It’s Time to Move On: Litigation Regarding Alabama Medical Cannabis Commission Needs to Come to a Head

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Maybe it was inevitable. Anyone who has seen another state award competitive licenses for a limited number of cannabis operators knew well that Alabama’s process would result in litigation. That was not an indictment of Alabama or those appointed to select licensees; rather, it was the natural next step of a hard-fought contest in which applicants expended substantial time and money to prevail. But recent events in Alabama’s medical cannabis selection process are unique.

There is a famous scene in the film Whiplash where the wonderful J.K. Simmons (who won a well-deserved Oscar for his performance) encounters an up-and-coming drummer played marvelously by the fabulous Miles Teller. In the scene, Simmons berates and assaults Teller for failing to play the drums at Simmons’ preferred tempo (sometimes “rushing” the tempo and sometimes “dragging”), eventually bringing Teller to tears. It’s heartbreaking and terrifying, one of those scenes you don’t want to watch but can’t avert your eyes.

I have been observing and participating in some form in the Alabama Medical Cannabis program since its inception more than four years ago when it was a little piece of legislation that very few believed had any chance of seeing the light of day, much less the signature of an Alabama governor. During that time, there have been many fits and starts and ups and downs. But my experience over the past few weeks is the first time I’ve felt a little like the Teller character, wondering if the program was rushing or dragging –  and feeling heartbreak, anxiety, and confusion. So where do we stand now? How did we get here? And where do we go from here?

How Did We Get Here?

To determine where we are, we need to know where we came from. Ah, the salad days of 2021. The sky was the limit. Patients were going to finally access medicine they had sought for years. Operators saw opportunities to help (and make a dime at the same time). Lawyers, including the author, were in high demand, and the conversations were cutting edge and exciting. Heady times, indeed.

And for a while, things seemed on track. The newly established Alabama Medical Cannabis Commission (AMCC) was appointed on time and meetings were scheduled. Almost immediately, though, it became clear that this road would not be without its bumps. First, commissioners began talking about moving up the timeline for awarding licenses. Although the statute authorizing a medical program called for applications to be accepted in September 2022, the AMCC began discussing the possibility of accepting applications as early as the first quarter of 2022. While this was exciting to many would-be patients and operators, many seasoned cannabis industry operators were concerned that the AMCC’s potential revised timeline was overly optimistic.

By starting too soon, the commission risked rolling out a half-baked program that did not meet the goals of providing safe, available, and effective medicine to Alabamians and increased the likelihood of litigation based on mistakes that were bound to happen if the process was rushed.

In the end, the commission decided to stick with the September 2022 date in the statute. Sort of. Would-be applicants were required to request applications in September and October, and applications were due on December 30, 2022. Over the course of the next six months, applicants worked with the AMCC to get applicantions ready to be scored so that licenses could be awarded.

The Initial Award of Medical Cannabis Licenses

For would-be licensees, June 12, 2023, was judgment day – the day the commission would award licenses to 21 applicants. When the announcement was made, there were understandably those who were satisfied and those who were dissatisfied. Many, in fact most, of the wealthiest and savviest Alabamians who had dedicated a great deal of time, resources, and effort to obtaining a license were not awarded licenses. Was that a feature of the process or a flaw? On the one hand, it is easy to see value in awarding licenses to capable operators who may not have the luxury of tens of millions of dollars in personal assets to put towards a medical cannabis operation. On the other hand, those deeper pockets arguably can afford the type of expertise it takes to operate a high-level facility and can also afford to withstand what is almost certainly to be a multi-year loss in profits as capital expenditures are incurred and the patient base grows.

Regardless of how you feel about the initial award of licenses on June 12, that was largely mooted when, just four days later, the commission announced that it was pausing the program while it examined certain “inconsistencies” in the results. No additional explanation was provided at that time, including what the apparent problem with the process was or how it would be remedied. It was later revealed that there had been an issue with the blind scoring process conducted by graders engaged by the University of South Alabama.

Is There a Lawyer in the House?

The next step, of course, was legal action. Lots of legal action. The initial lawsuits alleged that the commission neglected its duty to administer licenses in accordance with the statutory deadline and that the commission may have lacked the authority to halt the process. So, a temporary restraining order was entered so that the AMCC could address the issues and hold a subsequent meeting to award licenses. At the time, the court expressed its intention to allow the AMCC to conduct its licensing process as it saw fit pursuant to Alabama law.

The Second Award of Medical Cannabis Licenses

On August 10, the AMCC held another meeting. After a brief public session, the AMCC retired to executive session (outside of public view) to hear a presentation from representatives of the University of South Alabama and to discuss the “the general reputation and character, physical condition, professional competence, or mental health of individuals” associated with “certain applicants,” language which flows from the Executive Session section of Alabama’s Open Meetings Act. While it is not public record at this time what was actually discussed in executive session, we do know that commissioners were each permitted to draft a list of “nominations” of applicants the commissioner believed should be awarded a license. When the commissioners returned to public session – hours after retiring to executive session – the commissioners submitted the nominations to AMCC staff. Once the staff determined the number of nominations received for each applicant, the commissioners held an up or down vote on each applicant, in descending order of the number of nominations received, until the statutory cap had been reached.

The results were largely the same as the June 12 awards, but they differed in a couple of ways. First, three additional cultivation licenses were awarded and one of the secure transportation licenses that received an award in June was not awarded a license in August. Second, there was a significant change in the integrated facility category: Verano Alabama, which scored highest in the University of South Alabama grading in both June and August, was removed from the list of awardees, replaced by INSA Alabama, which finished seventh in the August scoring but was nevertheless awarded an integrated license.

