A Baltimore judge ruled Wednesday that a case that could disrupt Maryland's fledgling medical marijuana industry should proceed to trial.
Circuit Judge Barry Williams said a trial should determine whether state regulators acted outside the law when they chose which companies won lucrative licenses to grow the drug.
Williams dismissed the arguments of state lawyers, who wanted the case thrown out. If the court finds that the licenses were awarded improperly, he said, it has the power to order the Maryland Medical Cannabis Commission to remedy the situation.
“It’s not something that can be determined at this juncture,” Williams said from the bench. He did not set a trial date.
At issue are the two of the state’s 15 medical marijuana growing licenses that were awarded to companies that did not rank among the top 15 applicants.
Regulators said they awarded the licenses to the two lower-ranked firms, located on the lower Eastern Shore and in Southern Maryland, to broaden the geographic diversity of the growers, as required by state law.
The two top-15 firms that were displaced by that action sued the state, arguing they were not treated fairly because regulators never told companies their proposed location would determine whether they got a license.
Lawyers for those companies, Maryland Cultivation and Processing and GTI Maryland, argued the state acted arbitrarily and capriciously in denying them licenses.
“All of what was conveyed by the commission was they would pick the best, the cream of the crop,” said Alfred F. Belcuore, a lawyer for Maryland Cultivation and Processing. “If we would have been asked to move from Frederick County into Prince George’s County, we would have said yes.”
Lawyers for the state and for Holistic Industries, one of the lower-ranked companies that received a license, argued regulators were entitled to consider geographic diversity, and they did so in a methodical way.
“There is nothing that anyone can point to that said they didn’t stay within the lines,” said Bruce Marcus, Holistic’s lawyer.
At trial, lawyers are expected to call state regulators to explain why they awarded the lucrative licenses to lower-ranked marijuana growers.
The process by which the commission awarded growing licenses has been controversial since the preliminary winners were announced in August 2016.
State law also requires the commission to seek racial diversity among winners. But while a third of the state’s population is African-American, none of the winning firms are led by African-Americans.
The Legislative Black Caucus has pledged to expand the industry to include black-led companies. Its leaders threatened to use the caucus’ considerable power to tie up business in the General Assembly next year if lawmakers do not swiftly pass a fix.
Another losing firm, Alternative Medicine Maryland, has sued the state for failing to consider race in the selection process. State lawyers have argued the lawsuit should be thrown out for several reasons, including because they say there’s no evidence Alternative Medicine Maryland would have won a license if race had been considered.
Byron B. Warnken, who represents Alternative Medicine Maryland, said the losing firms “should be commended for shining a light on this dark corner of governmental decision-making.”
Assistant Attorney General Heather Nelson, who represents the medical marijuana commission, said the numerical ranking of the growing applicants created an “unacceptable concentration” of licenses in the central region of the state.
Ten of the top 15 were in just that one area, and there were three each in two adjacent counties.
Nelson said the commissioners decided to remove the lowest-ranked firms in those two counties — GTI, which ranked 12th overall, and Maryland Cultivation and Processing, which ranked eighth overall. And they decided to elevate Holistic, which had ranked 20th, to add a second company to the Southern Maryland area. Shore Naturals Rx, which had ranked 21st, was elevated to make sure there was a firm on the Lower Eastern Shore.
Lawyers for GTI and Maryland Cultivation and Processing argued that the process should have been made clear to applicants in advance, not created ad hoc.
State officials have objected to the lawsuit since it was filed in September 2016. They argue that the commission did not have to reveal how it picked winners because the decision-making process was protected by privilege. And they argued the results shouldn’t be second-guessed by a court because the companies should have objected through an administrative hearing instead.
Williams dismissed both of those arguments.
Lanny Davis, an attorney for GTI, said his clients were pleased they will have a day in court.
“Now the state must operate with sunshine on all of the facts instead of their continuing effort, up to now, to keep the lights out about what really happened,” he said.