Arkansas must wait until at least next week before issuing its first medical-marijuana growing licenses after a judge on Friday declined to rule from the bench in a case challenging the licensing process.
Noting the high likelihood of appeal, Pulaski County Circuit Judge Wendell Griffen said he planned to take until next Wednesday to issue a written order deciding whether to grant a disgruntled applicant's request for a preliminary injunction.
The Arkansas Medical Marijuana Commission had planned to formally issue the cannabis-cultivation permits on Wednesday this week to the five companies that scored highest during a merit-based review process. However, Griffen issued a temporary restraining order before Wednesday's meeting, saying that Naturalis Health LLC had demonstrated "a substantial likelihood of success on the merits regarding violations of the Administrative Procedure Act, due process and equal protection."
Attorneys for Naturalis Health argued during a four-hour hearing Friday that there were irregularities, biases and oversights during the commission's scoring process.
"We're seeking a total re-score by a third party, unbiased entity or company that's not subject to these biases," Patrick Murphy, an attorney and co-owner of Naturalis Health, said from the witness stand.
Deputy attorneys general defended the process, saying that the commission had followed the provisions laid out in the Arkansas Constitution and its own rules. Arkansas Alcoholic Beverage Control Division Director Mary Robin Casteel also testified that the commission chose to redact personal identifying information from the applications before scoring -- even though it wasn't required -- to remove any hint of bias.
Murphy, though, said there was too much public information that could have "tipped off" commissioners about who was behind the applications in front of them. Two commissioners have been accused of giving higher scores to groups that included people they knew.
Commissioners completed the two-month scoring process Feb. 27, when the commission revealed the top five cultivation facility proposals from a stack of 95 applications. The commission also must review applications from dispensaries.
In the two weeks since announcing the top five, several rejected applicants have sent letters of protest, making similar complaints to those outlined in Naturalis' suit; members of another unsuccessful group, Delta Cannabinoid Corp., filed an ethics complaint against one of the commissioners and a lawsuit against the commission in Lee County; and one state lawmaker called for a review by an out-of-state consultant.
The deluge of legal challenges has become routine in states debuting medical-marijuana programs.
Naturalis received the 38th-highest score, which seems to have befuddled the group's stakeholders. Naturalis' managing member is Jackson T. "J.T." Stephens III -- the son of millionaire businessman Jackson T. "Steve" Stephens Jr.
Murphy testified that the company already had started growing quinoa, tomatoes and herbs hydroponically to demonstrate its ability to operate a cultivation facility. Missing out on a license would cost the company at least $3 million, Murphy said.
State attorneys argued that Naturalis' suit was pointless because the company scored so low. Even if several of the top five companies were disqualified, Naturalis wouldn't be next in line to receive a license, said Deputy Attorney General Monty Baugh.
Baugh also argued that Naturalis' suit was premature because the licenses hadn't been formally issued.
"Until the licenses have been issued, the plaintiff has no property interest to protect," Baugh said.
The commission already has received the $100,000 licensing fees and $500,000 performance bonds from the successful applicants, but they can't formally issue the permits without a meeting of the commission.
Casteel did concede that Alcoholic Beverage Control staff members, who provide administrative support to the Medical Marijuana Commission, didn't independently verify every aspect of the growing facility proposals. She was under questioning about the proximity of one proposed facility to churches, schools and day cares.
However, she noted that the applications were sworn and notarized, and that the agency had the authority to revoke any licenses if it later discovered false information in an application.
Jay Bequette, an attorney for Naturalis, said afterward that he liked how his team presented the case.
"We're happy with our chances," he said.
Casteel and Baugh declined to comment after the hearing, but a spokesman for Attorney General Leslie Rutledge said, "We await the court's ruling and will make any further decisions at that time."
Friday's hearing was of interest to much of the Arkansas legal community after state attorneys asked Griffen to dismiss the suit on the basis of sovereign immunity, citing a recent state Supreme Court decision affirming Arkansas' immunity from being made a defendant in its own courts.
Griffen declined to toss the suit on such basis. Specifically, he said that Amendment 98 -- which Arkansans approved in 2016 to legalize medical marijuana -- explicitly contains a provision for aggrieved parties to appeal to circuit court.
He also said that the high court's ruling in Board of Trustees of the University of Arkansas v. Matthew Andrews didn't apply in all cases.
"It is and has been the law in the state of Arkansas, that sovereign immunity does not bar lawsuits seeking declaratory or injunctive relief," he said. "The Andrews decision did not change that law."
Baugh had argued that Amendment 98 did not waive sovereign immunity, but he did concede that the principle doesn't apply in cases where the state acts illegally or violates the constitution.
A Section on 03/17/2018
Print Headline: Judge puts off pot-license ruling