Medical marijuana bids unfairly rejected by Arkansas panel, suits say

Published 1 November 2017

A group of applicants vying to open some of Arkansas' first medical marijuana businesses filed anonymous lawsuits last week against the commission tasked with weighing their proposals.

The lawsuits, which were filed and placed under seal in Pulaski County, allege that the Arkansas Medical Marijuana Commission erred in its initial assessment of hundreds of applications submitted last month when it culled several applicants for failing to meet the minimum requirements.

The names of applicants and their associated corporation were left out of the complaints to protect the anonymity of the process, according to a copy of the filings obtained by the Arkansas Democrat-Gazette.

The lawsuits seek a temporary restraining order to force the commission to include the plaintiff's applications when the commissioners begin their final scoring review, as well as an ultimate injunction to keep those applications in the scoring pool.

Such an order would force the commission to "shut down" its work, spokesman Scott Hardin said in an email. The commission has already agreed to fully refund the application fees in the thousands of dollars for bids that are disqualified.

For other bidders hoping for a spot in the medical marijuana industry -- as well as patients waiting for the relief promised when voters approved medical marijuana last November -- court involvement at this point in the process is unwelcome, said Storm Nolan, the president of the Arkansas Cannabis Industry Association.

"We don't believe they have a good chance of getting an injunction," Nolan said. "But if they do, it will only slow down an already frustratingly slow process."

The complaints were prepared by Alex Gray, an attorney with the Little Rock law firm Steel, Wright, Gray & Hutchinson. State Sen. Jeremy Hutchinson, R-Little Rock, is a member of the firm.

Reached at his office Monday, Gray said his firm only became involved with the prospective medical marijuana entrepreneurs after the applicants received a letter from the state informing them that their application failed to meet the minimum standards. Hutchinson is "not really involved in the suit," Gray said.

Gray declined to comment further on the suits, citing the desire of his clients to remain anonymous. Hutchinson did not answer a call to his cellphone Monday.

In the lawsuits, Gray wrote that his clients submitted their bids to open a licensed cultivation center and dispensary several days before the Sept. 18 deadline out of an "abundance of caution" to allow them to identify and correct any errors.

The commission did identify problems with one of the applications once they were first submitted, including missing proof-of-residency documents and secondary forms of ID for some of the people associated with the bid, according to the complaints. The applicants then collected the missing materials and resubmitted their application before the final deadline.

At first, the applicants were told their resubmitted bids were complete, but then, more than 10 days after the deadline, they received follow-up notice that both applications were still missing documents, according to the complaints.

Earlier this month, and weeks after the applicants said they received notice that their bids fell short, the commission met to discuss problems that had arisen during the initial review of the applications.

Some of those problems included apparent discrepancies between what documents the rules required and what the application requested. In the rules, for example, it was unclear whether applicants had to provide only a driver's license or one of several documents verifying a date of birth while the application requested both the license and one of the documents.

The commission voted to go with the plain language on the application, meaning some applicants who did not submit two forms of IDs would not meet the minimum requirements. Because one of the people behind an application for a dispensary provided only a passport, the application was ruled incomplete, according to one of the complaints.

The other complaint, which dealt with the cultivation center application, said that application was denied because one of the applicants could not be verified as an Arkansas resident. That determination was "incorrect, arbitrary and capricious," according to the suit.

"Plaintiffs relied on the Commission's numerous assurances that the application was complete," Gray wrote, later adding "The Commission should be ordered to consider the application on its merits rather than erroneously rejecting it."

But Nolan, the industry association president who is part of his own bid to bring a dispensary and cultivation center to Fort Smith, said he felt the lawsuit lacked a good argument.

"The rules for what was necessary to submit the application were clearly laid out," Nolan said, adding that he was not aware of other complaints about the application process.

The Medical Marijuana Commission is assigned the task of reviewing and scoring each application once the documents have been stripped of identifying information. That process is expected to begin in December and continue well into next year.

Until a final decision is made, the commission will not make public which applicants were disqualified, said Hardin. Some applicants have been notified that their bids lacked certain required materials, he added, but no formal action has been taken.

Records provided by the state Department of Finance and Administration, under which the commission operates, show a total of 16 applications were flagged as inadequate for reasons similar to those described by the complaints. The state received a total of 322 applications for both cultivation centers and dispensaries.

While the name of the business is redacted, the lawsuits describe it as "majority female-owned," and contends that it is in the state's interest to promote such businesses.

Attorney General Leslie Rutledge's office will represent the Medical Marijuana Commission in the suit, a spokesman confirmed Monday. The state has not yet filed its response to the complaints.

A Section on 10/31/2017