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Marijuana | State Government

Judge: Pot license applicants did not have inherent right

Patient advisor Regan Fueget explains marijuana products on display to a customer at the+source dispensary in Henderson on Thursday November 9, 2017. (Jeff Scheid/The Nevada Independent)

A District Court judge on Tuesday agreed with two marijuana businesses that argued applicants for state licenses do not have a protected property right in the licensing process.

Judge Elizabeth Gonzalez agreed with Helping Hands Wellness Center Inc and Clear River LLC, two licensees that intervened in a case involving 11 marijuana companies that contend the state did not fairly issue dispensary licenses in December. 

The two companies that received licenses claimed in court that the voter-approved ballot measure allowed the Department of Taxation “a competitive bidding process to determine which application or applications among those competing will be approved.” Out of a pool of 461 applications, 61 conditional licenses were awarded to 17 cannabis businesses. 

Plaintiff attorneys argued that clients who applied in September 2018 did not receive fair, mandated and procedural consideration to attain a marijuana license, which in turn denied individuals who did not receive licenses of a property right. Citing the 14th Amendment, plaintiff attorneys argued all license applications needed to follow fair due process.

Attorneys for the two pot companies said there was no equal-protection claim under the federal Constitution, a federal due process claim or state due process claim. They argued that if any legally protected interests were being violated, it was on their side of the table because those awarded licenses by the state are now being prevented from moving forward by an injunction. 

Attorney Rusty Graf, who is representing Clear River LLC, claimed that SB32, a bill signed by Gov. Steve Sisolak in May to increase transparency in the marijuana licensing process, in part terminated the plaintiff’s argument. The bill  requires the state to publicly reveal the names of applicants and the mechanisms used to score their applications, which addresses a primary complaint within the case — secrecy. 

“So, you’re saying once SB32 became effective, everybody should have said, ‘Oh, now we know who all the participants are’?” asked Gonzalez. 

“Yes, because that is what it did,” said Graf.

Graf argued that the plaintiffs are asking the judge to affect the rights of other parties. 

“They’re asking this court to adjust the scores,” he said. 

Plaintiff attorney Michael Cristalli said that it was initially impossible to bring in all parties for litigation because the transparency bill was the first time the plaintiffs could know who in the industry had received a license. Cristalli said that when losing companies appealed the decision to the Department of Taxation, it was rejected. 

Graf closed by saying that what mattered most was the rank rather than the scores of applicants. 

“If the only thing they’re saying that is in petition for review is what score they got, give them all 250s for all I care,” Graf said, referencing the 250-point rubric used to grade applicants that has been at the center of arguments in 16 days of court proceedings. “But, that’s not what we are talking about here. What we are talking about here is the ranking of all of those scores.” 

The stakes for the case are high. Taxable sales in 2018 topped a half-billion dollars, and Nevada collected almost $70 million in revenue from marijuana wholesale and excise taxes during the first year of legal sales.

Closing arguments are expected to be scheduled for August, with the judge’s decision to come soon after.

UPDATE, 11 AM: This story has been updated to correct that the attorneys arguing in court Tuesday represent two pot companies, not the Department of Taxation.

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