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Medical marijuana panel lacks administrative review, Md. court says

Cannabis growers and processors denied licenses by Maryland’s medicinal marijuana commission may seek judicial review without first mounting an administrative challenge, the state’s second-highest court ruled last week.

In its reported decision, the Court of Special Appeals said the Natalie M. LaPrade Maryland Medical Cannabis Commission’s failure to promulgate regulations providing for administrative relief means that rejected growers and processors need not exhaust the administrative process before going to court.

The Court of Special Appeals’ 3-0 decision revived a rejected processor’s circuit court challenge to the commission’s 2020 finding that the company was not truly a disadvantaged woman- and minority-owned business statutorily permitted a preference in licensing decisions.

The Anne Arundel County Circuit Court had dismissed Green Healthcare Solutions LLC’s judicial challenge because the company had not first sought and “exhausted” review through the Office of Administrative Hearings, as the commission had instructed in a letter to the company. The circuit court agreed with the commission that the instruction was appropriate in light of the breadth of statutory authority the panel has in licensing medical marijuana growers and processors.

But the Court of Special Appeals deemed preliminary recourse to the OAH unnecessary due to the lack of a commission regulation expressly providing for administrative review.

“We agree that, based on the broad authority that the General Assembly gave to the commission to regulate the medical cannabis industry, it had implied authority to set up an administrative process for high-ranking applicants to challenge the denial of a grower or processor license,” Judge Kathryn Grill Graeff wrote for the appellate court.

“Thus, the commission could have adopted regulations to provide for such a remedy,” Graeff added. “If the commission had adopted such an administrative remedy by regulation, it could have created an exhaustion requirement for that administrative remedy.”

The Maryland Attorney General’s Office, which represents the commission, said in a statement Thursday that it is reviewing the appellate court’s decision.

Green Healthcare Solutions’ attorney Justin E. Tepe did not immediately return messages Thursday seeking comment on the ruling. Tepe is with Goodell, DeVries, Leech & Dann LLP in Baltimore.

The commission’s regulations provide that a five-point licensing preference be given to “Disadvantaged Equity Applicants” under the panel’s statutory mandate to “actively seek to achieve racial, ethnic, gender and geographic diversity.” The regulation defines a DEA as an applicant who belongs to a minority group or is a woman and has a personal net worth of no more than $1,713,333.

The commission declined to give Green Healthcare Solutions DEA status after concluding that Celine Krishack, a Black woman, was not truly the company’s owner because she received less than 51% of the company’s profits and her net worth exceeded the regulatory maximum when assets she owned jointly with her husband were included.

In its circuit court challenge, Green Healthcare Solutions alleges the commission acted arbitrarily and capriciously by not permitting Krishack to explain her majority interest in the company and that she satisfied the net worth cap because her assets and her husband’s were kept separate under their prenuptial agreement.

The company also claims it would have qualified for preapproval to operate a medical marijuana processor if it were not improperly denied the five-point bonus.

The commission, which defends its denial, won dismissal of the case in circuit court based on the argument that Green Healthcare Solutions had not exhausted the administrative process through the OAH.

The company then sought review by the Court of Special Appeals.

Graeff was joined in the opinion by Judges Douglas R.M. Nazarian and James R. Eyler, a retired jurist sitting by special assignment.

The Court of Special Appeals rendered its decision in Green Healthcare Solutions LLC v. Natalie M. LaPrade Maryland Medical Cannabis Commission, No. 766, September Term 2021.