Florida Appeals Court Denies Demand to Open Cannabis License Application Window
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Florida Appeals Court Denies Demand to Open Cannabis License Application Window

The decision comes despite the Florida Health Department’s constitutional obligation to issue more than 20 new licenses based on patient numbers.

September 9, 2022

New medical cannabis dispensaries have continued to open on a weekly basis during recent months in Florida, but the state’s ever-expanding retail footprint remains limited to 22 operators. 

Trulieve (120 dispensary locations), Verano (59 MÜV dispensaries) and Curaleaf (51 dispensaries) represent 49% of Florida’s 474 retail locations as of Sept. 9, according to a weekly update from the state’s Office of Medical Marijuana Use (OMMU).

Also as of Sept. 9, Florida has nearly 750,000 qualified patients with active ID cards, meaning each retail location serves almost 1,600 patients on average. For Trulieve, that means dispensing roughly 300 ounces of dried flower at each of its 120 locations every week, according to OMMU data.

But aspiring market entrants hoping to gain a piece of that pie through additional licensing will have to continue to watch from the sidelines following a Sept. 7 decision from Florida’s First District Court of Appeal. The court upheld an order to dismiss a complaint by Tampa-based Louis Del Favero Orchids Inc., which demanded the Florida Department of Health issue additional retail licenses under a default licensure mechanism in Section 120.60 of state law.

A general statute that applies to all state agencies, Section 120.60 states, “An application for a license must be approved or denied within 90 days after receipt of a completed application” or the application is “considered approved.”

Del Favero applied in 2018 for a license to cultivate and dispense medical cannabis from the Florida Health Department, but state officials didn’t approve or deny the application and instead told Del Favero that the department wasn’t accepting applications for additional licenses in the state at the time.

Since Florida voters passed Amendment 2 in 2016 and the state Legislature’s subsequent 2017 passage of Senate Bill 8-A—creating a framework for the state’s cannabis industry—Del Favero has waged a years-long battle to obtain a license. The orchid grower even spent $770,000 to purchase property in Pinellas County, according to the Tampa Bay Times, in order to meet a requirement under the 2017 law that gives special preference to applicants who own facilities used for concentrating or processing citrus fruit or molasses.

Following the 90-day window of submitting a license application, Del Favero sued the Florida Health Department, claiming that the state agency deprived the aspiring cannabis entrepreneur—not of the right to a license—but of the right to have its application for a license reviewed.

A trial court dismissed Del Favero’s complaint, and Florida’s First District Court of Appeal reaffirmed that decision this week, in part, because “allowing the appellants to file for licenses during an undesignated period for filing would contravene the competitive structure for licensing.”

Despite concurring with the majority opinion, First District Court of Appeal Judge Ross Bilbrey lambasted state officials for dragging their feet in issuing more licenses.

“[Del Favero] is understandably frustrated with the ongoing failure of the Department of Health to open the application window and issue Medical Marijuana Treatment Center licenses as required by the Florida Constitution,” Bilbrey wrote in his Sept. 7 opinion. In Florida, “Medical Marijuana Treatment Center” (MMTC) is the overarching term for a vertically integrated business. Vertical integration is mandated by state regulations.

According to the 2017 state law passed by the Legislature, the Health Department “shall license four additional medical marijuana treatment centers … within six months after the registration of each additional 100,000 active qualified patients in the medical marijuana use registry.”

According to OMMU, Florida hit the 100,000 registered patient mark in April 2018, the 200,000 mark in March 2019, the 300,000 mark in January 2020, the 400,000 mark in August 2020, the 500,000 mark in March 2021, the 600,000 mark in August 2021, and the 700,000 mark in late March 2022.

Based on the 2017 law, the Florida Health Department should have issued at least 20 additional licenses to keep up with the population of active patients. But much of the department’s licensing delay stems from separate litigation that went to the Florida Supreme Court.

In early 2017, Tampa-based Florigrown applied for a retail license just before lawmakers passed the bill that would implement rules requiring vertical integration, according to JD Supra. State lawmakers included an “Emergency Rulemaking” section in the bill that laid out the application process. Florigrown’s application was obsolete.

Later that year, Florigrown’s premature application was denied, and the company filed a lawsuit declaring that the S.B. 8-A vertical integration provision was unconstitutional because it didn’t align with the 2016 voter-approved amendment.

It wasn’t until May 2021 that the Florida Supreme Court issued a 6-1 opinion rejecting Florigrown’s constitutional arguments. While that decision dealt a blow to smaller, non-vertical companies hoping to enter the space, it also meant that state regulators would not have to amend the current licensing structure for Florida’s medical cannabis industry.

But that was more than a year ago and the regulatory authorities in Florida have yet to open the license application window to industry hopefuls.

“Almost five years after the emergency rule was issued, the MMTC license application window remains closed,” Bilbrey wrote in his Sept. 7 appellate ruling that dealt a defeat to Del Favero’s case.

Bilbrey also pointed out that the Florida Health Department’s counsel said in March 2020—during oral arguments in yet another court case involving jilted applicant MedPure LLC—that the reason for the delay in allowing applications was because of the pending Florida Supreme Court decision in the Florigrown case.

With that decision no longer pending, Bilbrey offered a recommendation for the Health Department.

“I respectfully suggest that the department comply with its representations at the MedPure oral argument—either open the application window referenced in the emergency rule or promulgate a superseding rule allowing for MMTC license applications,” he wrote. “Otherwise, it may be necessary for a potential licensee to ‘seek judicial relief to compel compliance with the department’s constitutional duties.’”