Lawyer, Anyone?

Care to guess what happened next? Yep, lawsuits. To spare you from what I have lived through for the past six months, I’ll summarize the lawsuits in the following buckets:

  • Many applicants argued that the AMCC violated the Open Meetings Act when it retired to executive session and engaged, according to the challengers, in improper deliberations and a secret ballot in violation of Alabama law. The logic of the balloting is fairly straightforward. Challengers point out that (1) there must have been deliberations about the applicants in order to lead to the changes in the scoring, particularly in the integrated facility category, and (2) the “nominating” process essentially ensured that the nominations made in executive session would dictate the award of licenses because those receiving the most nominations were essentially ensured of receiving the most votes and the voting stopped before other applicants were considered. The AMCC denies that deliberations occurred and points to the fact that commissioners could have changed their nominations at any point, including before submitting the nominations to AMCC staff in public session.
  • Applicants have challenged the process by which rules, regulations, and decisions made by the AMCC violated the Alabama Administrative Procedures Act. These claims go to the heart of the entire licensing process and, if successful according to challengers, call for the process to essentially begin again. Several other applicants have raised challenges to the manner in which applications were scored and whether the AMCC requirement that dissatisfied applicants pay the entire license fee (ranging from $30,000 to $50,000) in order to seek an administrative appeal of the AMCC’s decision.
  • Verano Alabama has argued that the AMCC lacked the authority to stay its June 12 awarding of licenses and that it should be awarded a license. In prior hearings the court has expressed skepticism about this argument but it remains a live issue.

As these lawsuits were filed, the court held a number of hearings. At each opportunity, the court expressed its strong preference that the AMCC work with challengers to find a path forward that would allow for the awarding and issuance of licenses.

So, What Now?

In my opinion, it’s time for the court to take a more active role in the process. I think the court’s initial inclination to allow the AMCC to conduct its statutory duties without judicial micromanagement was the right call at the time and in line with separation of powers. Circumstances, however, may now dictate a different course of action. The myriad lawsuits – including some potential procedural missteps by the AMCC – have essentially made it impossible to move forward. The court has given the parties several opportunities to resolve the Open Meetings Act issue without judicial intervention so that a meeting can be held in the relatively near future during which licenses can be awarded, but to no avail.

Of course, the parties aren’t able to agree on a framework. After all, the AMCC wants to move forward with an award and issuance of licenses in short order, and there are a number of litigants who understand that they have virtually no chance of being awarded licenses if the process moves forward using the existing scoring results. Why would someone volunteer for a process that essentially guarantees failure? But that is not to criticize the AMCC, who believe the scoring was sound and hope to soon be able to do what they believe they were directed by the legislature to do.

So here we are. If the parties do not agree on a framework (spoiler alert: they won’t), the court will have to intervene. At that point, it appears the court has three options: (1) rule that the August 10 meeting violated the Open Meetings Act and that there is no remedy other than starting the scoring process anew; (2) rule that there was no violation of the Open Meetings Act during the August 10 meeting; or (3) rule that that there was a violation of the Open Meetings Act during the August 10 meeting but that the AMCC can remedy the violation by conducting a subsequent meeting in a specific, court-ordered fashion.

But that’s not all. As mentioned above, a number of parties have raised legal challenges to the AMCC’s procedures that are entirely unrelated to the Open Meetings Act. The court needs to address those issues as well, and once again it will not be able to rely on the accommodation of applicants that were so dissatisfied with the process that they filed lawsuits with millions (maybe even tens or hundreds of millions) of dollars at stake. These are not easy questions, but they will require the court to make a critical decision.  This is in my opinion the most critical issue out there right now: Will the court allow for licenses to be awarded and issued while litigation is allowed to continue on a concurrent path or will the court determine that licenses may not be awarded and/or issued until the litigation concludes?

If the court takes the former course, licenses can be issued to operators in Alabama in relatively short order. On the other hand, it could find itself in a difficult position if it determines that a challenger to the litigation prevails. After all, there is a statutory cap on the number of licenses. Can the court issue another license or would that be up to the legislature? And is there a chance that an applicant could have been awarded a license and then spent hundreds of thousands (if not millions) of dollars developing and possibly even operating a cannabis business only to have the court take the license away to give it to a litigant? I doubt it, but I assure you it would be over the strongest of conceivable challenges by the prior licensee.

If, however, the court takes the latter course, will there ever be an end to the litigation such that licenses can be issued? Applicants who were not awarded licenses will have every incentive to extend the process indefinitely, perhaps hoping for some legislative fix that awards them relief they cannot obtain through the judicial system.

What a mess.

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Just yesterday, the Alabama Medical Cannabis Association issued a press release indicating that the parties had engaged in a full day of discussions but were unable to agree on a framework for moving forward. That is as disappointing as it is predictable.

The next AMCC meeting is scheduled for September 19, and the AMCC has previously indicated that it intends to yet again void previous awards and yet again award licenses. For now, I’m adding that meeting to my schedule in pencil.

Conclusion (for Now)

One of my all-time favorite films – and I stress the word “film” – is The Shawshank Redemption. In it, the sublime Morgan Freeman, whose character has spent the majority of his life in Shawshank prison, warns a similarly imprisoned character portrayed by Tim Robbins that “[h]ope is a dangerous thing.” Later, in one of the great closing scenes in cinema, a now-free Robbins responds: “Hope is a good thing, maybe the best of things, and no good thing ever dies.”

With some reservation, I’ll side with Robbins’s character and hope the commission – likely with the help of the court – finds a path towards a fair resolution to this situation. The future of medical cannabis in Alabama depends on it.