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Decision in Rx-pot case sides with state

LR-area license focus of dispute by John Lynch | August 8, 2020 at 7:43 a.m.
FILE - In this Aug. 15, 2019 file photo, marijuana grows at an indoor cannabis farm in Gardena, Calif. (AP Photo/Richard Vogel, File)

In a reversal Friday for a medical marijuana company run by the brother of an Arkansas legislator, a circuit judge has sided with state regulators on the issue of a dispensary license for the Little Rock area, at least until a full trial can be held on the question of whether the permit was properly awarded.

The ruling against Green Thumb Industries Arkansas by Pulaski County Circuit Judge Mary McGowan comes about 2½ weeks after the company sued to stop the state Medical Marijuana Commission from awarding a dispensary license to Native Green Wellness Center.

Green Thumb, run by Jay Hickey of Texarkana, brother to Republican state Sen. Jimmy Hickey, claimed that Native Green should have been disqualified because the company had already won a license to sell in the Saline County area and opened a store in Hensley more than a year ago.

The suit came too late to stop Native Green from collecting the permit, but in a preliminary ruling July 22 McGowan stated that Green Thumb, also known as GTI Arkansas, seemed likely to prevail on the question of whether the commission had correctly awarded the license. However, McGowan also acknowledged that regulators had not yet seen the suit or had a chance to respond to it.

Green Thumb, whose ultimate goal with the lawsuit is getting Native Green's license for itself, had further called on McGowan to block state regulators from taking any action on dispensary licensing in the Little Rock area by imposing a preliminary injunction until a trial could be held on the lawsuit.

But with Native Green joining the litigation, and lawyers from the attorney general's office representing the state agencies, McGowan conducted a hearing on the injunction issue this week, which included testimony from Doralee Chandler, the director of the Arkansas Alcoholic Beverage Control Division, which is the commission's enforcement arm.

After hearing Chandler's testimony about Native Green's ownership, the judge concluded that Green Thumb's chances at winning do not look good.

"Green Thumb must establish a likelihood of success on the merits of one or more of its claims for injunctive relief," McGowan wrote. "Green Thumb has failed to establish a likelihood of success on any such claim. Preliminary injunctions are extraordinary forms of relief and there is a very high bar to chin to receive one. That result has not been obtained."

Native Green edged Green Thumb out of consideration last month for the dispensary license to serve the Little Rock region, the four counties of Faulkner, Lonoke, Pulaski and White counties. Green Thumb says it would have gotten the permit if Native Green had been disqualified but that commissioners illegally twisted the rules to award it to Native Green.

The company's main challenge to Native Green's licensing eligibility is that the company, headed by former TV personality and pageant winner Kattie Hansen, has already been awarded one dispensary license, and that's all the Arkansas Constitution allows anyone to have.

However, what the judge found persuasive, according to her ruling, is that Native Green sold that license to another company, Hensley Wellness Center, in March before the licenses were awarded in July.

Both companies are controlled by members of Hansen's family. Records from the Marijuana Commission show Hansen and her father own 85% of Native Green, while her husband, mother and her father's wife own 93% of Hensley Wellness. Hansen's mother had owned an 8% stake in Native Green but gave up her interest in the company for 8% ownership of Hensley Wellness.

Before a trial can be held, Green Thumb must overcome dismissal motions from Native Green and the state agencies.

Native Green, represented by attorney Alex Gray of the Steel, Wright, Gray firm, argues that the court does not have the authority to override the commission's decision to award the license. In the motion, the company points to a 2018 Arkansas Supreme Court ruling that held that circuit courts do not have the authority to review the commission's licensing process under the Administrative Procedure Act.

The argument that the courts have no jurisdiction over this type of decision is also made by Senior Assistant Attorney General Jennifer Merritt on behalf of the state defendant, the marijuana commission, and the Department of Finance and Administration. Merritt further invokes sovereign immunity in calling for the judge to throw the case out.

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