Matthew Ginder , Senior Counsel
A Florida Appellate Court issued a ruling yesterday finding that current medical marijuana laws creating a limited, vertically-integrated licensing structure are inconsistent with the State’s Constitution. The ruling creates uncertainty regarding the sustainability of Florida’s current licensing structure governing its medical marijuana program.
Background
In 2016, Florida voters overwhelmingly voted in favor of a ballot initiative intended to expand medical marijuana accessibility to patients diagnosed with a “debilitating condition,” which is now embedded in Article X, Section 29 of the Florida Constitution (the “Medical Marijuana Amendment”). In 2017, then-Governor Scott signed into law Senate Bill 8-A intended to implement the Medical Marijuana Amendment. Among other things, Senate Bill 8-A –which is codified in Chapter 381.986, Florida Statutes (the “Act”) — limited the number of companies permitted to provide medical marijuana to patients, and created a vertically integrated licensing structure requiring each license holder (known as a “Medical Marijuana Treatment Center” or “MMTC”) to perform all business functions. The restrictions created by the Act have invited a significant number of lawsuits.
Florigrown Case
In December of 2017, a lawsuit was filed by an MMTC applicant challenging the constitutionality of the licensing scheme created by the Act. Florigrown, LLC, et al. v. Florida Department of Health, et al. Case No. 2017 CA 002549 (the “Florigrown Case”). Notably, the lawsuit challenged the constitutionality of (a) the requirement that MMTCs perform all business operations from seed to sale (i.e., mandatory vertical integration); and (b) the cap placed on the number of MMTC licenses or “registrations” issued. The trial court agreed and granted Florigrown’s motion for temporary injunction in October of 2018. The Department, then under the direction of Governor Rick Scott, appealed the trial court’s order to the 1st DCA (Case No. 1D18-4471 ).
Florigrown Appeal
On Tuesday, July 9, 2019, the 1st DCA issued its Opinion on the Department’s appeal to the trial court’s entry of a temporary injunction in the Florigrown Case. The Opinion upheld certain key aspects of the order granting Florigrown’s motion for temporary injunction. Notably, the three-judge panel unanimously found that there is a substantial likelihood of success in procuring a judgment declaring the vertical integration requirement set forth in the Act unconstitutional. As a result of that finding, the 1st DCA was “constrained to find that [Florigrown] has also established a substantial likelihood of success in its challenge to the statutory cap of MMTCs under [the Act].” The 1st DCA found that the license caps set forth in the Act were unreasonable but expressly declined to address the Department’s general authority to establish any caps. The 1st DCA found that the Department should be allowed a “reasonable period of time” to exercise its duties and promulgate new regulations pursuant to the Medical Marijuana Amendment.
The Department can still challenge the 1st DCA’s Opinion. If that occurs, then the case will likely remain pending during next legislative session, potentially giving the Florida Legislature another opportunity to amend the Act. Governor DeSantis has publicly expressed an interest in expanding the market and moving away from the vertically integrated licensing structure. (Read more here ). In lieu of continuing with litigation, the Department can accept the 1st DCA’s Opinion and promulgate regulations consistent with the Medical Marijuana Amendment (as interpreted by the 1st DCA), which would, among other things, address the types and number of licenses available in the State.
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