State ex rel. CannAscend Ohio LLC v. Williams
| Decision Date | 04 February 2020 |
| Docket Number | No. 18AP-820,18AP-820 |
| Citation | 2020 Ohio 359 |
| Parties | The State ex rel. CannAscend Ohio LLC, et al., Plaintiffs-Appellants, v. Jacqueline T. Williams, Director, Ohio Department of Commerce, et al., Defendants-Appellees. |
| Court | Ohio Court of Appeals |
(REGULAR CALENDAR)
DECISION
On brief: Zeiger, Tigges & Little LLP, Marion H. Little, Jr., and Christopher J. Hogan, for appellant Schottenstein Aphria, LLC. Argued: Marion H. Little.
On brief: Squires Patton Boggs (US) LLP, Heather L. Stutz, C. Craig Woods, Christopher F. Haas, Jeffrey M. Walker, and Andres H. King, acting as special counsel to appellee Jacqueline T. Williams, in her capacity as Director of Ohio Department of Commerce. Argued: Christopher F. Haas.
On brief: Vorys, Sater, Seymour and Pease LLP, Elizabeth T. Smith, and Christopher A. LaRocco, for appellee Terradiol Ohio LLC. Argued: Elizabeth T. Smith.
On brief: Peterson Conners LLP, Gregory S. Peterson, and Istvan Gajary, for appellee Cresco Labs Ohio, LLC.
On brief: Mac Murray & Shuster, LLP, Helen M. Mac Murray, Patrick W. Skilliter, and Kari R. Roush, for appellee Harvest Grows, LLC.
On brief: Buckingham, Doolittle & Burroughs, LLC, James S. Simon, Gregory P. Amend, and Andrew J. Pullekins; Murray Murphy Moul + Basil, and James B. Hadden, for appellee Parma Wellness Center, LLC.
On brief: Barnes & Thornburg LLP, C. David Paragas, and Jeanine Kerridge, for appellee Columbia Care OH LLC.
On brief: Taft Stettinius & Hollister LLP, Gregory J. O'Brien, and Devin M. Spencer, for appellee Grow Ohio Pharmaceuticals LLC.
APPEAL from the Franklin County Court of Common Pleas
{¶ 1} Plaintiff-appellant, Schottenstein Aphria, LLC (hereinafter referred to individually as "Aphria"), appeals from a decision of the Franklin County Court of Common Pleas entered on May 17, 2018. The trial court in its decision granted the motions filed by the various 14 defendants-appellees1 (hereafter referred to collectively as "appellees") to dismiss Counts 1, 2, 3, and 6 of the amended complaint for one or more of three grounds: lack of subject-matter jurisdiction pursuant to Civ.R. 12(B)(1), failure to state a claim upon which relief can be granted pursuant to Civ.R. 12(B)(6), and/or failure to exhaust administrative remedies.2 For the following reasons, we affirm the decision of the trial court.
{¶ 2} This appeal arises from Aphria's unsuccessful application for a level I cultivator provisional license under Ohio's Medical Marijuana Control Program (the "MMCP"). In the underlying matter, Aphria challenged the process by which the Ohio Department of Commerce (the "department") awarded a limited number of level I cultivator provisional licenses ("provisional licenses") and sought declaratory relief from the trial court.
{¶ 3} Appellees argued that Aphria's claims should be dismissed for three reasons: (1) the trial court did not have subject-matter jurisdiction over Aphria's claims as set forth in Counts 1, 3, and 6 (the "licensure claims"), thereby requiring the dismissal of thosecounts pursuant to Civ.R. 12(B)(1); (2) Aphria had failed to state a valid claim for relief as to monetary damages arising from its tortious interference claim under Count 2, requiring dismissal pursuant to Civ.R. 12(B)(6); and (3) Aphria had failed to exhaust the administrative remedies provided for in the MMCP. Appellees had challenged the trial court's jurisdiction to consider Aphria's claims on two bases: that exclusive jurisdiction over Aphria's claims is vested with the department and that Aphria's claim improperly sought to bypass a specialized statutory scheme for resolving licensure disputes under the MMCP.
{¶ 4} In 2016, the General Assembly adopted House Bill No. 523 ("H.B. No. 523"), thereby enacting new Ohio Revised Code Chapter 3796 to authorize the use of medical marijuana and to establish the MMCP. The legislation enacting the MMCP is comprehensive in scope, providing for the cultivation, processing, testing, and dispensing of medical marijuana from beginning to end. R.C. 3796.18 through 3796.21.
