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Legal Battles Mount Over Marijuana Licenses

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As the values of medical-marijuana operations skyrocket, wrangling over Florida’s limited number of pot licenses continues to escalate.

Five wannabe operators who got shut out of the state’s first round of medical-marijuana licenses three years ago and recently were shot down a second time are asking a judge for help.

But first, Administrative Law Judge G.W. Chisenhall has to settle an even more basic argument: How many licenses are up for grabs?

Florida Department of Health officials maintain only two licenses are available under a 2017 law aimed at implementing a voter-approved constitutional amendment that broadly legalized medical marijuana. The 2017 law was also intended to curb litigation related to the highly sought-after licenses.

But the rejected applicants contend that, if they meet eligibility requirements under the law, they should get licenses, no matter what the number. The five applicants have filed administrative challenges seeking to overturn health officials’ decisions to deny them licenses.

Meanwhile, another batch of prospective medical-marijuana operators trying to intervene in the challenges believe they’re entitled to two of the licenses, thanks to a citrus-related preference carved into the 2017 law.

Chisenhall deferred a ruling about whether to consolidate the five license challenges and whether to allow intervention by two firms trying to stake a claim to the citrus preference until he decides on the number of licenses at stake.

The “number of medical marijuana treatment center licenses that are still available would likely have a substantial impact on how” the five cases proceed, Chisenhall wrote in a Sept. 7 order.

The administrative law judge gave the petitioners until Friday to submit responses “addressing the Department of Health’s assertion” that they “are competing for only two available” licenses. He gave the health department until Sept. 21 to file a reply.

The confusion over the number of licenses and who gets them is the latest storm since the inception of Florida’s medical-marijuana industry in 2014, when lawmakers legalized non-euphoric cannabis and authorized five licenses.

A full rollout of the industry --- projected to generate more than $1.5 billion in sales by 2020 --- has been delayed by legal and administrative challenges, and the already-heavy competition for licenses in one of the nation’s most populous states intensified after voters approved the constitutional amendment nearly two years ago.

The latest challenges were filed by Dewar Nurseries, based in Apopka; Spring Oaks Greenhouses, based in Umatilla; Tree King-Tree Farm, based in New Port Richey; Perkins Nursery, based in LaBelle; and Bill’s Nursery of Homestead. The challenges were spawned by the 2017 law, which ordered health officials to issue 10 new licenses, and by health officials’ response to an administrative law judge’s recent scalding analysis of licensing decisions.

Under the law, health officials were required to issue licenses to applicants who had sought licenses in 2014 and who had legal challenges pending as of January 2017 or who had scored within one point of the highest-ranked applicants in five regions during the first round of licensing. Another license must go to a black farmer who was involved in federal litigation over unfair lending practices.

Also, the law told health officials to give preference for two licenses to applicants who own facilities that were used to process citrus.

The health department has issued seven of the 10 new licenses and must keep one for a black farmer. That means there are only two licenses left, the state argued in numerous filings related to the administrative complaints.

The new challenges followed a blistering June recommended order by Administrative Law Judge John Van Laningham in a case involving Nature’s Way Nursery of Miami, Inc. Van Laningham shredded the department’s Office of Medical Marijuana Use for using a flawed system --- which he said created a “dumpster fire” --- to decide which applicants were granted the coveted licenses.

Van Laningham said Nature’s Way was eligible for a license under the “one-point” provision in the law, contradicting what he called the state’s faulty scoring method. Although they said they didn’t agree with Van Laningham’s decision, health officials granted Nature’s Way a license in July, prompting the five challenges by applicants whose requests for licenses were subsequently denied. All say they, too, are eligible for a license because they fall within the one-point requirement.

“Perkins Nursery is entitled to a license pursuant to Florida law for the same reasons the department recently issued a license to Nature’s Way Nursery. We are not asking for special treatment and are instead asking the department to apply the same standard to Perkins as it did to Nature’s Way,” Jim McKee, a lawyer representing Perkins, told The News Service of Florida.

Adding to the consternation of the rejected applicants, health officials late last month sent notices to the citrus-related entities, indicating there may not be any citrus preferences available for licenses because of the other challenges.

“Anyone with a substantial interest in the remaining two licenses should take appropriate legal action,” Department of Health Chief Legal Counsel Amanda Bush wrote in the Aug. 27 letter.

Lawyers representing Dewar called the notice --- which prompted two potential applicants to try to intervene in the five cases --- a “highly unusual act.”

In the filings due Friday, the rejected applicants will also to try to convince Chisenhall to ignore the health department’s position that only two licenses are available.

In a Sept. 6 motion, for example, Dewar’s attorneys questioned “whether the department can refuse to license an applicant that fits the statutory requirements if it reaches the purported 10-license cap.” Dewar also asked “whether, if there are only two licenses, all of the challenging parties are competing for them.”

Another component of the 2017 law could make matters even murkier. The law required health officials to issue four additional licenses once the number of eligible patients in a statewide database reached 100,000, a benchmark that was recently surpassed.

The health department has proposed a rule to set up the process for the four new licenses, but the proposed rule has been challenged, which could result in further delays.

The applicants also could try to use the four additional licenses to persuade Chisenhall to reject health officials’ contention that they are limited to issuing just two.

The wrangling over the licenses comes amid international investment in Florida’s burgeoning marijuana industry.

Last month, William “Beau” Wrigley Jr. --- an heir to the Wrigley gum fortune --- led a $65 million round of funding in Surterra Wellness, one of Florida’s 14 licensed medical marijuana operators.

In a $93 million deal, Toronto-based Scythian Biosciences Corp. announced in July it intends to purchase a company that will take over the grower 3 Boys Farms, which received a license last year after suing the state. The deal also includes purchasing an unnamed “health care organization” as part of Scythian Biosciences’ entry into the booming U.S. cannabis market.