Cannabis News for Florda
By Michael J. Liss, Esq. A court case challenging the present Florida medical marijuana program has not only made its way to the Florida... The Legality of MMTCs – To Be Determined

By Michael J. Liss, Esq.

A court case challenging the present Florida medical marijuana program has not only made its way to the Florida Supreme Court, the Court invited the parties back for even more briefs and oral arguments before issuing a ruling. I don’t recall that happening, previously. It seems that at least one justice saw an argument that neither side argued in their initial presentations. The case is called Florigrown. It has had a fascinating journey, and it may well erase our present “vertical” program.

When the low-THC law was enacted, certain criteria were determined by the state to qualify a few growers/vendors in a limited program. Some applications were submitted by qualified applicants but were denied because of the limited number of licenses issued. Some were denied because the applicants did not meet the criteria.

After the 2016 constitutional referendum passed, but before the Department of Health had promulgated rules for the industry, a new company called Florigrown “registered” itself with the department so that when applications were accepted, its place in line would already be saved. The department refused to recognize the “registration” of Florigrown. Florigrown sued the Department of Health. 

The lawsuit sought a temporary injunction from the trial court causing the issuance of a license to Florigrown so that it could operate as a “Medical Marijuana Treatment Center” (MMTC), claiming that Florida’s program is unconstitutional because it is impossible for a company which was not grandfathered into the law to obtain a license. The state argued that the program was a rational system of regulating a limited program, and that it would eventually provide licenses to those who were not grandfathered, if and when there were enough patients to meet the formula designed by the legislature.

The trial judge agreed with Florigrown. The Department of Health was ordered to immediately issue to the company a license to operate as an MMTC because the whole vertical integration program was unconstitutional and against the intent of the voters, which was to make safe medical cannabis accessible to qualified patients. The court of appeals agreed, as well. It unanimously ruled that the vertical system which the Florida legislature enacted was unconstitutional. The Department of Health petitioned the Supreme Court to determine the constitutionality of the vertically-integrated medical marijuana program.

The Department of Health’s best arguments to the Florida Supreme Court were that the cap on the number of MMTCs was constitutional and that vertical integration was a rational way to make effective the intent of the voters – to make medical cannabis readily available to patients in need. In response, Florigrown argued that (1) the law which was enacted alters and contradicts the will of the voters, (2) the caps on the number of MMTC licenses was arbitrary, (3) that vertical integration created illegal monopolies and (4) that the law created a special class (those who were granted licenses or had applied under the former law).

It was at this point, having read the briefs, that I was convinced that the justices would rule that a system which grants a few winning tickets and excludes everyone else from an industry would be found unconstitutional for the reasons argued by Florigrown. Firstly, a lawyerly language argument over “or” or “and” (there is a large difference in interpreting a law depending on which word applies) which determines whether MMTCs must be vertically integrated, or whether MMTCs could simply provide parts of the cannabis supply chain. Secondly, the convoluted formula for determining the number of MMTCs is completely arbitrary. The best arguments, though, were that low-THC license holders and rejected applicants were automatically issued licenses prior to any applications being considered by the department. With the mathematical formula for licenses to be issued, the only way to get a license was to buy one of the unused licenses (“golden tickets”), which the trial court learned had sold for as much as $53 million dollars, by a company which had never planted a seed or conducted any other cannabis business with that license. Florigrown pointed out that the department, itself, had calculated the state’s need for MMTCs to approximate 2,000 dispensaries. The argument was that by vertically integrating the system, the program was set up to fail by the legislature, by selecting a few lucky players to reap unnatural rewards, gave patients fewer choices, less accessibility and higher prices.

The Supreme Court wanted more. The Court ordered the parties to brief an issue which had not been raised by either party. The issue is whether the whole program was created by a “special law granting a privilege to a private corporation.” In other words, does the vertical integration statute grant rights to particular companies which are not afforded to companies, generally. The department argued that the law allows for “classes” or businesses to get particular treatment, just not specific businesses. The law is not a “special” law, but a “general” law, uniformly applied, was the argument.

 Florigrown responded that this is clearly a “special” law in that it creates classes. Those who automatically got licenses without any review by the department, and all other companies, which in reality will never have applications reviewed, due to the cap on the number of MMTCs. While the department argued that the only restriction was a “grandfather clause” for the former licensees and applicant, Florigrown argued that this was simply a “statutory give-away” which created distinct treatment, which usurps any real opportunity to any company not already possessing a license from obtaining one. Clearly a “special”, not ”general” law.

I’m no mind-reader, but I thought that Florigrown was already going to win based on the monopoly argument. I was fascinated when the court asked for the additional briefing. The “special law” issue seems like a “layup” for Florigrown. How can this law not be a “special” law which gives special privilege to lucky ticket holders? The state’s argument seems weak to me, because while “classes” are formed all the time (such as plumbers, lawyers or any other licenses trade), there are not lawyers who get special treatment beyond other lawyers. Here, however, many of the license holders only hold licenses and aren’t even in the cannabis business. Investors flipping paper for $53 million dollars are not situated similarly to MMTCs which have spent endless millions of dollars to run licensed businesses, and they are not situated similarly to companies which want to operate but do not have the opportunity to have an application reviewed until some formulaic peak is reached, which may never happen.

Last month, I wrote that 2022 is likely to see an adult-use referendum pass. I opine that Florigrown will have an MMTC license prior to that ballot initiative reaching the voters, that the system in place will be found unconstitutional and that adult-use will be legal after the 2022 vote. Because, after all, we are a country which represents freedom and opportunity for all. Awarding monopolies and preventing competition to the selected few provides no freedom or opportunity for those wishing to enter the industry. Special law likely, but one way or another, I believe the Supreme Court is about to rule that the system we are just starting to get used to is unconstitutional.

Michael Liss, Esq. can be reached at ml@integritycounselpa.com or (561) 981-2507, located in Boca Raton.

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