the application process.
The ruling capped a case that was central in a major Arkansas Business examination of the state’s marijuana licensing process and its rocky and litigious history. The report, published Oct. 31, included details from sworn depositions taken by 2600 Holdings in the case, including a revelation that the FBI had investigated a bribe attempt made on a charter member of the marijuana commission. Those depositions also revealed that agents had questioned the former and current chairs of the panel, which granted all of Arkansas’ medical marijuana licenses.
Wright’s order said that he “remains curious as to why so many accommodations were made for Mr. Nolan, despite concerns and protests being repeatedly raised from the beginning of the application process.”
Southern Roots attorney Abtin Mehdizadegan told Arkansas Business last week after Wright’s ruling that justice was done, "justice that has been long-delayed." He expressed hope that state officials will speedily carry out "their now Court-ordered duties with the sense of urgency and expediency deserving of the Constitution that they pledged to uphold and defend. The people of Arkansas deserve for this question to be settled before they head to the ballot box, and at a more fundamental level, all Arkansans — all of us — deserve a government that respects the rule of law." He praised his legal team at Cross Gunter Witherspoon & Galchus of Little Rock, specifically praising attorney Brett Taylor.
The lawsuit’s importance is magnified by the fact that medical marijuana licensees will be front and center in a new adult-use cannabis market if voters approve the ballot measure, Issue 4, which has been backed by millions of dollars from industry businesses, primarily the cultivation companies. Under the constitutional amendment proposal now on the ballot, all medical marijuana licensees will get matching licenses to grow and sell recreational marijuana.
Through the first nine months of 2022, Arkansans spent $205 million on 36,600 pounds of medical marijuana. The state expects this year’s numbers to surpass the $264.9 million record of 2021, and independent projections for a recreational market’s sales potential start at three or four times that amount.