MO court decision opens state cannabis application system for discovery – and scrutiny

A Missouri appellate court decision opened the door to a review of the state’s medical cannabis application process, which could allow the creation of more licenses and possibly overturn how the state awards its cannabis licenses.

The appellate court’s ruling on Tuesday now makes it possible for attorneys for a rejected cannabis cultivation applicant, Kings Garden Midwest, to review application sections that received higher scores. Kings Garden Midwest is attempting to demonstrate that applications with identical responses to theirs received higher scores. If Kings Garden Midwest can demonstrate in court that their applications were mistakenly graded this way, it could open up a Pandora’s box of lawsuits against the state and possibly unravel the licensing process.

The law creating medical cannabis licenses in Missouri does not stipulate a license limit. Instead, the license limit is a policy of Gov. Mike Parsons’ administration. Cultivation licenses are limited to 60, but the state’s population growth may require it to increase the limit to 62.

Missouri cannabis regulators would not commit to whether or not they will appeal the decision. “The Department is reviewing this order and next steps in fulfilling the mandates in Article XIV, including seeking final review by the Missouri Supreme Court,” said spokesperson Lisa Cox, referring to the constitutional amendment, Article XIV, that legalizes cannabis in Missouri.

Kings Garden Midwest declined to make a statement through its attorney Josh Hill of Newman Comley Ruth.

[Read the appellate court decision.]

The case before the Missouri Appellate Court Western District, where Kings Garden Midwest requested access to the state’s full archives of cultivation applications, was not a decision to award a license, but rather a debate over whether the state should allow a suing applicant to conduct discovery in a case heard before the state’s Administrative Hearing Commission, the state’s quasi-judicial board, the first stop in reviewing complaints about license applications.

Other cannabis applicants with cases before the state were happy with the decision.

“This will give us the opportunity to be able to review the winners’ respective answers versus ours. We believe it will show the arbitrary and capricious nature of the scores and the Department made errors on scores for licenses,” said attorney Joe Bednar, who represents the Sarcoxie Nursery, which is suing the state to eliminate license limits.

“I think it will be very helpful to appellants,” said Dan Viets, an attorney who chaired the committee that drafted and passed Article XIV. “I think the court was correct, that you can’t prosecute the argument that scoring was arbitrary if you don’t have access to that data.”

Kings Garden Midwest did not receive a winning score during the 2019 application process and is charging that their application had answers that were identical to other applicants, but theirs received lower scores than others, which would be not allowed, according to the state’s published scoring system. With access to the state’s archives of applications, Kings Garden Midwest’s attorney would compare the applications and their scores, to demonstrate that the state’s scoring system is broken, and that Kings Garden Midwest should be awarded a cultivation license.

Attorneys representing the state’s cannabis regulators at the Department of Health and Senior Services argued that the law creating medical cannabis licenses, which was added to the Missouri constitution in a 2018 referendum, directs the state to keep application materials confidential. But appellate court judges rejected that argument, citing a section of the constitution’s cannabis law that says, “Such reports or other information may be used only for a purpose authorized by this section.”

The court ruled that the language thus gives permission for cannabis applications to be used in “an appeal of a license denial”, and is thus subject to discovery.

Kings Garden Midwest declined to make a statement through its attorney Josh Hill of Newman Comley Ruth.