Can Missouri keep medical marijuana applications secret? Supreme Court to decide

The Missouri Supreme Court will decide whether the state’s medical marijuana regulators can continue to keep secret the applications of businesses that won licenses — a case that could determine the outcome of hundreds of appeals of denied licenses in the controversial program.

The confidentiality provision was included in the constitutional amendment legalizing medical marijuana that voters passed in 2018.

But in a case the Supreme Court heard Tuesday, lawyers for a California-based company that was denied two licenses to grow marijuana argued there was “no meaningful” avenue to appeal their denials without comparing their applications to the ones that had won.

A state appeals court ruled in May that the state’s Department of Health and Senior Services must turn over the successful applications to that company, Kings Garden Midwest LLC, during the appeals process before the Administrative Hearing Commission.

The state has fought to keep them secret under a provision in the constitution that states DHSS must “maintain the confidentiality” of information such as licensees’ sales and financial information, security plans and business operations.

DHSS contended Tuesday that secrecy is a key component of a system in which the state awarded a limited number of marijuana licenses in order to closely regulate the fledgling market.

“When the people who submitted this information to the state, to the Department of Health and Senior Services, did so with the promise it would be confidential, we have to vindicate that right,” said James Layton, a private attorney hired to represent DHSS.

For nearly two years, DHSS under Gov. Mike Parson’s administration has been dogged by controversy and scrutiny from lawmakers over its implementation of the medical marijuana program.

The scoring of license applications, performed by a third-party state contractor, appeared to be riddled with inconsistencies, generating more than 850 administrative appeals. To defend its decisions, DHSS has spent millions of dollars in legal fees out of the application fees it collected, redirecting funds from a veterans’ health care fund, the intended target of the program’s revenues.

In the nearly 600 appeals still pending in administrative court, “competing applications have now been sought in many, perhaps most” of the cases, according to the brief DHSS submitted to the Supreme Court.

King’s Garden Midwest argued the confidentiality provision does not apply during the appeals process.

“The state has chosen winners and losers” in awarding limited licenses, said Joshua Hill, an attorney for King’s Garden Midwest. “They believe that they get to create a process by which they rank applicants against each other, they get all of the information … go apply scoring to those questions as they go along based on who gave the better answer, but when it comes time to review their decisions and review their scoring, they’re the only ones that can see that.”

It has left denied applicants “no meaningful way to challenge their scores,” Hill said.

Hill said the Administrative Hearing Commission could keep the applications under seal during the appeals process.

But Layton argued once the applications are part of a court record, “it can and will be used elsewhere,” threatening the license-holders’ edge in a competitive market.

“If investors knew that their materials would be made public, would be given to their competitors, they would be deterred,” he said. “And we needed those investors for this system to work.”

He told a Supreme Court judge the confidentiality provision would apply even in the face of a subpoena.

“No one has the power to compel” disclosure, he said. “Yes, that would be our position.”

Decisions of the state Supreme Court typically take months.

The state has issued just over the minimum number of dispensary, cultivation plant and manufacturing facility licenses required by the constitutional amendment. As of December, about 179 dispensaries out of 202 licensed have been approved to open.

The trade association MoCannTrade said this fall it expects medical marijuana sales to top $200 million this year.

This story was originally published December 14, 2021 at 1:08 PM.