A federal judge’s order temporarily halting Missouri’s cannabis license majority ownership requirement, is going to a bench trial today to determine if the ruling should be overturned or made permanent. Missouri’s cannabis laws, embedded in a state constitutional amendment passed by referendum in 2018, require cannabis licenses to have majority ownership by Missouri residents.
While most of the state’s dispensary licenses have become operational since they were first awarded in September 2019, majority in-state ownership has become a particular barrier for cultivation licenses, as they often require $12 to $15 million of capital investment to open. So far, only 34 of the state’s 60 cultivation licenses have been certified operational by Missouri regulators.
The lawsuit going to trial in Missouri’s Western District Court tomorrow, Toigo v. Department of Health and Human Services, resulted in the granting of a preliminary injunction barring Missouri cannabis regulators from enforcing state residency requirements for medical marijuana license majority ownership last June. The hearing tomorrow will be a bench trial – no jury – conducted on the facts, meaning that the plaintiff and defendant have agreed on the basic facts of the case, will not be submitting additional briefs or evidence, and will simply present oral arguments before Judge Nanette Laughrey. It is likely the trial will only take one day, and even decided by Judge Laughrey by the end of the month.
The case was brought by Mark Toigo, a Pennsylvania resident and minority owner of Organic Remedies MO, which owns a cultivation license in Chaffee and three dispensary licenses in Fenton, Sedalia, and Cape Girardeau. Toigo, who also owns and operates a similarly named group of dispensaries in Pennsylvania, is seeking to become a majority owner of the Missouri group, but is prevented from doing so by Missouri’s requirement that only residents who have lived in the state for at least one year own 51% of the license equity. However, Judge Nanette Laughrey found that Missouri’s residency requirement violates the federal constitution’s commerce clause, which “prohibits states from enacting laws ‘that discriminate or unduly burden interstate commerce,’” she wrote.
The case is one of a trio of lawsuits working their way through courts in Missouri that have the potential to upend the state’s licensing system. One, the “King’s Garden Case”, involves an effort by a failed licensee in the state’s Administrative Hearing Court to review cannabis license applications for patterns of mistakes by application reviewers. That case is pending a possible state supreme court review.
In another case, DHSS v. Heya Excello, applicant Heya is preparing to argue in late November before a Cole County Circuit judge that it should receive two additional licenses because their submitted applications were identical, but scored differently. Using circular logic, the state argues that because it reviewed its own scoring process, and found no problems with it, application scores should stay the same. Therefore, the Commissioner does not have the right to order the state to make changes to scores and award Heya Excello the two additional licenses.
