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Administrative Challenge Continues to Delay Medical Marijuana License Awards in New Jersey, as Court Denies Request to Dissolve Stay

New Jersey medical marijuana, already a multi-million-dollar industry, is primed for explosive growth. But first, the New Jersey Department of Health (DOH) must expand available licenses to grow and distribute medical marijuana. In order to fairly distribute such licenses, the DOH employs a regimented application process, offering a limited number of licenses and creating a highly competitive environment. Unfortunately for medical patients and businesses alike, the latest license round has grinded to a halt after litigation over a technical glitch during the application submission process.

2019 Requests for Applications and the Glitch

Most recently, the DOH solicited applications from July 1 to August 22, 2019, for permits to operate dispensary, cultivation, and manufacturing operations. The DOH received 196 applications for up to 24 licenses. Eight licenses are available in each of the Northern and Central regions of the state, seven are available in the Southern region, and one non-regional “at-large” license exists. Available are fifteen licenses for dispensaries, five for cultivation sites, and four for Vertically Integrated Alternative Treatment Centers (dispensing, cultivation, and manufacturing).

But, now almost a year later no licenses have been awarded because a number of applicants petitioned the courts after their applications were allegedly denied due to a technical glitch. During the submission process and electronic transmission of applications, the PDF documents supplied by approximately fifteen applicants, including both small and large operations, in support of their applications were corrupted somewhere during their electronic transport, rendering them impossible to open. As a result, the DOH denied those applications as untimely, stating that because the PDFs could not be opened, the applications were incomplete.

Stay of Application Process Granted

After exhausting their DOH appeals, the applicants took to the courts. The denied applicants argued their interests would be materially harmed if the process continued without consideration of their applications and requested a stay until the alleged glitch could be remedied.

Critically, the denied applicants argued, after submitting their applications electronically as suggested by the DOH, their applications were denied because of a technical glitch outside of their control and not because of the merits of the applications themselves. These applicants put forth expert testimony showing, at the time of submission, each of the applicant’s documents were free of viruses, malware, and not corrupted. The DOH denied responsibility for the glitch, noting the denied applicants could have submitted paper applications in addition to the electronic submission; a redundancy that six of the fifteen affected applications had completed.

In December 2019, Judges Rothstadt and Mitterhoff, Appellate Division, granted a stay of the DOH 2019 application process until the denied applicant’s claims could be heard. But, the DOH interpreted the Judges’ order to allow it to continue scoring applications that had already passed the initial review meant to ensure application completeness, reasoning that each application is scored on its independent merits and not in reference to one another.

The DOH’s interpretation was short lived. In January 2020, the Judges clarified the stay to “include all administrative activities relating to the entire administrative review process, including but not limited to, ranking of applications, scoring of applications, awarding permits and publishing results.” The Judges’ clarification once again brought the application process to a halt.

DOH Request to Dissolve Stay Rejected

In June 2020, the DOH filed a motion to dissolve the stay, arguing it was unnecessarily harming those who depend on medicinal marijuana to treat chronic conditions and irreparably harming the DOH’s charge to “keep pace with the rapidly growing demand for medical marijuana.” Applicants opposed the motion to dissolve the stay, pointing out that the DOH could simply allow the denied applicants to resubmit their applications to be scored. The DOH has yet to accept this proposal, standing firm that the denied applicants did not timely submit their applications and that their claims are meritless.

In July 2020, the court denied the DOH’s motion to dissolve the stay, continuing the freeze on the application process. Oral arguments on the matter have yet to be scheduled, but are expected to take place sometime this Fall. For now, all 2019 applicants must continue to wait for their applications to be process, with no end in sight.

COPYRIGHT © 2020, STARK & STARKNational Law Review, Volume X, Number 226


About this Author

Gene Markin Attorney Stark & Stark Law Firm

Gene Markin is a Shareholder in Stark & Stark’s Complex Commercial, Intellectual Property, and Cannabis Litigation Groups where he concentrates his practice on complex litigation matters involving copyright protection and infringement, trademark and trade dress infringement and enforcement, trade secret litigation, false advertising, domain name disputes, unfair competition, class actions, fraud and consumer fraud, shareholder and partner disputes, breach of contract, cannabis business disputes, cannabis intellectual property matters, cannabis insurance coverage...