Sue a state for failing to obtain a cannabis license

The battles over cannabis licenses and various statistics in the US are nothing new, especially to those very familiar with what is happening in the cannabis industry. With legalization and decriminalization being the central issue surrounding cannabis in many climates around the world, it is not surprising that this is a constant cause for concern. The current scenario is that many private parastatal companies are taking the necessary initiative to ride this platform in order to get what they need from the government regarding the legality of cannabis litigation. One example that we will be paying particular attention to is the case of a company based in Utah and the state.

The waters surrounding cannabis licenses and legality are not as clear as the boundaries between oceans and seas. This is because there is a lack of legal uniformity, as the countries have to work out their laws individually. This has then made room for different types of problems depending on the specifics of those states. Such is the case with the lawsuit recently filed against the state of Utah by a Utah-based company. The lawsuit was filed by this company on the grounds that foreign operators were receiving an unfair advantage in the state’s licensing process.

A deep dive into the lawsuit

The plaintiff in this lawsuit is JLPR LLC, which has filed a lawsuit in the U.S. District Court against officials from the Utah Department of Agriculture and Food (UDAF). These civil servants are alleged to have played an important role in unfairly informing some operators of changes in policies and decisions. These officials were also charged with teaching some applicants how to navigate. These holdings are believed to have affected the granting of cultivation licenses under the state’s medical marijuana program.

Voters in the state approved the medical marijuana program with Proposition 2 approval in November 2018. Between 2019 and 2020, four foreign operators were awarded and cannabis dispensaries were licensed. The lawsuit believes the selection was biased because it did not favor JLPR and hampered plans to launch the state’s medical marijuana program.

Suggested positions

The company’s claim and position was the court decision to immediately facilitate the granting of a cultivation license or to put JPLR at the top of the list for the next license to be granted. The company is also suing for monetary damages to offset the company’s loss in the form of profits, legal fees, and consulting services. The company’s attorneys believed that companies that were politically affiliated would be selected over those that were qualified and able to successfully operate in the emerging Utah cannabis market. In doing so, the officers violated due process and the same intellectual property rights that apply to JLPR.

The lawyers wholeheartedly backed the lawsuit by bringing to the table former UDAF officials related to the medical marijuana program, state purchasing officials, and companies seeking cultivation licenses. These appeared as defendants in the lawsuit to show that the corruption and problems in the agency were a major obstacle preventing JLPR from enjoying due process and equal rights.

A key point that cannot be faulted is a major change in regulatory policy that applies to companies applying for a cultivation license. The initial sand was that all breeders had to be based in Utah under the state’s medical marijuana program. Surprisingly, this regulation was changed after the deadline for submitting cultivation permit applications. The surprising reality was the fact that some overseas companies filed applications before this deadline, which could only mean that they were made aware of the expected change in regulations.

The lawsuit also addresses the fact that companies had limited time before applications were filed and assessments were made. The aspect of malpractice alleged in the lawsuit in this regard is that some of the application evaluators had a conflict of interest. Others were also found to have unapproved and improper communications with some applicants.

Impact of the Account of the Utah State Auditor

An earlier investigation by Utah state auditor John Dougall initially identified deficiencies in the agency’s selection process due to conflicts of interest and improper communication with applicants. That investigation was cited in the lawsuit as Dougall’s recommendation was that UDAF change the application process and start over. The procedure was checked by the UDAF in accordance with the recommendation, but the eight licenses issued were confirmed.

The conflict of interest issue was raised in the case of Scott Ericson, a former UDAF Deputy Commissioner. He left his position with the agency before the application deadline to work as a consultant with Standard Wellness, an Ohio-based company. The lawsuit sought to prove that Ericson played a large role in Standard Wellness granting one of the licenses. However, Ericson denied any illegal involvement on his part in order to get Standard Wellness to get the license. It is therefore safe to say that there are a number of things to consider in order to gain the full scope of this lawsuit and its implications for the UDAF.

Bottom line

The different policies that are supposedly being played at the UDAF level are a very bad recipe for the state of Utah. This lawsuit, for example, has put some of these issues in the spotlight and this is certainly not the last time we have heard about them. Until then, the tensions surrounding the state and the issuing of licenses to companies are likely to raise some eyebrows. The central point, however, is that every state must harmonize the bodies involved in such activities and make them free from such problems.

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