2 suits seek to de­lay is­suance of state pot-grow­ing per­mits

Arkansas Democrat-Gazette - - FRONT PAGE - HUNTER FIELD AND JOHN LYNCH

The flood­gates opened Tues­day at the Arkansas Med­i­cal Mar­i­juana Com­mis­sion as two law­suits were filed against it and let­ters con­tin­ued pour­ing in protest­ing the com­mis­sion’s process for li­cens­ing the state’s first le­gal cannabis grow­ers.

The del­uge of le­gal com­plaints by re­jected mar­i­juana cul­ti­va­tion ap­pli­cants has long been ex­pected by in­dus­try in­sid­ers, and they came on the eve of the day the com­mis­sion plans to of­fi­cially award the first five grow­ing per­mits.

Both law­suits filed Tues­day asked judges to stop the com­mis­sion from is­su­ing the li­censes at to­day’s sched­uled meet­ing at 5 p.m. The suits claim that the com­mis­sion had bi­ases and a flawed eval­u­a­tion process.

Alex Gray, an at­tor­ney for the Arkansas Med­i­cal Mar­i­juana As­so­ci­a­tion, on Tues­day said he re­mains skep­ti­cal that any law­suit will have a tan­gi­ble ef­fect on the com­mis­sion’s abil­ity to is­sue grow­ing per­mits to­day. He cited an Arkansas Supreme Court rul­ing this year af­firm­ing the state’s im­mu­nity from suits in its own courts.

The as­so­ci­a­tion in­cludes in­di­vid­u­als with shares in both suc­cess­ful and un­suc­cess­ful com­pa­nies that ap­plied for med­i­cal cannabis per­mits.

“Any chal­lenge nam­ing the state as a de­fen­dant is go­ing to have is­sues pre­vail­ing based on the state’s sov­er­eign im­mu­nity,” said Gray, who ear­lier this year rep­re­sented un­suc­cess­ful med­i­cal mar­i­juana cul­ti­va­tion ap­pli­cants in a suit that was even­tu­ally dis­missed.

Mean­while, pa­tient ad­vo­cates fear that the le­gal chal-

lenges will only fur­ther de­lay the avail­abil­ity of med­i­cal mar­i­juana, which Arkansans voted to le­gal­ize in Novem­ber 2016.

The law­suits — filed by Nat­u­ralis Health LLC in Pu­laski County and Delta Cannabi­noid Corp. in Lee County — each claim that the com­mis­sion’s scor­ing of all 95 med­i­cal cannabis cul­ti­va­tion ap­pli­ca­tions was ar­bi­trary and capri­cious.

Both com­plaints asked for tem­po­rary re­strain­ing or­ders, and Nat­u­ralis Health also asked the court to have the com­mis­sion toss out its ini­tial cul­ti­va­tion ap­pli­ca­tion eval­u­a­tions and re-score them.

Nat­u­ralis Health, which in­cludes Jack­son T. Stephens III, the 34-year-old son of mil­lion­aire busi­ness­man Steve Stephens, was the 38th-ranked com­pany among the com­mis­sion’s eval­u­a­tions; Delta Cannabi­noid, which in­cludes re­tired state Court of Ap­peals Judge Olly Neal, ranked ninth.

“De­fen­dants have caused a com­plete dis­trust in the newly im­ple­mented med­i­cal mar­i­juana in­dus­try, ap­proved by Arkansas vot­ers, to serve the medic­i­nal needs of qual­i­fy­ing Arkansans,” Nat­u­ralis Health’s 19-page law­suit states. “Arkansas is the first state in the south to le­gal­ize medic­i­nal mar­i­juana. The State has an obli­ga­tion not only to plain­tiff, but to its cit­i­zens, to get this right. The State has a lim­ited win­dow of time to cor­rect the prob­lems out­lined in this Com­plaint. This Court must act now.”

Scott Hardin, a spokesman for the Arkansas De­part­ment of Fi­nance and Ad­min­is­tra­tion, which pro­vides ad­min­is­tra­tive sup­port to the com­mis­sion, said Tues­day that the agency was aware of the suits, but that it was pre­ma­ture to com­ment on the cases.

Arkansas At­tor­ney Gen­eral Leslie Rut­ledge’s of­fice will rep­re­sent the com­mis­sion, Fi­nance De­part­ment and state Al­co­holic Bev­er­age Con­trol Di­vi­sion in the lit­i­ga­tion. Rut­ledge’s spokesman said the of­fice is re­view­ing the com­plaints.

For­mer At­tor­ney Gen­eral Dustin McDaniel, who is an in­vestor, lob­by­ist and at­tor­ney for one of the win­ning ap­pli­cants, Nat­u­ral State Well­ness En­ter­prises, said Tues­day that both law­suits were “with­out le­gal merit.”

The Med­i­cal Mar­i­juana Com­mis­sion on Feb. 27 an­nounced the five com­pa­nies that re­ceived the high­est ag­gre­gate scores among the five ap­pointed com­mis­sion­ers. Over the past two weeks, those com­pa­nies have each paid the $100,000 li­cens­ing fee and posted $500,000 per­for­mance bonds in an­tic­i­pa­tion of re­ceiv­ing their med­i­cal mar­i­juana grow­ing li­censes to­day.

