Skeptical court hears appeal on marijuana permit case | Arkansas Blog

Thursday, June 7, 2018

Skeptical court hears appeal on marijuana permit case

Posted By on Thu, Jun 7, 2018 at 11:39 AM

click to enlarge supcrt.jpg
The Arkansas Supreme Court heard oral arguments this morning of the state’s appeal of Circuit Judge Wendell Griffen’s ruling that the state Medical Marijuana Commission’s approval of five applications to grow medical marijuana was constitutionally flawed.

No decision was made but questioning indicated hostility to Griffen's ruling. Chief Justice Dan Kemp cut off a lawyer who tried to bring up an issue that developed this week — a secret document that was submitted to the court by the attorney general's office. It is outside the record, Kemp said and nothing further was said.


Griffen had noted potential conflicts of interest between applicants and members of the commission and listed other shortcomings in the process. The five successful applicants and the state want his ruling reversed.  They are Natural State Medicinals, Bold Team, Delta Medical Cannabis Natural State Wellness and Osage Creek Cultivation.

One loser that brought the lawsuit, Naturalis Health, wants the scoring reopened.  Another loser has also filed pleadings in the case, the latest under seal about a document the Supreme Court has so far kept secret. Generally speaking, successful applicants don’t want the document, introduced after pleadings in the case were closed by the attorney general. Naturalis Health has argued for transparency of the document. Parties believe, though no one has substantiated this, that the document could add weight to the argument that the commission evaluation process was flawed.

click to enlarge Casey Castleberry
  • Casey Castleberry
At the end of arguments, Casey Castleberry, attorney for three winners, Natural State Wellness, Delta Cannabis and Bold Team, wanted to bring up the secret document, which his clients had already argued was outside the record. Kemp wouldn't allow.

Earlier, Castleberry argued Griffin didn’t have jurisdiction. He said administrative decisions may not be appealed, unless authorized by law or Constitution. Marijuana Commission rules allow for an appeal to circuit court, but Castleberry said an agency of the state cannot create circuit court jurisdiction. He drew close and sympathetic questioning on this from several members of the court. Justice Rhonda Wood’s question suggested the issue wasn’t yet ripe for decision on the rights of those who lost because no applicant had yet received a formal denial letter. He said the court has no power to review the award of the licenses, which the losers have challenged. He said losers could ask for the state ABC Division, home to the commission, to revoke an application. Here, the losers just went to court.

Castleberry agreed to questioning by Justice Shawn Womack intended to show that Griffen took licenses away without the winning parties being heard. They were not parties to the lawsuit at the time. Justice Wood also took pains to emphasize Griffen had made a final decision without hearing from the winners and that he’d issued a final order even though the plaintiffs had only asked for protection to allow the case to proceed. Justice Karen Baker also raised a question about a lack of record for the court to consider.

Solicitor General Lee Rudofsky, representing the attorney general, joined Castleberry’s argument, though he differed on a point. He said the winners had not actually received the official license, though the difference between what occurred and a formal license was small.

Rudofsky addressed the issue of bias by Commissioners Carlos Roman and Travis Story, both of whom gave high scores (unusually so in Roman's case) to applicants with which they had a business association.  He said the top five applicants would have been unchanged had Roman's score been excluded. He didn't say the same about Travis Story, a law partner of Rep. Bob Ballinger, whose firm has done work for one of the winners, Osage Creek.

Rudofsky also said he didn’t think the commission could adopt rules granting jurisdiction to a circuit court. He seemed to agree the only appeal process under the law is for a losing party to challenge a winner within the agency. A denial of that appeal might then amount to an “adjudication” that could open the door to a court appeal.

Justice Courtney Goodson said it appeared there effectively had been an approval and denials, which should open the door to a circuit court appeal.

Jay Bequette argued for Naturalis Health, which brought the suit and finished 38th in the scoring. He said the process was “flawed and corrupt” and indicated it had found more flaws in subsequent investigations. He disputed the argument that licenses had been issued, except to the practical extent that it supported his argument that his client was entitled to appeal. He also said the circuit court had clear jurisdiction on account of the flawed and corrupt process in grading and scoring — the sort of abuse of discretion that does open administrative decisions to court scrutiny. Justice Wood didn't buy it “What occurred that you have a right to appeal from?” she asked.


Wood wondered if he thought all administrative decisions should be appealable. No,, he said, while arguing that this case was different. He said the commission failed to follow its own rules; two commissioners had conflicts; the commission overlooked evidence of unpaid taxes and revoked licenses, and a failure to check whether applicants met requirements on distances from churches. "This process was replete with problems that can only be overcome by punting it back to the commission to conduct a process that complies with due process is inherently fair and passed the smell test."

In response to a question from Kemp about the redeveloping law on sovereign immunity, Bequette said it wasn't an issue in this case. Whatever the law is on suing the state, such suits are allowed when an agency clearly acts in an arbitrary and capricious manner. Wood said she saw irony in raising that point while the record indicated that Judge Griffen had been arbitrary and capricious in his ruling.

Clear Creek Medical, another unsuccessful applicant, also argued that none of the successful applications were corporations, but LLCs, as the Constitution requires.

Castleberry closed by saying a decision upholding Griffen would "lead to chaos" in multiple appeals of agency decisions.

Prediction: The Supreme Court will reverse Griffen yet again. What then? It would seem possible that the plaintiffs in this suit could then take action suggested by several justices — ask for revocation of license approvals on account of the growing record of conflict of interest and scoring irregularities by the commission.  That would mean still more delays in implementing the medical marijuana law. The commission still hasn't graded applications for distribution facilities. They can't operate until growers are producing marijuana, however.

I'm where I've always been. This process was handled shoddily by the commissioners, who had too many political question marks to start with, beginning but not ending with Travis Story. The applications should be rescored by an outside, independent accounting firm.

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