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Contentious Hearing Over Pot Licenses Draws To a Close

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TALLAHASSEE — After 10 days of testimony that included an explanation of the “artistic buzz” caused by certain types of pot, an acrimonious legal battle between the state and a Northeast Florida nursery seeking a medical marijuana license wrapped up Friday.

Lawyers for Jacksonville-based Loop’s Nursery and Greenhouses tried to convince Administrative Law Judge R. Bruce McKibben that health officials should have granted one of five highly sought-after licenses to the grower, which has been in business for nearly seven decades and specializes in flowering plants.

“Loop’s is a large and successful nursery. It has strong financials. Its application was thorough and consistent,” said Jon Moyle, a lawyer for Loop’s.

Moyle repeatedly noted that Christian Bax, director of the Florida Department of Health’s Office of Compassionate Use, gave the nursery the highest score over four other competitors for the license.

“(Bax’s) testimony suggests that he … decided that Loop’s was the strongest applicant in the Northeast,” Moyle said.

But lawyers for the state accused Loop’s of being a “disappointed vendor” like other entities that lose potentially lucrative bids.

The contentious hearing was the first of three challenges about the “dispensing organization” licenses. It featured disagreements ranging from the length of proposed recommended orders to a prolonged dispute over whether a piece of yellow legal-pad paper with the names of investors in a business tied to Loop’s should be revealed to the public.

Testimony also included highly detailed information about the science involved in growing pot and creating products low in euphoria-inducing tetrahydrocannabinol, or THC, and high in cannabadiol, or CBD, first authorized by the Legislature in 2014. Bax offered the judge an explanation of the differences between cannabis indica and cannabis sativa, saying one sedates users and the other results in an “artistic buzz.”

Part of Loop’s case hinged on the nursery’s exclusive relationship with CWB Holdings, a Colorado-based company headed by Joel Stanley that owns the rights to “Charlotte’s Web,” a substance whose name has become synonymous with the low-THC, high-CBD treatments believed to eliminate or drastically reduce life-threatening seizures in children with severe epilepsy.

Under a 2014 law, the Department of Health in November awarded one dispensing-organization license in each of five regions of the state. The department awarded a license in the Northeast region to Chestnut Hill Tree Farm and later awarded a second license to San Felasco Nurseries after an administrative law judge ruled that San Felasco’s application had been wrongly rejected.

The law was expanded this year to allow the dispensing organizations to also grow full-strength marijuana for patients who are terminally ill.

Bax, one of the three members in the panel that ranked applicants in each region, testified for more than 10 hours in the Loop’s case.

As a lawyer with a degree in Master of Business Administration and had previously worked as a consultant in the marijuana industry in other states, Bax said Stanley and his brothers had done a good job “branding” their products with the Charlotte’s Web name, but that didn’t mean other high-CBD types of marijuana weren’t as effective.

But in a telephone interview Friday, Stanley said Charlotte’s Web users have reported a 75 percent positive response after using the products, with some reporting “super-positive” results.

“You can argue that it’s just a brand, but that’s silly. Because cannabis is not cannabis is not cannabis. Every strain has the potential to be unique and special,” Stanley said.

But Bax was clearly not on Loop’s side during prolonged questioning by Moyle, even responding sarcastically at some points.

Trying to demonstrate the Loop’s application was superior to its competitors, Moyle pointed out that Loop’s would have a security guard who would live on the nursery grounds.

That shows “solid dedication on his part,” Bax said. “I’m assuming that he sleeps, though, so that he’s not actively doing security 24 hours a day.”

Moyle also asked Bax about Loop’s capacity to grow marijuana, repeatedly noting that the nursery has about 650,000 square feet of greenhouse space, a far greater space than the two Northeast region operations with licenses.

“You said yesterday that size does matter, is that right?” Moyle said.

“That’s a fair statement,” Bax agreed, adding a caveat. “It’s like complimenting one of your children. Just because you say one is large doesn’t mean another one’s not large as well.”

Since the 2014 law was passed, the state has spent nearly $500,000 on legal fees and costs in its facing challenges to rules regulating the industry and to the choices of licensees. The bulk of the money went to the Tallahassee-based firm Vezina, Lawrence and Piscitelli. Ed Lombard, a shareholder with the firm, represented the agency during the Loop’s hearing.

“Judge, this case has all the classic elements of what the bid protest language calls a ‘disappointed vendor,’ ” Lombard told the judge during brief closing arguments.

“You submit your proposal, you submit your application – whatever it may be – and boy, gee, I’m really good,” Lombard said. “Why didn’t I get selected? Well, because there were other applicants who were as good or better than you. At the end of the day, what (the evaluators) came up with was San Felasco and Chestnut Hill (were) best.”

Moyle argued having another pot licensee in the state would be good for Florida patients because it would provide more competition.

“I remember the monopoly and oligopoly discussion from law school,” Moyle said. “Having another competitor, who has a very efficacious product, should be provided and pursued and permitted. We ask that you find that Loop’s on the record in this case, was the best applicant.”

Lombard said lawmakers intentionally restricted the number of licenses. This year’s legislation expanded the number of licensees to include San Felasco and applicants who win challenges. The expansion also allows the health department to issue three more licenses if the number of registered patients exceeds 250,000 people.

“If they just wanted it to be an open market, they could have said, ‘Here, (Department of Health), if they can just check the boxes, you can give everybody licenses and let the market regulate itself.’ They decided not to do that,” Lombard said.

About Dara Kam - News Service of Florida

Dara reports for the News Service of Florida, a wire service to which WUFT News subscribes.

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