The Florida Supreme Court will soon take up a case that has the potential to upend the state’s cannabis industry. The grip of a handful of big players on the state market could be broken. Or not.
At issue is a 2017 law that caps both the number of licensed cannabis operators in the state and the number of stores they can operate, and also requires cannabis companies to be vertically integrated or to grow, process and distribute cannabis products. If the justices uphold a lower court’s ruling, they would find these core components of Florida’s medical cannabis legislation unconstitutional.
The first piece of the puzzle fell into place last month when lawyers for the Florida Department of Health, challenging two lower courts’ rulings, filed their initial argument.
When the Supreme Court finally weighs in, which could likely be mid-2020, it will be the culmination of a yearslong battle over the state’s cannabis industry. Here’s how we got here:
Amendment 2 wins out
In the lead-up to the 2016 election, cannabis activists in Florida were pushing hard for Amendment 2, a constitutional amendment that would legalize medical cannabis. Advocates and major figures, including a prominent Orlando attorney named John Morgan, poured $12 million into the campaign, vowing to usher it successfully across the finish line.
Two years earlier, the amendment had received the backing of 58% of voters, just shy of the 60% threshold needed to amend the state constitution. In an attempt to assuage voters, the Republican-controlled legislature in 2014 authorized high CBD, low THC cannabis oil for people with epilepsy, cancer, and chronic muscle spasms. (That law would be expanded in 2016 to include high THC cannabis products for people with terminal illnesses.)
But polling in 2016 suggested that the tide was changing. Nationally, proposals for adult use were on the ballot in states like California, Nevada, Maine, and Massachusetts. And in Florida, as November neared, contributions to Vote No On 2—the campaign opposing the medical cannabis initiative in Florida—slowed to a halt.
Finally, on November 8, 2016, voters resoundingly gave their support to the measure. It passed with more than 71% of the vote.
Special legislative session
Amendment 2 placed oversight of the state’s medical cannabis industry with the Florida Department of Health. However, the measure also gave the state legislature the power to draft implementing legislation.
The Health Department released draft rules in January of 2017, immediately prompting backlash from cannabis advocates who felt the regulations weren’t in line with the amendment. But lawmakers during the 2017 session, which ran from March to May, seemed reluctant to step in.
Until they did. In May of 2017, the Republican Speaker of the Florida House of Representatives, Richard Corcoran, called for a special legislative session. “To just leave it to bureaucrats sitting over at the Department of Health I think would be a gross injustice,” Corcoran told WFLA-FM. The Senate President, Joe Negron, too, voiced his support for lawmakers’ involvement in cannabis legislation. The following month, then-Governor Rick Scott convened a three-day special session.
Florida lawmakers ultimately passed the Medical Use of Medical Marijuana Act, or SB 8A, in June 2017. Among other things, it listed eleven conditions that would qualify for medical cannabis; placed a cap on the number of Medical Marijuana Treatment Centers until April 1, 2020; and required the treatment centers to be vertically integrated cannabis businesses, seed to sale.
Florigrown: The fight begins
In mid-December, 2017, an aspiring Tampa-based cannabis operator, Florigrown, turned to the Leon County Circuit Court after the Health Department denied its application to become a Medical Marijuana Treatment Center. (Under the 2017 law, initially only operators who applied to be part of the state’s previous low-THC program would be considered for licenses in the full medical cannabis program. New licenses would be added as more patients signed on. Florigrown had not applied to the earlier low-THC program.)
Florigrown’s attorneys argued in the original complaint that state officials’ “actions and inaction have harmed and continue to harm Florigrown and Florida citizens while frustrating the mandate of over 71% of voters.” The company took issue with two crucial parts of SB 8A: the cap on Treatment Center licenses and the requirement that they be vertically integrated.
Lawyers for Florigrown contended that the license cap unfairly limits competition in the state’s medical cannabis market. Cannabis activists and officials alike, including Republican Governor Ron DeSantis, have referred to Florida’s industry as a cartel and an oligopoly because a few major operators dominate the market.
Florigrown’s challenge to vertical integration, meanwhile, hinges on a single word. The 2016 constitutional amendment defined a Medical Marijuana Treatment Center as a business that “acquires, cultivates, possesses, … transfers, transports, sells, distributes, dispenses, or administers marijuana.” Lawmakers instead chose to define a Treatment Center as an entity that “cultivates, processes, transports, and dispenses marijuana.”
In August 2018, Leon County Judge Charles Dodson sided with Florigrown, finding the legislature’s actions unconstitutional. Two months later, Judge Dodson went further, issuing a temporary injunction and chastising state officials for treating the state Constitution “like a suggestion.” The temporary injunction halted the existing license application process and required the Health Department to register Medical Marijuana Treatment Centers “in accordance with the plain language of the Medical Marijuana Amendment.”
The state appeals
After state regulators struck out in Leon Circuit Court, they turned to the Tallahassee-based 1st District Court of Appeal. It was there they were delivered yet another blow. A three-judge panel in July 2019 agreed with Dodson that the law ran afoul of the amendment.
“No evidence exists that the people via the elemental language of the medical marijuana amendment clearly intended a market limited to only a few full vertically-integrated medical marijuana companies,” Judges Scott Makar, James Wolf, and T. Kent Wetherell wrote in the majority opinion.
