Nurseries Wrongfully Denied Licenses to Dispense Medical Marijuana

We discussed the legalization process of medical marijuana within the state of Florida in a recent blog, SB 8-A: More Legislation on Medical Marijuana in Florida. Since the legalization of medical marijuana in Florida, there have been a series of lawsuits brought against the Department of Health (“DOH”) relating to the licensing of medical marijuana dispensaries, known as dispensing organizations in Florida. In mid 2015, Section 381.986, F.S., and Chapter 64-4, F.A.C., became effective. Together, these laws and rules laid out the medical marijuana licensing scheme, granting authority to the Department of Health (“DOH”) to oversee all things related to medical marijuana within the state of Florida. The Department of Health was required to grant 5 nurseries licenses to dispense medical marijuana, 1 for each region in the state. In the first round of licensing, a total of 28 nurseries applied for licenses to dispense medical marijuana.

Several of the nurseries, including Plants of Ruskin and Tornello Landscape Corp, that were denied licenses, took issue with the method in which the Department scored their applications. Specifically, the nurseries claimed that the DOH’s scoring method was arbitrary and capricious because the Department’s improper scoring procedures did not mirror the applicable rules and statutes. The nurseries claimed they should have received a much higher score and would have received a license if the scoring was done properly. The nurseries petitioned for their cases to be referred to the Division of Administrative Hearings (“DOAH”)and the two cases were consolidated in administrative court. The honorable Judge John Van Laningham was assigned to hear the case along with all other cases relating to the issue.

In this case, Judge Van Laningham issued the Recommended Order in favor of the two nurseries. In summary, the ALJ held the DOH’s scoring method was arbitrary, capricious, and an abuse of discretion because it did not give points to specific criteria, did not use an external benchmark for scoring, and compared nurseries instead of scoring individually; in totality, making the Department’s scoring method inconsistent with the applicable rules and law. Van Laningham concluded as a matter of law that ranking was not scoring by any means and created his own scoring method which he applied to Petitioner’s applications concluding that his scoring method was consistent with the applicable rules and law. Using this scoring method, both nurseries qualified for licenses for dispensing medical marijuana. Interestingly, in Van Laningham’s Recommended Order he hinted at the fact that the Department’s actions amounted to an unadopted rule. We will discuss a case next week that put the ALJ’s hint to good use.

Ultimately, the case settled and both nurseries went home happy, for the most part. The nurseries submitted affidavits documenting their compliance with the applicable rules and law and in exchange, the Department agreed to grant each nursery a license to operate as a medical marijuana treatment center under 381.986(8)(a)2a, F.S. Even though the case settled, the Department still felt compelled to issue a final order. In its Final Order, the Department overruled parts of the Recommended Order, specifically those relating to the DOH’s arbitrary and capricious scoring method.

If you are a nursery that applied for a license to dispense medical marijuana and were wrongfully denied like these nurseries, contact us. We can help you to get the license you rightfully deserve. We have recently successfully challenged an agency action as an unadopted rule and won back thousands of dollars for our clients. In one specific case, Brandy’s Products, Inc. v. Dep’t of Bus. & Prof’l Regulation, the challenger, Brandy’s, filed a refund claim for tax wrongfully paid that was then wrongfully denied by the state agency. The issue in this case was that the agency was requiring Brandy’s and others to pay other products tax on a product that did not fall within the definition of other tobacco products, blunt wraps. Brandy’s then filed a Petition for Administrative Hearing and received a favorable recommended order from the same Administrative Law Judge (“ALJ”), Judge John Van Laningham, that heard the medical marijuana cases discussed above. However, the agency rejected the ALJ’s recommendation and issued a final order again wrongfully denying Brandy’s of money that it was rightfully due. Brandy’s then appealed the case to the First District Court of Appeals, where the Judges agreed with the ALJ and held in favor of Brandy’s, awarding Brandy’s its refund claim.

In his law practice Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini obtained his LL.M. in Taxation at NYU. Mr. Donnini is licensed to practice law in Florida. If you have any questions please do not hesitate to contact him via email [email protected] or phone at 954-639-4496.