The first lawsuit over the state Medical Marijuana Commission›s scoring of the top five applicants for cultivation permits under the new medical marijuana law was filed Tuesday. The suit, by Naturalis Health of Little Rock, asks for an injunction against award of the permits. The suit was assigned to Pulaski County Circuit Judge Wendell Griffen. Defendants are the state Department of Finance and Administration, the Alcoholic Beverage Control Division and the marijuana commission.
It’s possible the state could raise a sovereign immunity argument against the lawsuit, given a recent state Supreme Court decision. Governor Hutchinson, however, has instructed executive agencies not to use the defense without his permission. A judge conceivably could raise the issue on his own.
Naturalis Health, which finished 38th in the scoring, says decisions were made arbitrarily and in violation of the Administrative Procedures Act. It contends there were “wide-ranging discrepancies” and “outright violations” in the applications of the top five scorers — Natural State Medicinals, Bold Team LLC, Delta Medical Cannabis, Natural State Wellness and Osage Creek Cultivation.
The suit also argues bias or conflicts of interest on the part of commissioners. Specific shortcomings included a residency requirement, tax liabilities and distance from a church or school of proposed facilities.
The suit notes that Commissioner Travis Story graded the application of a legal client, and that he and other commissioners didn’t have the requisite experience for the task. An independent committee of industry experts should have done the scoring, the suit says.
The suit lists numerous cases of corporate charters revoked for nonpayment of franchise taxes. But the DFA has already responded to a complaint on this point, saying the rule on deficiencies applies to individuals, not corporations. The suit also faulted scoring. It noted, for example, that no points were deducted on qualifications from the top scorer, Natural State Medicinals, despite the admission that two owners had paid regulatory agency fines of more than $10,000.
“The most blatant irregularity in scoring was Chairperson [Rhonda] Tillman’s use of a different scoresheet, unlike the uniform scoresheet used by the other four Commissioners. Tillman appears to have provided no numerical scores for several categories,” the suit says.
The suit also airs a complaint about the extraordinarily high score Commissioner Carlos Roman gave the top score, Natural State Medicinals. It alleges that Dr. Scott Schlesinger, who owns 5.66 percent in NSM, and Roman “have an extremely close personal and professional relationship.” Roman scored NSM’s application at a 98 out of 100, but his average score for the remaining applications was 55.55 out of 100.
The complaint recounted in detail a conflict first reported in the Arkansas Times: Commissioner Story’s past legal work for the Trulove family of Berryville, owners of Osage Creek Cultivation.
The suit objects to the commission’s plan to ratify permits at a meeting that was scheduled for Wednesday without a hearing or opportunity for public comment. Absent a review by the commission, a review by the court is appropriate, the complaint says.
The complaint was signed by Jay Bequette of Bequette and Billlingsley. The owners of Naturalis LLC are not identified, but they are believed to include Jackson T. Stephens III, grandson of the founder of the Stephens financial empire, who invested heavily in the successful campaign to get the medical marijuana amendment on the ballot. Henry Willmuth is an organizer of the Naturalis LLC.
In the days following the permit announcements, the commission and the state Ethics Commission have received complaints about scoring, the manner in which companies were incorporated, the relationships between commissioners and applicants, the lack of minority awards and an allegation of misinformation about an employee.
Retired Arkansas Court of Appeals Judge Olly Neal, Mildred Griggs of Marianna and River Valley Relief Cultivation made the complaints.