If a recent decision of the Florida First District Court of Appeal (Florida Department of Health, Office of Medical Marijuana Use, et al. v. Florigrown, LLC, et al., No. 1D18-4471) is upheld, there likely will be significant restructuring of the medical marijuana industry in the State. The cause of this uncertainty lies in the Florida Legislature’s choice of one conjunction, “and” instead of “or”.
Florigrown reviewed Florida’s scheme for regulating the medical marijuana industry through the development of a limited number of licensed “medical marijuana treatment centers” (“MMTC”).
In 2016, Florida voters approved an amendment to the Florida Constitution legalizing medical marijuana, under certain circumstances, the so-called “Amendment 2”. This amendment defined an MMTC, in relevant part, as “an entity that acquires, cultivates, possesses, processes …, transfers, transports, sells, distributes, dispenses or administers medical marijuana ….” Art. X, §29(b)(5) Fla. Const. (emphasis added).
In 2017, the Florida Legislature enacted enabling legislation, defining an MMTC, in relevant part, as “an entity that acquires, cultivates, possesses, processes …, transfers, transports, sells, distributes, dispenses and administers medical marijuana ….” §381.986(8)(e), F.S. (emphasis added). Based on the statutory definition, the Office of Medical Marijuana Use has required MMTCs to perform all the functions necessary to grow, process, and distribute medical marijuana, thus creating a vertically integrated industry.
After its application to become an MMTC was rejected, Florigrown filed suit, seeking a declaratory judgment and permanent injunction declaring §381.986, F.S. unconstitutional. The plaintiff also requested an order requiring DOH to grant Florigrown MMTC status. The trial court entered a temporary injunction in favor of Florigrown, which the State appealed.
On July 9, 2019, the First District Court of Appeal upheld (in part) the decision of the trial court. Although there were several procedural issues, the court addressed the substantive question - the definition of an MMTC. The court found the statutory definition of an MMTC “creates a vertically integrated business model which amends the constitutional definition of MMTC by requiring [through use of the conjunction “and”, rather than “or”] an entity to undertake several of the activities described in the amendment.” Further, “the statutory language directly conflicts with the constitutional scheme.” Florigrown, slip opinion at 6. The court made clear its view: “Our ruling that the vertically integrated system conflicts with the constitutional amendment thus renders the statutory cap on the number of facilities in section 381.986(8)(a) unreasonable.” Id, at 7. Thus, in the view of this court, the vertically integrated scheme for regulating the production, processing, and distribution of medical marijuana set forth in section 381.986, F.S., is unconstitutional.
If Florigrown is upheld (at this time it is not clear what action the State will take), Florida’s scheme for regulating the medical marijuana industry will need to undergo significant changes. Without vertical integration, each step in the process- growers, processers, packagers, etc., probably will need to be separately licensed or permitted. Initially, the current MMTCs are likely to have a competitive advantage. However, there will be opportunities for parties wanting to participate in various aspects of the industry. For example, if operating retail outlets is no longer limited to the MMTCs, Publix, or Walgreens may seek to offer medical marijuana to their eligible customers.
Assuming businesses in Florida’s medical marijuana industry are “just like” every other business is a serious mistake. Like everything else in Florida’s medical marijuana industry, the laws will keep changing, at least for the foreseeable future. Parties who want to participate in this industry need to become educated. They also need to work with knowledgeable attorneys and consultants, in order to obtain guidance and advice on how to legally accomplish their goals in this industry.
