Supreme Court of Florida upholds Vertical Integration requirement for Medical Marijuana and affirms caps on licensees

Supreme Court of Florida: The 7-Judges Bench of Candy, CJ. Polston, Labarga, Muniz Couriel, Grosshans and Lawson, JJ., upheld the Vertical Integration Requirement of Medical Marijuana Statute and also confirmed caps on licensees for MMTC.

The instant case was initiated at the Trial Court wherein Florigrown, LLC, and Voice of Freedom, Inc. (collectively, Florigrown) had filed a lawsuit against the Florida Department of Health (Department) and other state actors advancing several constitutional challenges to section 381.986(8), Florida Statutes (2017), contending the same to be inconsistent with the recent medical marijuana amendment to the Florida Constitution, Article X, section 29 (the Amendment) as it mandated that MMTCs (Medical Marijuana Treatment Center) use a vertically integrated supply chain, and the other places statutory caps on the number of MMTC licenses available to authorize entities to participate in the medical marijuana industry. Florigrown contended that provisions of section 381.986(8) as special laws granting privileges to private corporations were contrary to article III, Section 11(a)(12) of the Florida Constitution. The trial court agreed with Florigrown as to each argument and entered a temporary injunction.

Later on, while partially upholding the injunction, the First District certified the question to be of great public importance it framed the following question: whether the statutory requirements of vertical integration and caps on the number of medical marijuana treatment center licenses as set forth in section 381.986(8), Florida statutes, are in direct conflict with article x, section 29, of the Florida Constitution?

Analysis by the Court

Relying on the decision of Provident Mgmt. Corp. v. City of Treasure Island, 796 So. 2d 481, 485 (Fla. 2001), the Supreme Court opined that a temporary injunction is extraordinary relief that should be granted only when the party seeking the injunction has established four elements: (1) a substantial likelihood of success on the merits, (2) the unavailability of an adequate remedy at law, (3) irreparable harm absent entry of an injunction, and (4) that the injunction would serve the public interest.

Florigrowns Constitutional Claims

There were three claims at issue:

  1. that section 381.986(8)’s vertical-integration requirement conflicts with the Amendment;
  2. that section 381.986(8)’s caps on the number of MMTC licenses available conflicts with the Amendment; and
  3. that three aspects of section 381.986(8)(a) violate Florida’s constitutional prohibition against the use of a special law to grant a privilege to a private corporation.

Vertical Integration

Art. X, S. 29(b)(5) of the Constitution Amendment defined “MMTC” as an entity that acquires, cultivates, possesses, processes . . . , transfers, transports, sells, distributes, dispenses, or administers marijuana, products containing marijuana, related supplies, or educational materials to qualifying patients or their caregivers and is registered by the Department. In pertinent part, S 381.986(8)(e) provided as follows: A licensed medical marijuana treatment center shall cultivate, process, transport, and dispense marijuana for medical use.

The Court concluded that Article X, section 29(b)(5) of the Constitution provide a two-part definition of MMTC and that the definition in itself gave no entity the right to be either registered or licensed. Thus, an entity is an MMTC if it performs any one of the listed functions and is registered by the Department, the Bench emphasized that Section 381.986(8)(e) did not say otherwise neither it undertook to define “MMTC” rather it merely set forth requirements that an MMTC must meet in order to be licensed.

Similarly, the Amendment did not speak of “licensing” MMTCs but instead directed the “registering” of MMTCs. Noticing that the constitutional definition of “MMTC” did not provide for unilateral registration “with” the Department; it rather require an entity to be registered “by” the Department according to regulations designed to ensure safety and security before it can be considered an MMTC; the Court opined that because the Amendment did not entitle an entity to either registration or licensure simply because it intended to perform one of the listed functions, the Legislature’s enactment of standards that include vertical integration was not inconsistent with the Amendment.

Accordingly, the Court held that the vertical-integration requirement of section 381.986(8)(e) was within the Legislature’s specific authority recognized in article X, section 29(e) and its plenary lawmaking authority set out in article III, section 1 of the Constitution.

Statutory Caps on the Number of Licenses

Florigrown argued that Statutory Caps on number of licenses set out in section 381.986(8)(a) violated the Amendment by placing an unreasonable restriction on the medical marijuana industry and conflicting with the Amendment’s purpose of ensuring the availability and safe use of medical marijuana by qualifying patients. While rejecting the said contention, the Court stated that there was no competent, substantial evidence produced by Florigrown to prove that the statute had made medical marijuana unavailable and that the Amendment did not preclude a limit on the number of MMTCs that could be licensed.

Opining that though the Statute limited the number of dispensing facilities providing a limit of twenty-five per MMTC and a limit within that twenty-five of how many dispensing facilities each MMTC could operate in each of five regions of the state, however, it also provided for an expanding number of facilities in increments of five additional facilities per MMTC each time the patient population reached an additional 100,000 patients. Further, as planned from the outset by the terms of the statute, the limitation on the number of dispensing facilities MMTCs were permitted to operate expired on 01-04-2020 and currently there is no limit.

Special-Law Challenge

Florigrown’s last claim on the merits was that subparagraph 1, 2.a, 3 of section 381.986(8)(a) were unconstitutional under article III, section 11(a)(12) of the Constitution because they were special laws granting privileges to private corporations and because they operate on closed classes. The Court opined that for the alleged violation a statute must have two features:

(1) it must be either a special law or a general law of local application, and

(2) it must grant a privilege to a private corporation.

The Bench stated that the challenged provisions were parts of a general law implementing a statewide regulatory scheme and, accordingly, did not violate Constitutional provisions. The Court remarked,

“A law that addresses state interests and operates to protect those interests using valid classifications based upon proper differences which are inherent in or peculiar to the class[es] is a general law. Even if the law is limited in direct application, it is still a general law as long as the limitation on its application bears a reasonable relationship to its statewide purpose.”

Hence, statute at issue created an open class of entities that may be eligible for MMTC licensure and, within that open class, created sub-classifications based upon proper distinctions and differences that inhere in or are peculiar or appropriate to the class,, making it a general law.

Conclusion

Consequently, it was held that Florigrown did not have a substantial likelihood of success on the merits of its constitutional challenges to section 381.986(8). Accordingly, Florigrown’s request for a temporary injunction was denied and the First District’s decision was quashed. The matter was remanded to the First District with instructions to further remand to the Trial Court for vacation of the temporary injunction.

Dissenting View by Lawson, J.,

Although, Lawson, J., had a concurring opinion on the rest of the matter he expressed his dissent on the issue of special laws granting privileges to private corporations in violation of Article III, section 11(a)(12) of the Florida Constitution. The judge concluded that Florigrown has demonstrated a substantial likelihood of success on the merits of its challenge to section 381.986(8)(a)1 as the provisions in question had granted certain private corporations (described so precisely that they might as well be named in the statute) the right to MMTC licensure without entering the competition that others must enter for a statutorily capped number of licenses. The Judge opined that because the law granted this clear benefit to those private corporations, it violated the Constitution and thus, it could not be construed as a general law. Rejecting the argument that the class was not closed because any entity can sell its license once the license is obtained, he opined that the idea was that anyone can effectively join the classes established by section 381.986(8)(a)1 and 2.a. by purchasing a license from one of the entities that obtained their licenses under those provisions which did not show that the classes created were open, but rather underscored that the privilege those classes had been granted was a valuable commodity.[Florida Department of Health v. Florigrown, LLC, No. SC19-1464, decided on 27-05-2021]


Kamini Sharma, Editorial Assistant has reported this brief.

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