On July 2, 2024, a Montgomery Circuit Judge agreed to grant a motion for a restraining order brought by the cannabis company Alabama Always against the Alabama Medical Cannabis Commission (“AMCC”), preventing it from issuing integrated cannabis business licenses to applicants.
It has been three years since the Alabama Legislature passed the Darren Wesley 'Ato' Hall Compassion Act (“Compassion Act”), that legalized medicinal cannabis. The implementation of regulations under the Act continues to be stalled by litigation on behalf of unsuccessful medicinal cannabis integrated-facility and dispensary license applicants who claim that the AMCC’s licensing process, which began in 2022, has been untransparent and arbitrary as to who receives a dispensary license. While licenses have already been issued for cultivators, processors, secure transporters, and a state testing lab, not a single license has been issued for prospective dispensaries or integrated businesses (i.e., “seed-to-sale” businesses whose operations encompass everything from the cultivation to the dispensation of cannabis products). This has left advocates and would-be patients in Alabama frustrated and without the access to medicinal cannabis they thought they would receive earlier, as Alabama physicians remain unable to recommend cannabis to their patients until licensed dispensaries are up and running.
The AMCC initially awarded medicinal cannabis licenses to five integrated businesses in June of last year, but those licenses were not issued after an internal investigation revealed inconsistencies in how the applications were scored. Two months later, the AMCC sought to issues licenses again but was prevented from doing so after Alabama Always, a failed medicinal cannabis license applicant, sued AMCC and argued the scoring system it used to assess applications was unfair and unduly relied on third-party evaluations. Alabama Always was soon followed by a number of other unsuccessful applicants who also sued the AMCC and took issue with the transparency of the process.
In November of last year, the parties underwent court-ordered mediation. The resolution was that AMCC agreed to no longer consider the scores provided by the third-party evaluators and the applicants agreed to drop their lawsuits against the AMCC. The license applicants were subsequently given the opportunity to restart the application process and make new submissions. This mediated settlement proved short-lived, as Alabama Always then brought further claims against the AMCC in January of this year after its third attempt to issue licenses for integrated businesses and dispensaries. After these claims were discovered to have jurisdictional defects, Alabama Always moved to dismiss them without prejudice and subsequently filed revised petitions for judicial review.[1]
As pointed out by the Judge hearing last week’s motion brought by Alabama Always, the reason this litigation has effectively stalled the licensing process is that the Compassion Act caps the number of integrated-facility licenses that can be issued at 5 (which has turned out to be disproportionate to the demand, as 37 applicants threw their hats into the ring). This means that failed applicants who were not awarded licenses had to challenge the AMCC’s license decisions by seeking injunctive relief against the successful applicants so as to prevent further licenses from being issued, as opposed to letting their appeal process play out while licenses were being issued to other successful applicants.
A similar experience to Alabama’s unfolded in the neighboring state of Georgia, whose medical cannabis legalization statute likewise imposes a cap on the number of possible issued licensees. After two years of litigation targeting Georgia’s licensing process on similar transparency-related grounds, the state’s Medical Cannabis Commission finally issued the last of these available licenses in November of last year, even though pending lawsuits by unsuccessful applicants remained to be resolved.
Additionally, the lack of an internal appeal mechanism built into the licensing process set out in the Compassion Act, which Alabama Always’ attorney Will Somerville has argued renders it noncompliant with the state’s Administrative Procedure Act, has further forced these challenges to play out in court. This has bogged the entire process down with seemingly endless motions and temporary orders resolving technical matters before these failed applicants’ claims can be assessed on the merits.
As three years have gone by since Alabama passed legislation to legalize medicinal cannabis without any medicinal cannabis dispensaries in operation, it is not a surprise that the disputants are facing increased pressure to resolve their conflicts in a more expeditious manner. The decision last week by the Montgomery Circuit Court that contained the temporary restraining order against AMCC’s future issuance of medicinal cannabis licenses directed the parties to collaborate in designing the particular terms of the temporary restraining order.
For states designing future medicinal cannabis licensing regimes, this saga in Alabama demonstrates the importance of anticipating potential challenges that could arise and creating a licensing process that all stakeholders will see as reasonable to participate in. The incorporation into a State’s medicinal cannabis regime of time conscious and non-litigious processes would allow for dispensary applicants to make specific proscribed challenges in a manner that does not disrupt the availability of access for prospective medicinal cannabis patients. In so doing, the policy objectives of the state legislature that drafted the medicinal cannabis legislation that was sought to be implemented expeditiously would likely be met.
[1] 2024 WL 3077223