A Fort Smith medical marijuana cultivator should have been "joined as an indispensable party" in a lawsuit filed by a rival company seeking to strip its state cultivation license, the Arkansas Supreme Court ruled on Thursday.
In a 5-2 ruling, the Supreme Court reversed and remanded a Pulaski County Circuit Court ruling against Bennett Scott "Storm" Nolan II and his company, River Valley Production LLC, which does business as River Valley Relief Cultivation.
The Supreme Court also vacated a summary judgment against Nolan.
The Arkansas Medical Marijuana Commission issued a cultivation license to River Valley at a June 30, 2020, meeting, said Scott Hardin, a spokesman for the Arkansas Department of Finance and Administration.
Following a final inspection of the facility, River Valley received formal approval to begin growing in July 2021, he said.
Hardin said all eight of Arkansas' annual medical marijuana cultivation licenses come up for renewal in May and June.
In early 2021, 2600 Holdings LLC -- an unsuccessful applicant for a cultivation license -- filed suit against the commission, the Department of Finance and Administration and the Arkansas Alcoholic Beverage Control Division. 2600 Holdings does business as Southern Roots Cultivation.
The lawsuit mainly alleged that Nolan's application for a license didn't comply with "the minimum merit selection criteria" and that the commission violated its own rules and the Arkansas Constitution when it awarded Nolan a license, according to the Supreme Court ruling.
"This case is one of many arising from the medical marijuana licensing process that followed the passage of Amendment 98, several of which have surrounded the Commission's decision to grant a license to Nolan," Associate Justice Rhonda K. Wood wrote in Thursday's Supreme Court opinion for the majority.
The commission is authorized under Amendment 98 to issue between four and eight cultivation licenses.
"Nolan was not named as a defendant, nor was he joined as a party in the suit," wrote Wood. "The complaint sought a declaratory judgment and a writ of mandamus ordering the Commission to strip Nolan of the license and award it to the next highest scoring applicant from the reserve pool.
"The State moved to dismiss, arguing that the suit was barred by sovereign immunity and that 2600 Holdings had failed to include Nolan, who was an indispensable party."
Circuit Judge Herbert T. Wright denied the motion to dismiss, and the state brought an interlocutory appeal.
The Supreme Court dismissed the claim for declaratory judgment, but it found that sovereign immunity didn't preclude the petition for writ of mandamus.
On Oct. 25, 2022, 2600 Holdings filed a 938-page motion for summary judgment. The state opposed it on multiple grounds, one being that Nolan was an indispensable party required to be joined under Rule 19 of Arkansas Rules of Civil Procedure.
"Rule 19 governs the mandatory joinder of parties to a civil suit, where they are needed for a 'just adjudication' of the controversy before the court," wrote Wood.
On the same day the state filed its response, Nolan moved to enter the case through a "motion to intervene," mainly arguing that he was an indispensable party under Rule 19.
"The circuit court denied Nolan's motion and the following day it granted 2600 Holdings' motion for summary judgment," wrote Wood. "The circuit court found that in awarding the license to Nolan, the Commission exceeded its discretion, did not act within its ministerial duty, and violated the Arkansas Constitution and its own rules."
Nolan filed a second motion, arguing his right to participate as a party as well as a motion for a new trial. The circuit court also denied those motions.
"The circuit court erred in its November 2 order denying Nolan's motion in which he sought to be made a party ..." wrote Wood. "Additionally, we find that the relief sought by 2600 Holdings would impair Nolan's ability to protect his interests. The circuit court's next step granting summary judgment and the State's decision to not appeal resulted in what was, essentially, a court order for the Commission to revoke Nolan's license.
"Nolan has paid licensing fees to the State and has invested millions in a cultivation facility. Whether 2600 Holdings is ultimately correct in its allegations and legal attack on the Commission's decision to grant Nolan a license is not before us. But Rule 19(a) requires that Nolan be joined as an indispensable party. We find that the circuit court erred as a matter of law in not joining Nolan as an indispensable party to the litigation.
"Because the November 3, 2022 order that granted summary judgment for 2600 Holdings was entered without Nolan as an indispensable party, it is vacated. We do not address Nolan's remaining arguments on appeal because they are now moot."
Justice Barbara W. Webb wrote a concurring opinion.
Justices Karen R. Baker and Shawn A. Womack wrote dissenting opinions.