“Any litigation will include claims related to the Department’s regulatory authority over other areas of marijuana industry.”
By Rebecca Rivas, Missouri Independent
Missouri’s crackdown against a cannabis firm accused of illegally importing THC concentration could lead to a battle over the state’s authority to regulate this industry.
Delta Extraction’s manufacturing license was revoked by the state in November. This came months after a mass recall that removed more than 60,000 items from the shelves. The state claims these products were made illegally with a hemp THC concentrate imported out of the state.
The legal battle is dragging on, and the company has stepped up its game: If Missouri continues to try to punish Delta and the products that were recalled, the company will respond by filing a lawsuit, which the attorneys of the company believe could undermine Missouri’s marijuana laws.
Delta is not only challenging [the Department of Health and Senior Services] authority to control hemp-derived products, Delta’s lawyer Chuck Hatfield wrote in a letter sent to the state on November 15, 2015. The department’s authority to regulate other parts of the marijuana market will be a part of any lawsuit.
The company, which has 20 employees and is located near Pacific at the end a dusty road, seems unlikely to be able to change Missouri’s regulatory structure.
Delta’s owners, associates and partners include some of Missouri cannabis’ most influential players.
Delta is far from an underdog. From its powerful lobbyists to the attorneys and lawyers hired to represent it and its affiliates.
Nick Schroer of O’Fallon, a Republican who chairs the committee overseeing Missouri’s marijuana laws, said Delta had hired “big guns” in order to win back its license, including long-time Jefferson City lawyers Hatfield, a Democrat and Lowell Pearson a Republican.
Schroer explained that the issue is not necessarily political. It affects all parties and all individuals in the state. From veterans to those who smoke for recreational purposes, it impacts everyone.
Hatfield’s email states that Delta was willing, in order to reach an agreement with state regulators “to admit it had failed to strictly comply with the regulatory requirements.”
Hatfield stated that the company will not admit to doing anything wrong because hemp is a non-controlled substance.
Lisa Cox said that Delta Extraction had its license revoked due to “numerous rules violations, including extensive non-compliance with seed-to sale tracking requirements.”
Cox said that the company was not allowed to use THC unless it came from cannabis grown in a licensed facility.
A Question for the Courts
The THC distillate or concentrate that is at the heart of Missouri’s massive recall of marijuana is a THC concentration, or distillate made in part from hemp.
Delta purchased oil from , a Florida laboratory that contained THC-A from the hemp plant. The company heated the oil in Missouri through a decarboxylation procedure, which turns it into delta-9-THC, the cannabinoid that is most known to produce a high.
The cost of hemp-derived THC A from Florida is cheaper than the cost of producing it in Missouri.
Although hemp is legal on the federal level, state regulators claim that they can regulate marijuana once it contains THC derived from hemp.
In a document filed on December 4, the Department argued that the Missouri Constitution “expressly” requires all marijuana products and marijuana-infused goods sold in Missouri be grown or manufactured there. This was in response to Delta’s appeal before the Administrative Hearing Commission regarding the recall of its product and the revocation of their license.
The Missouri Commission is currently considering whether it has the authority to prevent licensed companies from infusing Missouri marijuana products with hemp derived THC.
Carole Iles has stated in an order dated August 29, that it is illegal to add “chemically modified hemp-derived ‘converted cannabinoids'” to marijuana products.
The fight is likely to end in court.
In September, in Arkansas, a federal court sided with the hemp industry in issuing a preliminary injunction against a state law that aims to regulate hemp-derived THC.
U.S. district judge Billy Roy Wilson stated that if Arkansas wanted to participate in federal hemp program it couldn’t choose which parts of law it would follow.
The ruling of September 7 states that “under the 2018 Farm Bill Arkansas can regulate hemp cultivation and even outright ban it if they so desire.” The ruling states that “the legislature appears to have attempted to keep parts of the program they like (purely industrial uses), and eliminate parts they don’t like (human consumption).
Hatfield stated that this is what Missouri’s cannabis regulators try to achieve.
In a letter to the Department, he stated that the Division of Cannabis Regulation has the authority to regulate marijuana other than hemp and it does not matter if the marijuana is used to produce THC.
Schroer says he has heard from many marijuana businesses who are affected by the recall. He is not convinced that the state’s decision of removing Delta’s license from the shelves and thousands products was the right choice. He believes that voters wanted a marijuana product program in which all products are grown in Missouri.