But the judges found it “unnecessary” to rule on license caps. Since the vertical integration model is unconstitutional, it “renders the statutory cap on the number of facilities … unreasonable,” they wrote. This is notable because it seems the court isn’t ruling out the possibility the Health Department could cap licenses, so long as they are “necessary for implementation and enforcement.”
The state then asked the 1st District Court of Appeal for a rehearing en banc, in which every judge on the court weighs in, rather than a three-judge panel. That motion was denied, and the judges punted the decision to the state Supreme Court.
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The Supreme Court opens the case
And that’s where it stands.
Lawyers for the state Department of Health will argue that the legislature acted within its power when it capped the number of available licenses and required cannabis companies to be vertically integrated. In a brief filed with the Supreme Court last month, the Health Department contends that since no part of the constitutional amendment expressly prohibited license caps or vertical integration, the law is constitutional.
“The Amendment is silent as to the number of MMTCs that may be registered or licensed by the Department or whether [Medical Marijuana Treatment Centers] should be ‘horizontally’ or ‘vertically’ integrated,” the lawyers wrote.
Florigrown’s attorneys in their brief with the court, filed Monday, called the state’s law a “hoax” that “undermines the explicit will of the voters who chose to add horizontal licensing to their constitution in order to ensure the availability and safe use of medical marijuana.” The court could potentially hold oral arguments in the coming months.
If the state’s high court rules in favor of Florigrown—as the circuit court and appeals court have—it will undeniably transform the state’s cannabis industry.
Florida is dominated by a few major players—namely Trulieve, Curaleaf, and Parallel (formerly Surterra). Others, like MedMen and Cresco Labs, are rapidly expanding their footprints in the state. If the current regulatory framework were struck down, these large companies would lose their grip on the market. Smaller businesses, no longer required to be vertically integrated, would have far more opportunities for success. And in a state with nearly 300,000 active medical cannabis patients and the potential for adult use, that could be huge.
“Without a doubt, it would dramatically change the landscape and the industry—which is still relatively nascent,” Taylor Patrick Biehl, legislative director for the Medical Marijuana Business Association of Florida, told Cannabis Wire. “We’re in year six. There’s a lot on the radar, and a lot can change in a short amount of time.”
State Representative Ray Rodrigues, chair of the House Health and Human Services Committee, told Cannabis Wire he’s confident that the Supreme Court will reverse the lower courts and rule in favor of the 2017 law. “At this point, we’re optimistic that we’ve got a strong legal foundation and that we can successfully defend the legislation that was implemented,” he said.
“If the court were to ultimately decide that’s not the case, then obviously the legislature would have to look at what the legislative remedies to that would be,” Rodrigues continued. “But at this point, the House has no plans and we’re taking no action in that area.”
Rodrigues highlighted the fact that the House, in September, won approval to defend the state’s law before the high court. It was a major victory for lawmakers, delivered by the 1st District Court of Appeal, which ruled that the House has standing to intervene in the Florigrown case.
The industry’s future is in question
Still, one major question, Biehl said, is whether lawmakers will proactively pass legislation before the Supreme Court moves on the issue.
State Representative Anthony Sabatini, for example, has filed a measure, HB 149, that would eliminate both the vertical integration requirement and the license cap. That is a marked departure from the status quo of the conservative House, which has typically favored restrictions on the industry. But that measure likely won’t go anywhere this session, multiple people familiar with the matter told Cannabis Wire. Rodrigues confirmed it would be a “pretty good prediction” that the bill will stall.
State Senator Jeffrey Brandes, however, told WFSU he plans to file his own adult use bill, but it’s unclear what it would entail. Brandes has led that chamber’s cannabis policy efforts, including last year’s measure to allow smoking medical cannabis. Previously, medical cannabis patients were prohibited from using cannabis flower.
On the other hand, even if the Supreme Court finds the current law unconstitutional, the legislature might try its hand again at imposing new regulations on the state’s cannabis industry. Support for medical cannabis—and even adult use—has surged in Florida in recent years. But still, state lawmakers remain reluctant to push cannabis policy forward, especially in the House.
The legislature might, in this case, be interested in taking a some smaller steps that would open up business slightly while still keeping a level of control. The legislature could put a new, different limit on Medical Marijuana Treatment Center licenses, perhaps allowing for a few horizontally-integrated ones, Biehl said. In this case, operators would only focus on one aspect of cannabis production, such as cultivation or dispensation. “Within the confines of the constitutional amendment, you’ve got to look for what’s a reasonable number of licenses that one could reserve for horizontal integration to meet patient demand,” Biehl said.
Rodrigues also left open the possibility of a measure that would limit the amount of THC allowed in cannabis flower. He proposed a similar bill last session but failed to get it across the finish line. “It’s definitely on the table and it’s being discussed in both chambers,” Rodrigues told Cannabis Wire.
Regardless of what the Supreme Court decides, uncertainty abounds in Florida’s cannabis industry. DeSantis settled a case last year granting eight new licenses. But it left three more licenses up for grabs, and another four could be available soon, as the number of licenses is tied to the number of patients, which continues to rise.
Meanwhile, with a potential constitutional amendment in the works, Floridians could vote to legalize adult use as early as November.
