Florida Faces New Challenge On Marijuana Licenses As Tampa Business Contests A Rule

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A Tampa-based orchid grower is challenging a rule proposed by state health officials, arguing the proposal fails to properly carry out a law giving preference for up to two highly sought-after medical marijuana licenses to applicants who own facilities that were used to process citrus.

The citrus preference was included in a law passed last year that implemented a voter-approved constitutional amendment broadly legalizing medical marijuana. The law required health officials to issue 10 new licenses to applicants that meet certain requirements.

The state overall has issued licenses to 13 operators, including a handful of new operators who met the criteria laid out in the 2017 law, but has yet to begin accepting applications for four new licenses from potential vendors that may not have participated in the process before. The new rule challenge will likely delay the application process even further.

The 2017 law requires one of the new licenses to go to a black farmer who was involved in federal litigation about discriminatory lending practices.

Also, the law requires health officials to give special preference for up to two licenses to applicants that “own one or more facilities that are, or were, used for the canning, concentrating, or otherwise processing of citrus fruit or citrus molasses and will use or convert the facility or facilities for the processing of marijuana.” The citrus preference is the subject of one of several marijuana-related court challenges.

The proposed rule, however, “seeks to grant a preference to a broader group of applicants than the statute permits” by giving the preference to applicants who own “property” that was once used for the citrus-processing purposes but will be used for growing, processing, or dispensing medical marijuana, if the applicants are chosen for licenses, lawyers for Louis Del Favero Orchids Inc., wrote.

“By using the broader word ‘property’ rather than ‘facility,’ the department is granting the citrus preference to a broader group of applicants than the statute permits, such as owners of packinghouses and other parties that fail to meet the definitions of ‘processor’ or were not used for ‘canning’ or ‘concentrating.’ The statute is clear and unambiguous,” lawyers Seann Frazier and Mark Ito wrote in the 18-page administrative complaint.

The complaint alleges that the proposed rule “is an invalid exercise of delegated legislative authority,” “exceeds the department’s rulemaking authority,” “enlarges and modifies” the provisions of the statute and is “arbitrary and capricious.”

In addition to the issue about the use of “property” or “facility,” the proposed rule is flawed in at least two other ways, according to the orchid grower’s lawyers.

The proposed regulation would give 35 additional points to the two highest-scoring applicants seeking the citrus preference, but that means some applicants seeking the citrus preference won’t get any extra points, the lawyers argued.

According to the complaint, the Department of Agriculture has indicated that more than a dozen companies will qualify for the citrus preference. But, under the proposed rule, “most of those applicants would receive no additional points despite qualifying for the statutory preference,” Frazier and Ito wrote.

In addition, the proposed rule “provides no assurance that any applicant qualifying for the citrus preference will actually receive a license,” the lawyers argued.

The 35 extra points for the citrus preference — in addition to a total of 1,150 points available to all applicants — amounts to just a 3 percent bonus, the lawyers argued.

“If those extra 35 points are not enough to exceed the scores of other applicants, then no citrus-preference qualifying applicant will receive a license,” they wrote in the complaint, adding that the Legislature “clearly intended” for two licenses to go to applicants that meet the citrus preference.

But some marijuana industry experts called that assertion a stretch, because lawmakers could easily have required health officials to issue two citrus-related licenses, as they did with the black farmers.

The state’s medical pot regulations and laws have been tangled in legal and administrative challenges since lawmakers first legalized non-euphoric marijuana four years ago. Many of those disputes have centered on the awarding of potentially lucrative licenses.

In addition to the rule challenge, the Department of Health is currently involved in at least seven pot-related lawsuits.

Del Favero’s lawyers filed the challenge Friday, 10 days after a public hearing at which Frazier warned Florida pot czar Christian Bax and other state health officials that the regulation was problematic.

The orchid grower began exploring the citrus preference after the law went into effect a year ago, Del Favero’s lawyers argued.

“Del Favero purchased facilities that were used in citrus processing specifically for the purpose of converting those facilities for use in processing medical marijuana, and to obtain the preference available to any applicant that owned such facilities at the time of application for a medical marijuana treatment center license,” they wrote.

The proposed rule “substantially affects” Del Favero because it “would provide no additional points to most applicants that qualify for the citrus preference, and because the rule provides no assurance that the preference will actually result in any licenses being issued to applicants that meet the citrus preference.”