Litigation on Commonwealth’s Medical Marijuana Program Focuses on Pennsylvania Department of Health’s Evaluation of Medical Marijuana Organization Applications and its Administrative Appeal Process

Earlier this year unsuccessful grower/processor applicant Elemental Health Group, LLC (“Elemental Health”) filed an original jurisdiction Petition for Review with Commonwealth Court seeking the award of a grower/processor permit in Region 4 (the Northcentral region of the state). Terrapin Investment Fund 1, LLC (“Terrapin”) and GTI Pennsylvania, LLC were awarded grower/processor permits in that region, with Elemental Health’s application receiving the third highest score.  Elemental Health asserts that, due to an error in scoring Terrapin’s application, Elemental Health is one of the top two scorers in the region (and should be awarded a permit), regardless of whether the Department revokes Terrapin’s grower/processor permit or allows it to remain as a third permit holder.  Similar to lawsuits filed by other unsuccessful medical marijuana organization applicants, Elemental Health cites the Pennsylvania Department of Health’s failure to provide administrative due process.

On August 23, 2017, the Department issued a Delegation Order that instructed hearing officers on the scope of their authority when reviewing appeals of permit denials.  Pursuant to the Order, hearing officers are prohibited from recommending that the Department issue a permit or adjudicating a constitutional issue, but may order the Office of Medical Marijuana to re-score a particular application.  The hearing officer assigned to Elemental Health’s appeal interpreted the Delegation Order as restricting her to considering only evidence related to Elemental Health’s application, despite the comparative nature of the application process.  Elemental Health asserts that these restrictions and the hearing officer’s interpretation of same, resulted in denial of its administrative due process rights.  Elemental Health explains in its complaint that the Department and the Hearing Officer assigned to its administrative appeal foreclosed any opportunity to remedy the incorrect scoring of a permittee’s application.

Specifically, Elemental Health claims that the competing application filed by Terrapin improperly responded affirmatively to a Yes/No application question on whether Terrapin’s planned grower/processor facility would be located in a “financially distressed municipality.”  While not explicitly stated in the application, the term “financially distressed municipality” had a “live” link to a list of Act 47 financially distressed municipalities.  Terrapin’s proposed facility location is in Pine Creek Township, which is not an Act 47 financially distressed municipality.  Terrapin’s erroneous response to the above-referenced application question purportedly resulted in Terrapin’s application being awarded an additional, unwarranted 30 points.  Presumably, the designation of the municipality was not verified as part of the Department’s application review process.  Elemental Health claims that if Terrapin had not been awarded those additional points, it would have been awarded a permit instead of Terrapin.

As unsuccessful applicants that have filed administrative appeals run in to similar discovery barriers and procedural impediments, we may see similar complaints filed in Commonwealth Court.

This Eckert Seamans Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice.  If you have any questions, please contact Dan Clearfield at (717) 237-7173 – dclearfield@eckertseamans.com – or Sarah Stoner at (717) 237-6026 – sstoner@eckertseamans.com.

 

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Sarah C. Stoner

Associate - Harrisburg