A Missouri appellate court said on Tuesday that the state's cannabis regulator failed to adhere to its own rules when it rejected a company's application to open a medical marijuana cultivation facility.
The 2-1 majority said that the Department of Health and Senior Services neglected to inform applicant MO Cann Do Inc. that its initial application lacked a certificate of good standing as a corporation and that it therefore could not reject the company's subsequent applications.
"We agree that the Commission's decision was unauthorized by law in that the DHSS failed to follow ... its own regulation, when it failed to specify in the deficiency letter that [MO Cann Do's] application was incomplete for lack of a certificate of good standing," Judge James M. Dowd wrote for the majority.
The opinion reverses a lower state circuit court's decision that affirmed an Administrative Hearing Commission ruling against the company, and the appellate panel remanded the matter with a directive to send the case back to the commission for reappraisal.
According to the opinion, DHSS informed MO Cann Do that its August 2019 application for a grower's license was deficient and identified certain missing pieces but did not specify precisely that the company needed a certificate of good standing as a corporation issued by the Missouri secretary of state.
In the initial and subsequent applications, MO Cann Do included a certificate of incorporation, which it asserted in court filings was sufficient to show it was authorized to do business in Missouri.
"We find that the DHSS's rejection of MCD's application impermissibly violated its own regulation which it has no authority to do," Judge Dowd wrote.
The DHSS regulation at the crux of the dispute holds that the agency "will notify" an applicant if their submission is incomplete and "will specify" what is missing, according to court documents.
In a dissent, Judge Kelly C. Broniec wrote that the regulation was "merely directory, and not mandatory," and that the DHSS it did not give up its ability to reject applications if it failed to heed the letter of the rule.
"[I]t stands to reason that DHSS would not want to waive its authority to deny an application simply because it failed to identify one non-compliant or missing item from a lengthy application, even an item seemingly as trivial as a certificate of good standing," Judge Broniec wrote.
Counsel for MO Cann Do and a spokesperson for the DHSS did not immediately respond to requests for comment on Tuesday.
The case was heard by Judges Kelly C. Broniec, Philip M. Hess and James M. Dowd of the Missouri Court of Appeals.
MO Cann Do is represented by Eric Walter, Paul L. Brusati, and Jeffery T. McPherson of Armstrong Teasdale LLP.
The Missouri Department of Health and Senior Services is represented by Jason K. Lewis of the Missouri Attorney General's Office.
The case is MO Cann Do v. Missouri Department of Health and Senior Services, case no. ED110329, in the Missouri Court of Appeals, Eastern District, Division Four.
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