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Pot Challenges Rolling On Despite Law

A new law that protects five nurseries may have given more ammunition to "ganjapreneurs" seeking an entree into what could be one of the nation's largest medical marijuana markets come this fall.
The law was intended to inoculate from pending legal challenges the five growers -- and their teams of consultants and investors -- selected by Florida health officials in November to serve as medical marijuana dispensing organizations, responsible for growing, processing and distributing cannabis products to a limited population of patients.

While the law did just that, it also gave at least one losing applicant new grounds for its existing complaint.

Another losing hopeful -- whose application was rejected because it was delivered 27 minutes after a deadline -- is trying to convince a Tallahassee judge that it deserves a license because, the nursery claims, health officials bent the rules for other applicants.

Over the past two years, the state has spent nearly $500,000 on private lawyers to represent the Department of Health in legal challenges that have delayed implementation of a 2014 law that first opened the door for medical marijuana in Florida.

Backers of this year's law say it was focused on ensuring that patients authorized to use non-euphoric cannabis, authorized in the 2014 law, get the treatment they need. Doctors were supposed to begin ordering the low-THC cannabis for patients with severe muscle spasms or cancer more than a year ago. But legal challenges delayed implementation of the law, pushed by parents of children with severe forms of epilepsy who believe the cannabis can eliminate or dramatically reduce life-threatening seizures.

"We had one central goal, and that was to get this treatment in the hands of these families as quickly as possible. So the law was a 100 percent success on that front. That was the central goal, and that goal has been achieved," Sen. Rob Bradley, a Fleming Island Republican who was instrumental in the passage of both the new law and its 2014 predecessor, said in a recent telephone interview. "They're going to be out of the ground in September, and people will be getting treatment I would suspect in September, or maybe even earlier, so the goal of the law was accomplished."

Under the 2016 law, the five growers selected last fall by a three-member panel --- who ranked the applications within different regions and awarded licenses to the top scorers --- are allowed to keep their licenses. The law also requires health officials to grant licenses to organizations whose administrative or legal challenges are successful.

And the law requires that any nursery that was the top scorer in a region must receive a license, even if health officials deemed it ineligible. Under that provision, a single nursery --- Gainesville-based San Felasco --- was granted a license this spring.

San Felasco received the highest score in the Northeast region, but health officials determined that the nursery was ineligible for a license because of a decade-old drug crime involving the nursery's director of research and development. An administrative law judge in February decided that agency wrongly rejected San Felasco's application.

Now, a second nursery is claiming that it also must receive a license because of what was known in the Capitol and the industry as the "San Felasco provision."

McCrory's Sunny Hill Nursery, which specializes in growing bromeliads, contends that it should have received the highest score in the Central region, where health officials granted a license to Knox Nursery. McCrory's and Redland Nursery were already challenging Knox's license when the new law went into effect this spring.

As with challenges in two other regions, administrative law judges had planned to perform "de novo" hearings to essentially re-rank the applicants to determine who should receive the coveted licenses. Administrative law judges put hearings --- which were supposed to begin in May --- in two of the three cases on hold after the 2016 law passed.

In an amended complaint filed May 2, McCrory's --- which joined forces with three other growers and purchased a 180,000-square-foot facility in Lake Wales with the hopes of receiving a license --- argues that it should receive a license without having to go through the process of being re-evaluated.

To determine who should get a license, a three-member panel --- comprised of state Office of Compassionate Use Executive Director Christian Bax; his predecessor, Patricia Nelson; and Ellyn Hutson, a Department of Health accountant --- ranked each applicant in a variety of areas, including cultivation, processing and dispensing.

Of the seven applicants in the Central region, the panel gave McCrory's an aggregate score of 5.5417, just a fraction below Knox, whose score of 5.5458 earned the Lake Mary-based grower a license.

One of the reviewers identified McCrory's as "superior to all other applicants" on the dispensing/infrastructure component, McCrory's lawyers argued in complaints filed in the Division of Administrative Hearings. But instead of receiving a score of "7" in that area, the reviewer assigned the nursery a score of "6."

"The scoring error resulted in the department erroneously awarding the highest score to Knox," McCrory's lawyers David Ashburn and Lorence Jon Bielby wrote. "Due to the closeness of the scores awarded to the Knox and McCrory's applications, if the reviewer had not erroneously deviated from the department's otherwise consistently applied scoring methodology, but had given McCrory's the correct high score of 7 on that scoring component, McCrory's would correctly receive the high score and been the highest scoring applicant in the central region."

Health officials, however, argue that section of the new law only applies to nurseries that were high scorers and that were determined by the department to be ineligible for a license. Only San Felasco met both of those criteria, the department argued late last month in a request that Administrative Law Judge Elizabeth McArthur dismiss the case.

But McCrory's lawyers argued that the department's interpretation that the law only applied to a single nursery would make the statute an unconstitutional "special act."

The new law created a "safety valve" for applicants "who were not part of the original five" whose challenges are successful, Bradley said. The law also recognized that San Felasco should have received a license, Bradley said.

"If you look at the substance of the San Felasco challenge, they should have gotten a license. So certainly the law allowed for the five and then allowed for San Felasco because they, by law, should have received a license under the structure that was in place in the 2014 law. But (the new law) didn't end there. If there was another company that was challenging the department's determination, and if they were successful, they would receive a license as well," he said.

The new law also expanded the market for the nurseries because it legalized full-strength medical marijuana for terminally ill patients. The same dispensing organizations would be allowed to provide full-strength pot products to a vastly expanded patient base if a constitutional amendment on the November ballot passes.

In a separate case, Ed Miller & Son has filed a challenge in Leon County circuit court, arguing that the nursery --- which did not get evaluated because its application was turned in 27 minutes after last year's 5 p.m. deadline on July 8 --- should have received a license because it would have earned the highest score.

Ed Miller & Son is seeking a license in the Southeast region, where Costa Nursery Farms --- one of the largest nurseries in the country --- was granted a license.

In a complaint filed on April 18, lawyers for Ed Miller & Son accused health officials of using the rule governing the application process to pick "pre-determined winners" as dispensing organizations.

Health officials allowed other licensure hopefuls to amend their applications after the deadline, the nursery's lawyers, Daniel Bushell and David Kotler, wrote. One of the nurseries granted a license has not been in continuous operation for more than 30 years, as required by Florida law, while others failed to meet the financial requirements established by rule, the lawyers argued.

"Yet despite disallowing Miller's application from the scoring process due to missing a deadline by mere minutes, the department permitted other applicants to submit required documentation weeks after the deadline," the lawyers wrote.

As of Friday, the Department of Health had not responded to the complaint.