Missouri can’t keep applications of medical marijuana licensees secret, high court says

The Missouri health department can’t keep secret the applications of businesses that have won medical marijuana growing and dispensary licenses from the state, the Missouri Supreme Court ruled Tuesday.

The judges ruled unanimously that the Department of Health and Senior Services, which oversees the state’s burgeoning medical marijuana program, must turn over information in the successful applications to those who were denied a license, for use in their appeals.

The decision is a blow to Gov. Mike Parson’s administration, which chose to regulate the state’s new legal marijuana industry with a competitive system of limited licenses after voters approved the idea in a 2018 constitutional amendment.

DHSS has been dogged by controversy and scrutiny from lawmakers over the implementation. Many of the hundreds who were denied licenses accused the state of an inconsistent and arbitrary application scoring process.

The state still faces 513 administrative appeals from applicants it denied. The Supreme Court decision could allow those denied applicants to now compare their applications with those of successful licensees, potentially hastening the awarding of additional marijuana business licenses in the Missouri market.

Lawyers for the state had fought to keep the successful applications secret in the appeals before the Administrative Hearing Commission, relying on a confidentiality clause in the constitutional amendment.

In oral arguments over the matter in December, DHSS attorney Jim Layton even said the confidentiality clause prevented the state from producing the application information in response to court orders.

But the judges ruled Tuesday in favor of Kings Garden Midwest, a California-based company that had been denied two licenses to grow marijuana in Missouri.

Without seeing the applications, wrote Judge George W. Draper III in the court’s opinion, Kings Garden would be afforded “no meaningful review” of the licensing decisions during the appeals, and suggested the state’s reading of the constitutional provision was “unreasonable or would lead to absurd results.”

“Because applications are not judged solely on their own merits but are ranked competitively against other applications, the only way to determine whether (DHSS) denied Kings Garden’s application in an arbitrary or capricious manner is to compare its applications against information from those of successful applicants,” Draper wrote.

He wrote that the information could be produced under seal before the Administrative Hearing Commission.

In a statement provided by DHSS, the director of the medical marijuana division said the ruling provides “clarity.”

“The Department prioritizes the privacy interests of Missouri’s citizens and businesses and welcomes the clarity provided by the Missouri Supreme Court on this important constitutional issue,” Lyndall Fraker said. “The Department will proceed consistent with the court’s ruling.“

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.

Efforts are underway to put legal recreational marijuana on the ballot this fall. Legal Missouri 2022, the primary campaign to legalize which is backed by much of the established Missouri industry, would allow the health department to impose the current license caps on regular marijuana businesses. It would also create 144 new “microbusiness” licenses tailored to lower-income applicants, veterans and those convicted of marijuana offenses.

Under that proposal, current medical marijuana licensees would get the first chance to convert their licenses to include recreational sales; any new licenses would be chosen afterward by lottery.

Earlier versions of this story misstated Legal Missouri 2022’s proposal for license caps. It calls for caps to continue on regular business licenses while creating new licenses for disadvantaged business owners.

This story was originally published February 8, 2022 at 3:06 PM.