Pulaski County Circuit Judge Wendell Griffen will likely issue a written decision next week on whether to grant a preliminary injunction that would further delay the award of licenses to cultivate medical marijuana, the judge said Friday at the conclusion of a hearing on a complaint filed by Naturalis Health LLC earlier this week. (Here’s the complaint itself.)
Naturalis was one of 95 applicants — competing for just five potentially lucrative cultivation slots — that submitted proposals to the Arkansas Medical Marijuana Commission. After a lengthy scoring process, the commission announced the winners in February, and allegations of irregularities began almost immediately afterward.
Griffen issued a temporary restraining order on Wednesday in response to Naturalis’ complaint, halting the commission’s plans to formally issue licenses that afternoon.
On Friday, the state attorney general’s office represented the commission, the Arkansas Department of Finance and Administration and the DFA’s Alcoholic Beverage Control Division, which serves as staff for the commissioners. Deputy Attorney General Monty Baugh pointed out on Friday that Naturalis scored 38th out of the many applicants, meaning that even if all five of the winners were somehow disqualified, Naturalis would still be far away from securing a license.
“They have 37 people in front of them,” Baugh said.
But Patrick Murphy, a partial owner in the LLC and in-house counsel for Naturalis, said he believed his company would score in the top five if all applications were graded by independent experts, rather than the commission itself. Murphy was the sole witness for the plaintiff.
“We’re seeking a total rescore by a third-party, unbiased entity or company that is not going to be subject to any of these conflicts or these biases that we are alleging here,” Murphy told plaintiff’s attorney Jay Bequette .
The Naturalis complaint details a variety of alleged problems with how the five-member commission ranked applicants. It alleges undisclosed conflicts of interest between commissioners and two of the winning applicants. Commissioner Travis Story, an attorney, has done legal work for the Trulove family of Berryville, which owns Osage Creek Cultivation, LLC. Osage received Story’s second-highest score.
“I believe they tried but did not, in fact, conduct a blind scoring process,” Murphy said. The medical marijuana amendment does not require redaction of the applications before the commission scores them, but the commission chose to do so. Yet even after staff removed names of individuals from the applications, other identifying information remained in the documents.
The Osage Creek application “references various Trulove related entities,” Murphy said later. “If you were Story, it would impossible to get it out of your mind when you see an entity bearing the name of your client, in the same county.”
On cross-examination, Baugh asked Murphy whether throwing out the Osage Creek application would provide any relief to Naturalis, considering its low ranking.
“Our relief is to throw out the entire process and give everybody a fair shake. None of these numbers mean anything,” Murphy replied.
Another commissioner, Dr. Carlos Roman, gave his highest score — far higher than any others he awarded — to Natural State Medicinals Cultivation. A partial owner of that company is Dr. Scott Michael Schlesinger. The complaint states the two men have an “extremely close personal and professional relationship,” with Roman regularly referring patients to Schlesinger’s practice. Murphy said that this gave him “deep concern … that we weren’t getting a fair shake.”
Baugh pointed out that that professional relationship would appear to work to the benefit of Schlesinger, rather than Roman. “I think it’s mutually beneficial,” Murphy said.
The complaint also alleges irregularities in some scoring rubrics, with Dr. Ronda Henry-Tillman, the commission’s chair, placing check marks in one section of a score sheet rather than numerical values. ABC Commissioner Mary Robin Casteel, a witness for the defense, said later that Tillman, an oncologist and surgeon, was extremely busy at the time she scored the applications. Casteel contacted Tillman about the sheet after noticing the oversight and Tillman then added her numerical scores for that section, Casteel said.
The complaint also lists other alleged problems that supposedly point to shortcomings in the state’s process. Among them:
*Cultivation applicants may not be delinquent on their taxes. A search of public records by the plaintiffs found a connection between several individuals associated with the top-scoring applicant, Natural State Medicinals, and “Arkansas corporations with revoked charters, as a result of past due franchise taxes.” But DFA attorney Joel DiPippa, another defense witness, said that “individuals do not file franchise taxes … and are not generally liable for those franchise taxes,” which affect to corporations. DiPippa said DFA staff reviewed owners and officers associated with all applications for tax liabilities that would disqualify them from the process.
*One applicant, Natural State Agronomics, seemingly did not meet the constitutionally mandated requirement to locate the entrance to its facility at least 3,000 feet from a school, daycare or church which should have disqualified it from consideration. The actual distance on a diagram included with the application appears to be about 2,900 feet. However, as state attorneys pointed out, Natural State Agronomics was not one of the winning applicants and scored lower than Naturalis on the rubric. The plaintiff’s complaint says the alleged error nonetheless illustrates “a pattern of selectively enforcing the Rules and applying the Rules in an arbitrary and capricious manner.”
*Two commissioners, Story and Henry-Tillman, evidently continued scoring applications after a deadline had passed. The state noted that this deadline was self-imposed by the commission — rather than mandated by rule or law — as were many other aspects of the scoring process.
At the beginning of the hearing, the state asked Griffen to dismiss the suit based on a sovereign immunity defense. A recent ruling by the Arkansas Supreme Court broadly curtailed lawsuits against the state by declaring the legislature may not pass laws that waive sovereign immunity. But Griffen noted that medical marijuana was legalized by a non-legislative process — the passage of an amendment by Arkansas voters in 2016.
“Amendment 98 explicitly contains provisions that contemplate that judicial review will occur in the event that there is some adverse action surrounding the exercise of the powers of the Medical Marijuana Commission,” Griffen said.
“The Medical Marijuana Commission is a creature of the people, by a constitutional amendment. … It begs credulity to ask a court to say that the people of Arkansas voted into law … a provision that allows people to sue and then say the state cannot be sued,” he added later.