Politics
Missouri Supreme Court Hears Marijuana Business Licensing Case
“I’m asking this court to make findings as to the proper score for each of these applications.”
By Rebecca Rivas, Missouri Independent
The Missouri Supreme Court heard arguments Wednesday challenging an appeals court’s decision in March directing the state to award cannabis company Hippos LLC 13 facility licenses after finding the 2019 application scoring process was inconsistent.
It’s been five years since the Missouri Administrative Hearing Commission denied Hippos’s appeal over its applications for marijuana facility licenses, after the company argued identical applications received different scores from the same grader.
That dispute has since worked its way through the state court system and landed Wednesday before the seven Missouri Supreme Court judges.
At issue is whether the commission acted properly when it rescored Hippos’s applications by selecting the most common score given to answers the company was challenging—or whether that approach was “completely flawed,” as three appellate judges found in March, because the grader left no notes explaining the scores.
The Missouri Department of Health and Senior Services, which oversees the state’s cannabis regulatory agency, argued Wednesday that the commission acted correctly and did a thorough investigation of the scores given to Hippos’s applications. The department also urged the court to focus on the commission’s decision and not to rehash the state’s controversial grading process of marijuana applications as part of the case.
“The Administrative Hearing Commission’s decision is under review here, not the department’s initial decision,” said Sean McDowell, an assistant attorney general representing the state.
However, Chief Justice W. Brent Powell challenged that distinction, saying state law requires the court to combine “how the agency acted” and the commission’s decision.
“Isn’t that how the statute indicates we should review this?” Powell asked McDowell.
McDowell agreed, saying the commission “steps into the shoes” of the department, conducts a review and “their decision becomes the agency decision.”
In March—just weeks before the appellate judges’ unanimous ruling in favor of Hippos—Missouri State Auditor Scott Fitzpatrick issued a scathing state audit of the Division of Cannabis Regulation. The audit examined, among other issues, the state’s 2019 marijuana facility licensing process, citing erratic scoring, poor documentation and a process so opaque it cast doubt on the integrity of the results.
When the state was working in 2019 to build the framework of Missouri’s now multi-billion dollar industry, it hired Nevada-based company Wise Health Solutions to score the nearly 2,000 applications.
“In each of Hippos’s applications, there were many instances in which identical answers to the same question received inconsistent scores,” wrote Missouri Court of Appeals Southern District Judge Jeffrey Bates in the March ruling. “That should never have occurred if Wise’s scorers had followed the instructions that they were given. Neither the department nor Wise did anything to correct this situation.”
The three appellate judges found the commission’s approach to rescoring was flawed “because there are no notes explaining why the scores were given,” the ruling states.
“The conflict in these unexplained scores cannot be reconciled by simply assuming the more common score for a particular answer is the correct one,” it states.
Fitzpatrick’s audit found scorers were instructed by Wise Health Solutions to take limited notes while scoring applications in order to reduce the amount of documentation that could be produced in litigation.
The appellate judges agreed with Hippos that the commission’s decisions affirming the state’s denial of the company’s applications were “arbitrary, capricious and unreasonable, and these decisions were not supported by competent and substantial evidence on the whole record.”
McDowell argued Wednesday that the commission’s rescoring was valid because Hippos didn’t successfully “disprove the validity of the original scores.”
Two witnesses for Hippos testified that the applications should have received higher scores, and the appellate judges noted that the state did not present experts to rebut their testimony.
However, McDowell said the witnesses were cross-examined and one admitted that her interpretation of the grading system could be different than the graders.
“It’s clear from the record the department contradicted Hippos’s expert witnesses,” McDowell said.
Hippos’s attorney Austin Preston argued Wednesday that “simply asking cross-examination questions” wasn’t enough to rebut the witnesses’ testimony, and that the commission was required to make a finding about whether the witnesses’ information was credible or not.
Supreme Court Judge Zel Fischer pressed Preston on that argument.
“When cases are tried to the trial court, we do it all the time,” he said. “The assumption is that all facts not specifically found were found in accordance with the judgment. Are you suggesting that the administrative context provides a different presumption?”
Preston said he believes case law requires it.
The judges asked if Hippos is asking the judges to remand the case back to the Administrative Hearing Commission or to make a finding themselves.
“I’m asking this court to make findings as to the proper score for each of these applications, which has been laid out, would satisfy the minimum cutoff and order those licenses be issued,” Preston said.
McDowell responded that if the judges believe additional fact-finding is necessary, the case should go back to the commission.
“I think the proper remedy would probably be to remand to the Administrative Hearing Commission,” he said, “because they were the fact finder in this case.”
The court did not issue a ruling Wednesday.
This story was first published by Missouri Independent.
Photo elements courtesy of rawpixel and Philip Steffan.
