Arkansas Supreme Court overturns lower court order to block state’s first medical pot licenses

The Arkansas Supreme Court on Thursday (June 21) overruled a lower court decision to halt the implementation of the state’s medical marijuana industry, saying a Pulaski County judge erroneously applied the law in blocking the award of the state’s first five licenses for pot greenhouses.

Scott Hardin, a spokesman with the Arkansas Department of Finance and Administration and official spokesman for the Arkansas Medical Marijuana Commission, provided the following statement to Talk Business & Politics.

“We appreciate the Arkansas Supreme Court’s decision to overturn the injunction from the Circuit Court that blocked the implementation of Arkansas’ medical marijuana program. Today’s Supreme Court ruling will be declared final in just over two weeks. At that point, the Medical Marijuana Commission, with the ability to continue any action that was underway or scheduled prior to the injunction, will announce the next steps in this process.”

The decision comes exactly two weeks after state Supreme Court justices heard testimony on the state’s expedited appeal of a Pulaski County Circuit Court decision to block the medical marijuana cultivation licenses handed out to five venture partnerships in late February.

The case was handed off to the Supreme Court on appeal after a March 21 decision by Pulaski County Circuit Court Judge Wendell Griffen declared the state Medical Marijuana Commission’s (AMMC) process of scoring and awarding Arkansas’ first licenses to five pot cultivators as “null and void,” citing the constitutional amendment approved by voters.

Naturalis Health of Little Rock had filed the first lawsuit against the commission and other state parties on March 13 in Pulaski County Circuit Court amid a flurry of legal protests and complaints filed by several runners-up and also-rans for the state’s first batch of the highly-coveted cultivation licenses.

THE RULING
In a majority opinion written by Associate Justice Rhonda Wood, the state’s highest court first determined that Griffen’s order was “appealable,” noting that the circuit court had nullified the AMMC’s decision to award the medical pot cultivation licenses and remanded the state of Arkansas to restart the selection process.

“The circuit court had ruled on the merits,” Justice Wood wrote. “Therefore, we find that the order is a final disposition of the case for purposes of an appeal.”

Because Griffen’s order was final after the lower court vacated the selection of licensees and enjoined the AMMC from issuing the cultivation licenses to applicants it had chosen, Wood said the high court determined that the Pulaski County judge’s “null and void” order in the case could be appealed.

“The circuit court considered it sufficiently final that it erroneously applied the ‘law of the case doctrine.’ The court’s decision concluded the lawsuit’s controversy, and the appellants appealed from a final, appealable order,” the high court ruling stated.

On the issue of “subject-matter” jurisdiction, the court’s majority also ruled the Pulaski County judge did not have authority to take up the case because the denial of the licenses to the 90 losing applicants that submitted applications to the Commission was “not ripe for the circuit court to hear.”

In the high court hearing two weeks ago, Attorney General Leslie Rutledge and attorneys representing the five winning medical marijuana startups told justices that Judge Griffen improperly adjudicated a case where the lower court had no jurisdiction. Rutledge, on behalf of the Arkansas Department of Finance and Administration, Arkansas Alcoholic Beverage Control Division, and Arkansas Medical Marijuana Commission, filed the appeal on March 23 requesting the state’s high court to speed up the defendant’s appeal of Griffen’s ruling. The five winning companies selected by the AMMC to receive the state’s first medical pot licenses also joined the state in its interlocutory order – an appeal that is made before all claims are resolved.

In making arguments on behalf of those companies, Little Rock attorney Casey Castleberry argued Naturalis Health had no right to appeal the decision from a “quasi-judicial” state agency to the lower court, noting that the Commission does not have “subject matter” jurisdiction.

“Without adjudication, there is no jurisdiction before this court,” Castleberry said. “Jurisdiction can only be created by the [Arkansas] Constitution or by legislative action, not by an agency of the state.”

In her ruling, Wood said the issue of subject-matter jurisdiction requires interpretation of a statute or constitutional provision.

“Our constitution divides our state government into three branches and states that no branch ‘shall exercise any power belonging to either of the others. This is foundational to our government. The judicial branch must not abdicate this by reviewing the day-to-day actions of the executive branch,” Wood wrote, reversing and dismissing the subject-matter appeals.

Siding with Wood on the majority opinion were Associate Justices Robin Wynne, Courtney Goodson, Shawn Womack, Karen Baker and Special Justice Emily White. Justice Josephine Hart recused from the case.

‘CURE ANY DEFICIENCIES’
In a concurring opinion, Chief Justice Dan Kemp agreed with the majority’s decision to reverse and dismiss the case for lack of subject-matter jurisdiction, but offered a different opinion on the respective roles of the court and the state’s newly-created medical marijuana regulatory panel.

“This court will not rewrite administrative-agency rules, nor will it substitute its judgment and discretion for that of the agency,” Kemp wrote in his concurring opinion. “The court may, however, reverse an agency decision if the substantial rights of the petitioner have been prejudiced because the administrative findings, inferences, conclusions, or decisions are in violation of constitutional provisions or made upon unlawful procedure.”

Kemp continued that the Medical Marijuana Commission has a constitutional duty to adopt rules necessary for its “fair, impartial, stringent, and comprehensive administration” of the constitutional amendment approved by Arkansas voters in the November 2016 election.

Griffen’s earlier ruling had noted that two commissioners on the panel had the “appearance of bias.” Also, following the June 7 high court hearing, the court released contents of a letter from Rutledge that one of the five commissioners on the state’s five-person Medical Marijuana Commission was offered a bribe by one of the companies hoping to receive one of the highly-prized licenses to grow and supply pot to medical patients across Arkansas.

“I urge the MMC to review its rules and procedures and to cure any deficiencies,” wrote Kemp.

As news of the high court’s ruling began to spread among the many interests in the state’s fledgling medical marijuana industry, many were confused by the court decisions, wondered if the ruling would lead to more lawsuits and pondered the state’s next steps.

Before the Naturalis lawsuit on March 13, the commission was expected to ratify the scores of the five highest-scoring cultivators and to review several letters of protest presented by three of the 90 losing cultivators that participated in the highly-competitive sweepstakes for the state’s first legal pot cultivation facilities. All five had met the state’s requirement to pay a $100,000 licensing fee and post a $500,000 performance bond to begin construction on the state’s first cultivation facilities. Four of the five cultivators plan to build their greenhouses in the Arkansas Delta.