Business

Florida Supreme Court to Hear Challenge to Vertical Integration

By Willis Jacobson Oct 5, 2020
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
See my articles
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The Florida Supreme Court is set to hear a rare second round of arguments over the legality of the state’s MED law.

On Wednesday, the state’s high court is scheduled to hear arguments about whether the state’s MED licensing system violates the Florida Constitution. The charge is at the center of a 2017 lawsuit filed against the state by Florigrown, a Tampa-based business that alleges the state’s guidelines improperly limit the number of companies eligible to operate MED dispensaries.

That hearing – one of several legal challenges to Florida’s MED regulations – could have major implications for Florida’s MED market. Under the current regulations, which were established after state voters legalized MED in 2016, only vertically integrated businesses can qualify for a license. Vertical integration refers to businesses that handle every aspect of the seed-to-consumer chain.

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Florigrown attorney Ari Gerstin, with the Akerman law firm, noted that this week’s arguments represent the “end of the road” in the Florida court system. He said he was confident in the merits of the case, particularly since lower courts have ruled in Florigrown’s favor to this point.

“It’s been really frustrating that we haven’t been able to move forward with actual relief for everyone that’s trying to get a license in Florida,” Gerstin said Monday. “It’s just a matter of time, we hope, but it’s been a really long wait.”

The original lawsuit filed by Florigrown, which seeks a MED license, takes issue with the licensing bill approved by the state legislature in 2017.

Under that law, a Medical Marijuana Treatment Center is defined by the state as an entity that, among other roles, cultivates, processes and retails MED to patients. Florigrown argued forced vertical integration establishes an unconstitutional “special law” – those intended to benefit specific groups – by excluding companies that aren’t vertically integrated.

Florigrown argues that the voter-backed 2016 amendment expressly permitted licensing for businesses that only sought to perform one or some of the functions in the seed-to-consumer chain.

The lower courts backed up that argument.

“People don’t always want to specialize in doing everything,” Gerstin said. “You don’t want to necessarily be the jack of all trades. What might sound good can be very difficult and very expensive and very unwieldy in actual practice. Having the ability to outsource delivery or purchase from another cultivator – that can be a real boost to an operator.”

Lawyers representing the Florida Department of Health, which appealed the previous lower court decisions to the state supreme court, have argued that nothing in the voter-backed amendment or the state’s constitution prohibits the state from requiring vertical integration.

They’re expected to make the same case during Wednesday’s hearing. Messages to some of the attorneys representing the state in the Florigrown case were not immediately returned Monday. 

Trulieve, the leading vertically integrated company in Florida, did not immediately return a request for comment.

It is uncommon for the Florida Supreme Court to hear a second round of arguments in a particular case. The court first heard arguments in this case in May. In July, the court scheduled the second round of arguments to focus specifically on the “special law” aspect that wasn’t discussed in the first round.

Gerstin said he wasn’t particularly shocked this case warranted a second round.

“I think that perhaps the court senses that there’s a lot of interest, and this touches a lot of people,” he said. “It’s a big issue and I’m glad the court is taking time with evaluating it and not just simply [stamping it] open and shut.”

Gestin noted that the arguments made before the high court could affect the state’s entire MED industry.

“Hopefully there’s some kind of light at the end of the tunnel for some relief for the patients and the businesses in Florida,” Gerstin said. “This [licensing framework] has been really harmful for a lot of small businesses … that really wanted to join the medical marijuana field before the legislature put this statute in place. It really just kind of shut down that whole industry that was building up in Florida.”

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