Judges side with health officials in pot challenge
Friday, October 7, 2016
Posted by: DCMS
By Dara Kam
The News Service of Florida
THE CAPITAL, TALLAHASSEE, October 7, 2016..........A Northeast Florida nursery failed to convince an administrative law judge that health officials should have granted the grower one of five highly sought-after licenses to grow, process and sell medical marijuana.
Administrative Law Judge R. Bruce McKibben's recommended order Friday was the first decision in a series of challenges to the licenses, awarded by the Department of Health's Office of Compassionate Use in November.
McKibben found that Loop's Nursery and Greenhouses failed to prove that the Jacksonville-based grower's application was superior to those of its competitors in the Northeast region of the state.
"While Loop's did prove definitively that it was approvable and had a very good proposal, that fact alone did not establish that it was better than the other two applicants at issue," McKibben wrote in the 30-page order.
McKibben's order comes after a contentious, 10-day hearing in July that featured disagreements ranging from the length of proposed recommended orders to a prolonged dispute over whether a piece of yellow legal-pad paper with the names of investors in a business tied to Loop's should be revealed to the public.
Part of Loop's case hinged on the nursery's exclusive relationship with CWB Holdings, a Colorado-based company headed by Joel Stanley that owns the rights to "Charlotte's Web," a substance whose name has become synonymous with the low-THC, high-CBD treatments believed to eliminate or drastically reduce life-threatening seizures in children with severe epilepsy.
Florida lawmakers authorized the low-THC treatment for patients with chronic muscle spasms, epilepsy or cancer two years ago.
The 2014 law ordered the Department of Health to award one dispensing-organization license in each of five regions of the state. The department awarded a license in the Northeast region to Chestnut Hill Tree Farm and later granted a second license to San Felasco Nurseries after an administrative law judge ruled that San Felasco's application had been wrongly rejected.
The Legislature expanded the law this year to allow the dispensing organizations to also grow full-strength marijuana for patients who are terminally ill.
The state's cannabis industry could see a boost after November, when voters will decide whether to legalize medical marijuana for patients with debilitating illnesses, including Parkinson's disease, multiple sclerosis and cancer.
Loop's lawyers repeatedly pointed out that Office of Compassionate Use Director Christian Bax --- one of three panelists who scored the applications --- gave the nursery the highest marks over four other competitors in the Northeast region. Bax spent more than 10 hours testifying in the case.
"(Bax's) testimony suggests that he ... decided that Loop's was the strongest applicant in the Northeast," Loop's attorney Jon Moyle told the judge in July.
But in Friday's order, McKibben said that Bax's preference didn't prove the nursery should have been granted a license, noting that Loop's failed to address the conclusions reached by the other two scorers.
"Loop's attempted to prove that its application was superior by affirming the appropriateness of its own application, superficially presenting portions of the competing applications, and showing that only one of three scorers deemed its application superior. That is not a legitimate or appropriate comparison," McKibben wrote.
McKibben acknowledged that Charlotte's Web "has proven to be effective" as a treatment for many medical conditions, including intractable epilepsy.
But other forms of low-THC cannabis could prove just as beneficial, the judge decided.
"There are many strains of medical marijuana, however, as evidenced by the fact that the Stanley brothers themselves grow hundreds of different strains ... Other than its notoriety, there was no competent evidence that Charlotte's Web is superior to any other strain," he wrote.
Since the 2014 law was passed, the state has spent more than $500,000 on legal fees and costs --- with the bulk of it paid to the Tallahassee-based Vezina, Lawrence and Piscitelli law firm --- on challenges to rules regulating the industry and its choices of dispensing organizations.
To help speed up the process of getting the treatment to patients, the law passed this year required that the five dispensing organizations selected by the Department of Health be able to keep their licenses, and also allowed applicants whose challenges were successful to get licenses.
That provision prompted McKibben to question health officials' "aggressive adversarial stance" against Loop's in the administrative challenge.
"Should Loop's prove that its application should have been approved rather than one of the other applicants, OCU (the Office of Compassionate Use) would issue a DO (dispensing organization) license to Loop's. If Loop's fails to meet its burden of proof, OCU would not issue a license. That is the extent of OCU's status in this matter. Notwithstanding, OCU fervently opposes approval of Loop's as a DO in the Northeast Region," McKibben wrote.
Nevertheless, the judge found that "no competent evidence was presented" to suggest that the proposals of Chestnut Hill or San Felasco "were inferior to Loop's, or, conversely, that the Loop's proposal was superior to those applications."
Testimony during the July hearing about a financial backer referred to as "the man" sparked a News Service of Florida report that identified Panhandle developer Jay Odom as a major investor in Chestnut Hill.
Odom was sentenced to six months in prison three years ago after pleading guilty in a 2007 scheme to funnel $23,000 in campaign contributions through employees or their family members to a presidential candidate.
Odom, who at one time was a major Republican fundraiser and a supporter of former presidential candidate Mike Huckabee, also played a prominent role in an airplane-hangar controversy that led to the exodus of former House Speaker Ray Sansom from the Legislature in 2009.
During questioning by Moyle about Chestnut Hill's financials in July, McKibben asked Bax to refer to the Destin developer as "the man" because Odom's name is not part of the public record.
Bax said he was concerned about Chestnut Hill's ability to stay in business for at least two years --- something applicants were asked to prove --- if granted a dispensing organization license.
Bax, reading from his notes, said it appeared to him that "the man's net worth appears ... to be inflated" at the time Bax evaluated Chestnut Hill's application last year.
Chestnut Hill's lawyer, John Lockwood, told the News Service at the time that money was not an issue for the nursery.
"Jay has more than enough capital to ensure that this deal is completed," Lockwood said in July. "Money is of no concern to the operations of this business."
In Friday's order, McKibben noted that Loop's cast "some reasonable doubt" as to Chestnut Hill's financial operations but also found that Loop's own financial ability to operate is "somewhat suspect" due to "the conditional nature of its audited financial statements."