{¶ 5} The General Assembly established the MMCP in the department and the Ohio Board of Pharmacy (the "pharmacy board"). R.C. 3796.02 The department is responsible for licensing medical marijuana cultivators, processors, and testing laboratories. Id. The pharmacy board is responsible for licensing retail dispensaries and registering patients and caregivers. Id. Additionally, the State Medical Board is responsible for certifying physicians who are authorized to recommend medical marijuana to patients. R.C. 3796.08. The MMCP vests the department, the pharmacy board, and the State Medical Board with authority to establish rules and standards for licensure and/or certification of their respective populations. R.C. 3796.03, 3796.04, and 4731.30. The General Assembly intended for the department and the pharmacy board to have the MMCP fully operational by September 8, 2018. 2015 Ohio HB 523; see also, e.g., R.C. 3796.03, 3796.04, 4731.30.
{¶ 6} The General Assembly mandated that the department adopt rules establishing standards and procedures for the MMCP not later than September 8, 2017, and adopt rules establishing standards and procedures for the licensure of cultivators not later than May 6, 2017. R.C. 3796.03(A). The department was required to adopt its rules in accordance with R.C. Chapter 119. R.C. 3796.03(A)(3). The department is authorized to refuse to issue a license or to suspend, revoke, refuse to renew, or impose a penalty on a license it had issued, but any such action must be taken in accordance with R.C. Chapter 119. R.C. 3796.14(A); Ohio Adm.Code 3796:5-6-03.
{¶ 7} The department was authorized to establish (1) the number of medical marijuana cultivator licenses permitted, and (2) the procedures and eligibility requirements for cultivator licensure. R.C. 3796.03(B). The department established two categories—level I and level II—of cultivator provisional licenses. Ohio Adm.Code 3796:1-1-01(A)(23) and (24). The level I cultivator provisional licenses at issue in the underlying matter allow licensees to operate up to 25,000 square feet of space for marijuana cultivation. The department's administrative rules allowed it to issue up to 12 level I cultivator provisional licenses before September 8, 2018. Ohio Adm.Code 3796:2-1-01. Each provisional licensee must pass inspections and conform to certain statutory and regulatory requirements to obtain a final license, a "certificate of operation," which permits the licensee to cultivate medical marijuana. Ohio Adm.Code 3796:2-1-06(A) and (B).
{¶ 8} The department began accepting applications for level I cultivator provisional licenses in June 2017. In November 2017, the department announced it was issuing 12 level I cultivator provisional licenses for marijuana cultivation. Aphria applied for, but not did not receive, a provisional license. In accordance with R.C. 3796.14(A), the department notified Aphria and other unsuccessful applicants that they were entitled to a hearing before the department made a final decision about their applications. Four other unsuccessful applicants (the other plaintiffs in the underlying matter) pursued the special statutory proceeding provided for in H.B. No. 523 and timely requested administrative hearings under R.C. Chapter 119, in accordance with R.C. 3796.14(A).3
{¶ 9} Aphria, however, did not request an R.C. Chapter 119 hearing.
{¶ 10} On February 20, 2018, Aphria and five other unsuccessful applicants4 filed the complaint that initiated the underlying lawsuit against the department (naming Jacqueline T. Williams, in her official capacity as director of the department), 3 of the department's consultants,5 and 10 of the 12 successful applicants for the provisional licenses.6
{¶ 11} On April 2, 2018, Aphria and the other plaintiffs7 filed an amended complaint, adding one count and naming the other two successful applicants for the provisional licenses.8 The amended complaint alleges that the department's process for scoring cultivator applications was "unreasonable, unlawful, arbitrary, and capricious" in nature. (Apr. 2, 2018 Am. Compl. at ¶ 20.) The amended complaint contains the following overview of alleged problems with the department 's process:
Among other things detailed in this Complaint, the Department: (1) failed to adhere to the mandates of Chapter 3796 of the Ohio Revised Code, its own Administrative Rules and application instructions, and the Due Process Clause of the Ohio Constitution; (2) awarded provisional licenses to entities that made material fraudulent and/or misleading representations in the cultivator applications, which were not discovered, but could or should have been uncovered by the Department with reasonable due diligence; (3) awarded provisional licenses to entities that should have been disqualified for failure to meet mandatory provisions of Chapter 3796 of the Ohio Revised Code, but were not disqualified due to the Department's failure to verify or otherwise evaluate information provided in at least some of the Defendants' cultivator applications; and (4) failed to uncoverblatant conflicts of interest between the Defendant-consultants, who scored the cultivator applications, and the Defendant-applicants who received a provisional license despite clear conflicts of interest.
{¶ 12} Aphria and the other plaintiffs asserted three claims against the department and one claim against the non-department defendants.9 Count 1 alleges the department's actions in the licensure process were unreasonable, arbitrary, and/or unconscionable, constituting an...
To continue reading
Request your trial