Florida Supreme Court upholds vertical integration requirement for cannabis producers

(The Center Square) – Tampa-based Florigrown filed a lawsuit nearly three years ago challenging the Legislature’s 2017 “vertical integration” law, which it claims only benefits corporations with the resources to be “vertically integrated” and pay $50 million for a license.

Two lower courts agreed. In October 2018, Leon County Judge Charles Dodson ruled the law’s cap on Medical Marijuana Treatment Centers (MMTC) licenses at 14, and “vertically integrated” requirement to grow, process and distribute, is unconstitutional.

In July 2019, a three-judge panel of the 1st District Court of Appeal backed Dodson’s ruling, determining the Legislature created an “oligopoly” when it adopted its “vertically integrated” regulatory scheme.

The state appealed the rulings and secured a hearing before the Supreme Court last May 6, insisting lawmakers were “within the scope of policy discretion afforded it by the Florida Constitution in setting requirements for licensure and initial market participation.”

On Thursday, the Supreme Court issued its verdict from that hearing more than a year ago, reversing the lower court rulings and upholding the Legislature’s vertical integration framework in a 54-page ruling.

“We hold that Florigrown has not demonstrated a substantial likelihood of success on the merits of any of its constitutional claims. Accordingly, and as is fully explained below, we quash the 1st District’s decision,” read the majority opinion.

The ruling was unanimous with all but Justice Alan Lawson signing on.

The Supreme Court opinion said lower courts erred in determining there is conflict between 2016’s Amendment 2, which legalized medical cannabis and authorized the creation of a medical marijuana regulatory program, and the law adopted by lawmakers during the ensuing legislative session.

“The Amendment expressly left the Legislature its authority to enact the legislative framework,” justices wrote.

While Florigrown’s claim that restricting MMTCs to 14 hurts patients gained resonance in lower court deliberations, the Supreme Court dismisses the contention “because competent, substantial evidence does not support a finding that the statute has made medical marijuana unavailable.”

The law doesn’t actually “preclude a limit on the number of MMTCs that can be licensed,” the opinion noted, but allows the state’s Department of Health (DOH) to offer more licenses as the number of patients grow.

According to the May 21 Office of Medical Marijuana Use’s (OMMU) update, there are 561,177 medical marijuana patients in the state, 2,526 physicians licensed to proscribe marijuana and 338 dispensaries.

As many as 15 new MMTC licenses could become available once numbers top 600,000.

Florigrown’s suit was one of many lodged against the 2017 medical marijuana laws and its apparent resolution is seen as pivotal by investors leery about entering Florida’s medical marijuana market until the Court ruled one way or another in upholding the vertical integration scheme.

Florida’s medical marijuana industry created nearly 15,000 jobs and generated nearly $1.23 billion in taxable sales in 2020. Analysts project the state’s medical marijuana industry could generate $6 billion in sales by 2030.

State Agriculture Commissioner Nikki Fried, Florida’s only statewide-elected Democrat, a former marijuana industry lobbyist and likely 2022 gubernatorial candidate, blasted the ruling in a Thursday statement

“This ruling by our Republican-dominated Supreme Court further entrenches Florida’s unfair, unconstitutional medical marijuana system put in place by our Republican-dominated Legislature. This status quo helps absolutely no one except the 22 medical marijuana companies in Florida at the expense of patients,” Fried said.

The vertical integration requirement is bad for patients and for Florida small businesses, she said.

“Unlike hemp’s open, horizontal market in Florida that provides opportunity to everyone, Florida’s medical marijuana industry will remain closed-off, restricting freedom of opportunity, weakening the free market, and leading to ever-higher prices for patients. If we’re applying the law to medical marijuana, then it’s past time to grant the licenses that Black farmers and our citrus industry deserve and the law requires,” Fried said.

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