In their court fil­ings, Nat­u­ralis Health and Delta Cannabi­noid raise nu­mer­ous con­cerns that have cir­cu­lated for weeks among ap­pli­cants that scored out­side the top five.

Most of the com­plaints have been aired pub­licly — in me­dia re­ports, an ethics com­plaint and let­ters to the com­mis­sion — but Nat­u­ralis Health, in its plead­ings, ac­cused one com­mis­sioner of giv­ing pref­er­en­tial treat­ment to an ap­pli­cant he was close to per­son­ally and pro­fes­sion­ally.

Those in the med­i­cal mar­i­juana com­mu­nity had only spec­u­lated through whis­pers about why com­mis­sion mem­ber Dr. J. Car­los Ro­man scored one ap­pli­cant vastly higher than all the oth­ers. Ro­man gave Nat­u­ral State Medic­i­nals Cul­ti­va­tion — which had the high­est ag­gre­gate score — 98 points; his scores for the other top five ap­pli­cants ranged from 52.5-67.

Nat­u­ralis’ suit as­serts that Ro­man has an “ex­tremely

close per­sonal and pro­fes­sional re­la­tion­ship” with Dr. Scot Michael Sch­lesinger, a part-owner of Nat­u­ral State Medic­i­nals.

The com­mis­sion also re­ceived two more let­ters ad­vo­cat­ing for changes to the scores given to sev­eral ap­pli­cants.

An at­tor­ney for River Val­ley Re­lief Cul­ti­va­tion, which is tied for the sixth-high­est-scor­ing com­pany, claimed in a Mon­day let­ter that one of the fu­ture li­censees, Delta Med­i­cal Cannabis Co., pro­vided false in­for­ma­tion about one of its “med­i­cal mar­i­juana ex­perts.”

Specif­i­cally, the let­ter states that Jeff Botkin does not hold the li­censes re­quired in Colorado to own and op­er­ate a mar­i­juana busi­ness, as Delta Med­i­cal Cannabis Co.’s ap­pli­ca­tion said. At­tached to River Val­ley Re­lief’s let­ter were records show­ing that Botkin’s Colorado busi­ness li­censes had ex­pired or been vol­un­tar­ily sur­ren­dered in April 2016.

A spokesman for the Colorado De­part­ment of Rev­enue said in a Tues­day email that Botkin had been is­sued new li­censes Mon­day — the day River Val­ley Re­lief’s let­ter was sent to the com­mis­sion.

Nei­ther Botkin nor Delta Med­i­cal Cannabis Co. of­fi­cials re­turned phone calls and emails re­quest­ing com­ment on Mon­day and Tues­day.

On Tues­day, Lit­tle Rock at­tor­ney David Couch sent a let­ter to the com­mis­sion on be­half of Boll Weevil Farms of the Delta LLC, of which he is a mem­ber. The let­ter as­serted that the com­pany’s ap­pli­ca­tion wasn’t prop­erly scored and should’ve re­ceived 22 ad­di­tional points, putting it in po­si­tion for a cannabis grow­ing li­cense.

Couch drafted Amend­ment 98 to the Arkansas Con­sti­tu­tion, which le­gal­ized med­i­cal mar­i­juana. Couch wrote the let­ter “out of an abun­dance of cau­tion,” ask­ing for the ad­di­tional points only if the com­mis­sion de­cided to change its rules, “which this ap­pli­cant is not ad­vo­cat­ing.” Couch said the protest let­ters sent to the com­mis­sion should be dis­re­garded.

“These protest let­ters are based on con­spir­acy the­o­ries, ru­mors and in­nu­endo cre­ated by los­ing ap­pli­cants, and the let­ters wholly dis­re­gard the time and dili­gence ex­er­cised by the Com­mis­sion and its staff re­lated to the scor­ing of these cul­ti­va­tion ap­pli­ca­tion,” Couch wrote.

The law­suits, protest let­ters and ethics com­plaints all voice a cen­tral con­cern — that the com­mis­sion’s eval­u­a­tion process was fun­da­men­tally flawed.

In its re­quest for re-scor­ing, Nat­u­ralis Health sug­gests that the judge or­der that an “in­de­pen­dent” ap­pli­ca­tion re­view and a se­lec­tion com­mit­tee be es­tab­lished as a rem­edy to avoid fu­ture ques­tions. The com­mis­sion re­ceived sim­i­lar sug­ges­tions at some of its first meet­ings, but the mem­bers elected to re­view the vo­lu­mi­nous ap­pli­ca­tions them­selves.

“[Two] med­i­cal doc­tors, a phar­ma­cist and a busi­ness pro­fes­sional. … While these oc­cu­pa­tions are ad­mirable, these in­di­vid­u­als did not have the req­ui­site ex­per­tise or train­ing to un­der­take the ar­du­ous task of grad­ing vo­lu­mi­nous ap­pli­ca­tions in a very com­plex in­dus­try, as ev­i­denced by bla­tant is­sues which plagued the scor­ing process, all of which were ar­bi­trary, capri­cious and char­ac­ter­ized by an abuse of dis­cre­tion,” the suit states.

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