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Arkansas Department of Finance and Administration v. Naturalis Health, LLC

Supreme Court of Arkansas

June 21, 2018

ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION; ARKANSAS ALCOHOLIC BEVERAGE CONTROL DIVISION; AND ARKANSAS MEDICAL MARIJUANA COMMISSION APPELLANTS
v.
NATURALIS HEALTH, LLC APPELLEE NATURAL STATE WELLNESS ENTERPRISES, LLC; DELTA MEDICAL CANNABIS COMPANY, LLC; BOLD TEAM, LLC; AND OSAGE CREEK CULTIVATION, LLC APPELLANTS/INTERVENORS ARKANSAS MEDICINAL SOURCE, LLC; CLEAR CREEK MEDICAL, INC.; NATURAL STATE AGRONOMICS, INC.; RIVER VALLEY PRODUCTION, LLC, D/B/A RIVER VALLEY RELIEF CULTIVATION; ACANZA HEALTH GROUP, LLC; CARPENTER FARMS MEDICAL GROUP, LLC; MILDRED GRIGGS AND DELTA CANNABINOID CORPORATION APPELLEES/INTERVENORS

          APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT [NO. 60CV-18-1559] HONORABLE WENDELL L. GRIFFEN, JUDGE

          Leslie Rutledge, Att'y Gen., by: Lee P. Rudofsky, Solicitor Gen., Monty V. Baugh, Deputy Att'y Gen., and Jennifer L. Merritt, Sr. Ass't Att'y Gen., for appellants/cross-appellees.

          McDaniel, Richardson & Calhoun, PLLC, by: Scott M. Richardson, for appellant-intervenor/cross-appellee Natural State Wellness Enterprises, LLC.

          Fuqua Campbell, P.A., by: Eric R. Gribble, Phil Campbell, Annie Depper, and Haley Heath Burks, for appellant-intervenor/cross-appellee Delta Medical Cannabis Company, LLC.

          Murphy, Thompson, Arnold, Skinner & Castleberry, by: Kenneth P. "Casey" Castleberry, for appellant-intervenor/cross-appellee Bold Team, LLC.

          Hardin, Jesson & Terry, PLC, by: Rex M. Terry; and Everett Law Firm, by: John C. Everett, for appellant-intervenor/cross-appellee Osage Creek Cultivation, LLC.

          Bequette & Billingsley, P.A., by: Jay Bequette, Keith I. Billingsley, and W. Cody Kees, for appellee/cross-appellant Naturalis Health, LLC.

          Dover Dixon Horne, PLLC, by: Randall L. Bynum and Roger "Todd" Wooten, for appellee-intervenor Acanza Health Group, LLC.

          Hale & Young PLLC, by: Virgil W. Young and Paul A. Young; and William L. Owen, P.A., by: William L. Owen; and Robert S. Tschiemer, for appellee-intervenor/cross-appellant Natural State Agronomics, Inc.

          RHONDA K. WOOD, Associate Justice

          Appellants, which include Arkansas Department of Finance and Administration (DFA), Arkansas Alcoholic Beverage Control Division (ABC), and Arkansas Medical Marijuana Commission (MMC), [1] appeal the circuit court's preliminary injunction and declaratory judgment. At issue is the MMC's process that resulted in a decision awarding the top five scoring applicants, including Natural State Wellness Enterprises, Delta Medical Cannabis Company, Bold Team, LLC, and Osage Creek Cultivation, medical-marijuana-cultivation-facility licenses. Appellee[2] Naturalis Health, LLC (Naturalis), is one of the applicants that did not receive a score sufficient to obtain one of the initial five licenses. We reverse and dismiss the appeal because the circuit court lacked subject-matter jurisdiction.

         I. Factual and Procedural Background

         In 2016, the people of Arkansas amended the Arkansas Constitution to legalize medical marijuana. Ark. Const. amend. 98. Amendment 98 created the MMC[3] "to determine the qualifications for receiving a license to operate a dispensary or a license to operate a cultivation facility and the awarding of licenses." Id. § 19(a)(1). Pursuant to this authority, the MMC promulgated "Rules and Regulations Governing the Application For, Issuance, and Renewal of Licenses for Medical Marijuana Cultivation Facilities and Dispensaries in Arkansas" (MMC Rules).

         The MMC reviewed and ranked the applications[4] for cultivation-facility licenses pursuant to the criteria for merit selection contained in the MMC Rules. In February 2018, the MMC named the top five applicants to whom it would award licenses after each applicant paid a $100, 000 licensing fee and posted a $500, 000 performance bond.[5]Naturalis ranked thirty-eighth out of eighty-two applicants.

         On March 13, 2018, Naturalis filed a "Verified Complaint to Appeal Agency Decision, for Temporary Restraining Order, Preliminary and Permanent Injunction and Declaratory Judgment" in the circuit court against DFA, ABC, and the MMC. On March 14, 2018, the circuit court entered a temporary restraining order. On March 16, 2018, the circuit court conducted an evidentiary hearing on the preliminary injunction. On March 21, 2018, the circuit court entered an order granting the preliminary injunction and a declaratory judgment. Naturalis had asserted that the MMC carried out the application process in a flawed, biased, and arbitrary and capricious manner, and that the commissioners failed to uniformly apply their rules when scoring the applications. The circuit court went further and concluded that the MMC's licensing process and decisions violated Amendment 98 to the Arkansas Constitution, were ultra vires, ...


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