Company that didn't win medical marijuana license sues state commission

A company that was bumped out of the running for one of Maryland's lucrative medical marijuana grower licenses is suing the state commission that issues the permits, throwing the already delayed program into further uncertainty.

Bethesda-based GTI Maryland contends that the Maryland Medical Cannabis Commission broke its own rules last month when it granted preliminary licenses to two companies that were ranked lower by analysts who were charged with assessing the applicants.


The commission said it was trying to achieve more geographic diversity, as required by law.

GTI, one of two higher-ranking companies not selected, argues the commission's decision-making process was "illogical, opaque and fatally flawed." The company is asking the court to issue an injunction reversing it.


"This is a case about a state commission setting rules and then inexplicably failing to follow them," said Philip M. Andrews, a Baltimore lawyer who represents GTI.

GTI filed the lawsuit in Baltimore Circuit Court on Monday.

The company contends that the grower licenses are "by all accounts valued at tens of millions of dollars" and urges the court to swiftly find that the commission's action was illegal.

"Any further delay in awarding GTI its grower license will be devastating for GTI and will unfairly delay and prevent GTI's entry into the marketplace and deprive it of critical market share," the company says.

A commission spokeswoman said Tuesday the commission would not comment on pending litigation. A spokeswoman for the state attorney general's office, which would represent the commission, said the state's lawyers had not yet seen the lawsuit.

The lawsuit further complicates a program that already has taken more than three years to get off the ground.

Preliminary licenses to grow, process and sell marijuana to treat medical conditions such as seizure disorders and the side-effects of chemotherapy for cancer were granted last month after months of delays caused by a greater-than-expected number of applicants.

Other losing applicants complained that most of the 30 preliminary licenses to grow or process marijuana went to companies led by white men.


The law authorizing the program required the commission to consider racial diversity when awarding licenses, but the panel said it did not follow the requirement because it received legal advice that such preferences would not hold up in court.

The Legislative Black Caucus has pledged to find a way to stop the program from moving forward without minority-owned businesses.

GTI, which proposed a growing operation in Hagerstown, was dropped from the top 15 contenders for licenses. So was Maryland Cultivation and Processing LLC, which hoped to produce medical marijuana in Frederick County.

Applicants were ranked by Towson University's Regional Economic Studies Institute. The institute was brought in to handle the painstaking work of reviewing more than 1,000 applications, including 145 to grow cannabis plants.

Maryland Cultivation came in eighth statewide but was third in Frederick County. GTI ranked 12th statewide but was third in Washington County.

They were replaced in the top 15 by Holistic Industries LLC, which plans a growing operation in Prince George's County, and Shore Natural Rx LLC, which proposed cultivating cannabis in Worcester County.


The two applicants had been ranked No. 20 and No. 21, but they proposed operations in regions that wouldn't otherwise have made the list.

GTI says the commission's grower subcommittee voted unanimously to award licenses to the 15 applicants rated highest by the Regional Economic Studies Institute.

But the five-member subcommittee reversed itself during a conference call two days later, GTI says. Members voted 4-1 to drop GTI and Maryland Cultivation and to elevate the contenders from Southern Maryland and the Lower Eastern Shore.

The full commission approved the plan Aug. 5.

GTI says the action "effectively removed merit" as a basis for awarding the licenses. The company says the commission's use of "geographic diversity" as a basis for leap-frogging lower-ranked applicants over higher-scoring contenders goes against the panel's own assurances that the location of a proposed operation was not relevant for preliminary approval.

If the commission wanted to increase geographic diversity, GTI says, it should have given high-ranking applicants an opportunity to change locations rather than move them down the list. The company says the commission gave two applicants who finished in the top 15 for licenses to process medical marijuana the opportunity to change their proposed locations, and both groups did.


Officials say the Towson institute ranked the applications using a "double-blind" process in which the evaluators did not know the identities of the applicants.

Andrews said the commission should have accepted the institute's rankings.

"The commission must follow all of the licensing selection rules it set, and it's unfair and illegal to change any rule after the process was over," he said.

Edwin Weidenfeld, the leading partner for Maryland Cultivation, said he believes that what started out as a "clean process" was "corrupted" by the commission's decision to override the rankings. He said he has left open the options of joining GTI's suit or filing his own.

"I want to give them a chance to clean up their own mess because I have concerns that a lawsuit will end up delaying this," he said. "But better it be delayed than corrupted."

The state faces other hurdles in getting medical cannabis into the hands of patients.


African-American lawmakers vowed this month to halt the process of issuing licenses until minority-owned businesses, none of which made the cut in the selection of growers, get a share of the licenses.

The caucus has tried to enlist the support of Gov. Larry Hogan, who has expressed sympathy but has no power to overrule the commission.

The state has been attempting to get a medical marijuana program off the ground since 2013, when the General Assembly enacted the first law allowing its medicinal use. That measure was seen as a failure, because it relied on academic medical centers that weren't interested in participating.

Lawmakers revisited the issue with new legislation in 2014 and 2015 that opened the program to private growers, processors and retailers and put the commission in charge of issuing licenses.

Even before the lawsuit and the black caucus protest, the commission said it did not expect medical cannabis to be available to patients before the summer of 2017.