“The applicants did not meet all of the requirements for the application, and it is not the role of the state government to hand-hold sophisticated entities.”
By Rebecca Rivas, Missouri Independent
The Missouri Supreme Court heard Thursday arguments in a marijuana case that regulators claim could force them to grant “dozens” of licenses for cannabis producers, sellers and distributors who want to sell or distribute products over the self-imposed limits set by Missouri.
Mo Cann Do Inc. requested a license for marijuana cultivation in 2019. The state denied the application because the company did not include the Missouri Secretary’s Office certification of good standing in its application.
The company claims that the Division of Cannabis Regulation is required by state law to provide a detailed letter describing what information was missing in a license application. This wasn’t done before the state denied Mo Cann Do s license.
The company then appealed the denial of its license, one of over 800 appeals that were filed after the state set limits on the number marijuana business licenses they would grant. Mo Cann Do , after losing in both the Administrative Hearing Commission (AHC) and Circuit Court levels, won at the Missouri Court of Appeals Eastern District.
The court ordered Missouri award the company with a license for a marijuana growing facility.
Documents from the court show that the state requested the Missouri Supreme Court hear the case in part because there were dozens of cases pending before the Missouri Commission and Court “where the specific document deficiency might not have been listed” in the rejection notice.
The state argues that if the Court of Appeals’ ruling is upheld, it will be forced to grant marijuana licenses to applicants who may not even have received the required scores in 2019.
The state claimed in its application for transfer to the Supreme Court that “the license cap” in the [state rules] would prevent the award of a license. License caps may not mean anything in a regulated sector.
The state stated that the medical marijuana industry is “not the only place where this issue is important.”
The regulators believe that it could also affect gambling boat licenses.
Eric Walter, Mo Cann’s lawyer, said at the hearing on Thursday that the state set the cap for licenses.
Walter added, “We will add more licenses if a court orders us to do so, or if the department chooses to settle one of these appeals.”
In the letter dated September 24, 2019, regulators detailed more than 15 specific areas where Mo Cann Do’s application was incomplete. This included all of the names of owners and their voting rights.
The two-page list, however, did not include the certificate of goodstanding.
The judge in the 2021 circuit court ruling noted that Mo Cann Do also submitted six other applications, where the certificate was missing. In those six cases, the division informed the company by letter that the certificate was missing. However, the company did not submit it.
In his ruling, St. Louis Circuit Court judge Thomas Albus said, “It’s reasonable to conclude that, at least in the case in question, a more detailed notice would not have had any effect.”
Jason Lewis, chief attorney with the Missouri Attorney General’s Office said that the Administrative Hearing Commission had carefully examined the issue and determined the state’s notification “met a level of specificity sufficient.”
He said that the marijuana industry is heavily regulated and its application process is “unique.”
Lewis stated that “Applicants did not complete the application requirements” and “the state government shouldn’t be in the business to hand hold sophisticated entities – giving them a third bite at the apple in an environment highly structured and competitive.”
Walter confirmed that Mo Cann Do had submitted a certificate of registration to prove the good standing of the company.
Lewis used the example of a law school application that required an LSAT score, but was denied because a student submitted scores from another test. If the student scored well on the LSAT but did not submit the score, is the university responsible for rejecting her application?
Lewis was asked by Missouri Supreme Court Judge W. Brent Powell: “But, the obvious argument is this: Does the University create fault for themselves when it states that in its regulations that we will notify you if you do not submit an LSAT and that you must correct that deficiency?”
Walter stated that certificates of incorporation were commonly used as a way to demonstrate good standing. The state law of 1990 that established the process of obtaining a certificate of good status did not prohibit this practice.
He said, “That language could’ve been there.” “The general Assembly didn’t put it there, and courts haven’t made this finding.”
Lewis stated that the decision of the court could “generalize” to other areas.
He said, “Let’s take small business loans.” Let’s say that the U.S. Department of Agriculture offers agribusiness loan. This is why I believe that our arguments are not based on a checklist. “They don’t rise or fall on extra-record material.”
The original publication of this story was by Missouri Independent.
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Photo by Carlos Grancia.
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