He said, “And hemp was arguably part of that?” “I believe we’re going to find out in court.”
The Underdog
The case is not only a legal dispute, but also a conflict.
Hemp-derived THC is a threat to Missouri’s marijuana growers because Missouri marijuana licensees are required to go through an expensive and rigorous regulatory process, which hemp companies do not.
Delta and other manufacturers will be hurt if they can purchase hemp-derived THC for a quarter of what it costs to buy marijuana-grown THC.
It would be a huge win for hemp farmers in the state.
Sean Hackmann of the Missouri Hemp Trade Association said Delta sold more that $20 million in distillate, which was a mix of marijuana from Missouri and hemp grown by other states.
Hackmann, The Independent, September. But it was another state that benefitted from this. Not our Missouri industry.”
As the hemp industry is usually the underdog, people like Steve Tilley, top marijuana lobbyist, and lawyers Hatfield, Pearson, and Alec Rosenblum are now fighting for it because their clients benefit.
The web of political connections is deep.
Josh Ferguson, a member of Delta Extraction’s ownership team, hosted a fundraising event for Attorney General Andrew Bailey’s election campaign in November.
Delta’s suit against the state made it to the Court of Appeals. The Attorney General’s Office normally handles legal representation for marijuana cases in this court.
Bailey’s office began representing Delta in the appeal two weeks before the fundraiser. Josh Devine is the Solicitor General, who is the highest ranking lawyer in the Attorney General’s Office.
Madeline Sieren is Bailey’s spokesperson. She said that the AG’s Office represents agencies of state in these cases. “That’s what we did.” His work as Attorney General is not affected by his political activities. “I would ask the campaign any questions regarding political activity.”
Political Power
A Joint Operation is the 50 percent owner of Delta Extraction. This management group has three principals, Ferguson, Josh Corson and Ryan Rich.
Ferguson is the founder and owner of Kaldi’s Coffee. Corson is a real-estate agent and Rich is the owner and CEO at Hot Box Cookies.
Rachael Dunn, chief development officer of A Joint Operation, is one of the original founders of Greenway Magazine which covers the cannabis sector.
Ozark Highland Cannabis LLC owns the other half of Delta Extraction. This is the company that is responsible for Midwest Magic, which uses Delta Extraction to produce its products. Jack Maritz, the general manager of Delta Extraction and Edward Maritz are the registered agents for Ozark.
Delta also manufactured products for the Conte label. Delta, according to documents submitted in the lawsuit as well as the appeal filed with the commission has been manufacturing Conte’s THC-distillate for more than a year. The distillate is primarily hemp-derived THC A combined with a tiny amount of Missouri marijuana.
Jack Maritz, in his testimony to the Administrative Hearing Commission on August 14, said that this company has been selling 700 liters since July 2022.
Delta has made $20 million in revenue since April 2022 when it started offering hemp-marijuana distilate.
Maritz stated in his testimony that 700 liters oil could be used to produce “millions” of edible packs.
The summer of 2008, Conte Enterprise Holdings contracted the Jefferson City-based lobbying firm Strategic Capitol Consulting. Tilley is the owner of the firm, who was a state legislator and fundraiser for Governor. Mike Parson (R).
Rosenblum is Conte’s lawyer.
In February or early march, the Administrative Hearing Commission will conduct a three-day public hearing to hear the appeal filed by the company against the license revocation and recall. Delta will fight the state in court if the commissioner takes a side with them.
In September, a separate lawsuit was filed against the state by a company who purchased the recalled THC oils from Delta. The company is now challenging regulators’ authority in pulling the product off the shelves.
Integrated Sales Solutions claims that, despite not being a Missouri licensed company, its products have been put on lockdown, and that the livelihood of the company is at risk.
Marc Ellinger, Bailey’s campaign treasurer, represents Integrated Sales Solutions in the lawsuit.
Ellinger has not responded to The Independent’s comment request.
The original publication of this story was by Missouri Independent.
Missouri Marijuana Regulators Say A Quarter Of Microbusiness License Winners Are Ineligible
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The post A Missouri company at the center of a massive marijuana recall threatens a lawsuit that could overturn regulations appeared initially on Marijuana Moment.
