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AL Regulators Suspend Second Attempt at Medical Licensing Per Court Order
Published on September 14, 2023

Regulators in Alabama are hoping the third time’s the charm after two botched attempts to roll out the first round of medical cannabis licenses in the state – they just have to convince the court they can get it right this time.

In a brief, seven-minute hearing, the Alabama Medical Cannabis Commission voted Aug. 31 to suspend all licensing activities until it can resolve its ongoing legal battle with begrudged multi-state operator Verano.

An Alabama Circuit judge allowed a temporary restraining order on Aug. 17, barring the commission from issuing any licenses. The commission was complying with this order when it voted two weeks later to suspend licensing activities. 

"Today's meeting is so that the commission can consider a stay pursuant to the Alabama Medical Cannabis Commission's rules and regulations," said commission chair Rex Vaughn as he opened the meeting. "This will also allow us to enter into discussion with litigating applicant's counsel. The judge has asked us to hold another meeting on Sept. 19 to award licenses de novo."

The suspension passed unanimously.

Alabama Med Cannabis Commission meeting-083123-1

The Alabama Medical Cannabis Commission met Aug. 31, 2023, to suspend the second round of licensing.

Commission to negotiate with Verano

Before the AMCC can take another swing at licensing, it is going to have to reach a compromise with Verano, which sued the state after its second attempt at licensing. The Chicago-based MSO was among the first set of awardees. But after the AMCC rescinded its first awards over concerns about application scoring, Verano was the sole vertically integrated company left out when the AMCC re-awarded licenses.

Verano then sued the state, claiming the commission overstepped its authority when it clawed back Verano's original license.

“Regardless of the Commission’s intent when it decided to issue the stay and subsequently ‘re-award’ the licenses, its decision to ‘void’ previously awarded licenses without following the Legislature’s — and its own — clearly established rules and regulations, exceeds and violates the statutory authority it has been granted, violates its own rule, and is clearly erroneous,” said the 14-page complaint filed in the Circuit Court of Montgomery County. “As such, Verano Alabama’s awarded license remains valid.”

Alabama's legislature legalized medical cannabis in 2021, but the state still needed to finalize regulations and establish the Alabama Medical Cannabis Commission. The commission was finally awarded its first round of licenses on June 12, 2023.

These included five vertically integrated facility licenses, four cultivator licenses, four processors, four dispensaries, three transporter licenses and one testing lab.

Four days later, the commission announced that those awards were suspended due to the “potential” for inconsistent scoring of applications. At the time, the commission said that it would recalculate the scores before re-announcing the license awardees. 

Between the first and second attempt at issuing license, AMCC chair Dr. Steven Stokes resigned from the commission on Aug. 3. His resignation came after a lawsuit was filed in July alleging that he was ineligible to be appointed to the commission because he also serves as a trustee for the University of South Alabama. 

The University of South Alabama also happened to be selected to score the first round of applicants, though Stokes told the Alabama Political Reporter that the commission also offered the job to the University of Alabama at Birmingham and the Auburn University School of Pharmacy, but both declined the offer. 

After re-tabulating the application scores, the AMCC re-approved four of the five companies that had been approved the first time for vertically integrated licenses, with INSA replacing Verano for the fifth. The commission also approved three more cultivators in addition to the first four, and replaced Alabama Secure Transport's transportation license with one for XLCR, while also re-approving two other transport companies.

No one from Alabama Secure Transport responded to a voicemail request for comment.

The commission published the full scores on its website on Aug. 11, one day after the second set of awards were issued. The release further complicated the concerns over the process, because it appears that the scores alone were not used to determine who received a cultivator or vertically integrated license. For example, Verano is ranked first for its score but was left out of the second round.

As a result, at least one other applicant is suing over being left off the list, while another is seeking a court order to make the AMCC scrap its current regulations and rewrite them all over again.

Meanwhile, applicant Medalla LLC sued the state on Sept. 12 for defamation, based on the state's scoring incorrectly noting that one of the company's stakeholders had a criminal record. 

The Alabama Cannabis Coalition's president and founder, H. Marty Schelper, called on Gov. Kay Ivey to order a special legislative session to amend SB46, which established legal medical cannabis in Alabama. Without a special session, the legislature will have to wait until February 2024 for the next formal session to open.

"There is no doubt there will be more lawsuits and this could all end up in the Alabama Supreme Court or ultimately the U.S. Supreme Court. All of this could simply be resolved by admitting a mistake was made and amending SB46," said Schelper. "It really is that simple."

The governor’s office did not respond to a request for comment.

-- Zack Huffman, CRB Monitor News

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