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Georgia Cannabis: Trulieve sues the state over medical license

Georgia Cannabis: Trulieve sues the state over medical license

Georgia Cannabis: Trulieve sues the state over medical license

On December 22, 2020, one of the leading cannabis companies in the U.S., Trulieve submitted a bid protest to Georgia’s Department of Administrative Services (DOAS). 

Through this lawsuit, the company seeks to overturn requirements implemented by the Cannabis Commission of Georgia (“Commission”) to the Request for Proposals for Class 1 Medical Licenses (“RFP”).

There are currently two types of Georgia Medical Cannabis Cultivation Licenses:

  1. The Class 1 Production License, which authorizes the licensees to grow cannabis only in indoor facilities for use in producing low THC oil, limited to 100,000 square feet of cultivation space, and manufacture low THC oil. The Commission shall issue two Class 1 Production licenses.
  2. The Class 2 Production license, which authorizes the licensees to Grow cannabis only in indoor facilities for use in producing low THC oil, limited to 50,000 square feet of cultivation space and manufacture low THC oil. The Commission shall issue four Class 2 Production licenses

About the lawsuit

According to the plaintiff, the Commission exceeded its authority delegated by the General Assembly and therefore improperly tried to legislate the terms of Georgia’s medical cannabis law – the Hope Act. 

Trulieve alleged: 

The Commission sought to modify the requirements of the RFP by utilizing criteria that do not exist in statute and changing the definition of a material term that is contrary to the statutory definition. Through these actions, the Commission has exceeded its statutory authority, the impact of which is to significantly limit competition for this RFP

Through this lawsuit, Trulieve requested to eliminate the requirement that an entity must have operated in Georgia for five years to constitute a Georgia business, comply with the statute that requires minority business participation as either owners or suppliers, and follow the broader definition of “products” as stated in the statute, rather than the more limited definition adopted by the Commission in the RFP.

Trulieve’s real intentions probably had to do with delay, because the RFP application submission window was set to close days after the bid protest was filed in court.

Furthermore, Trulieve also requested that the RFP didn’t close until a final decision regarding this protest (and any other protest that might be filed) is issued, as they consider that the criteria that was applied in the RFP is ‘impermissible and improper’.

Is important to note that the deadline of the RFP for the Georgia medical licenses would have occurred on December 28, 2020. 

RELATED POST: GEORGIA MEDICAL CANNABIS PRODUCTION LICENSE

RELATED POST: MAP OF MARIJUANA LEGALITY BY STATE

Want to Get a Georgia Medical Cannabis Cultivation License?

Background and requirements for a Georgia medical license

Georgia’s “Hope Act” (HB324) was enacted in 2019. You can read about Georgia’s Medical License in our article about it. 

Following its enactment, the Commission issued the Competitive Application Request for Proposals for Class 1 and Class 2 Medical Licenses on November 23, 2020, and through this process, the RFP seeks to award up to two Class 1 Production Licenses that authorize the licensee (“winning offeror”) to “grow cannabis only in indoor facilities for use in producing low THC oil.”

The Georgia Code (O.C.G.A.) and Georgia’s “Hope Act” outlined many aspects of the application that the Commission issued. Among these aspects, the O.C.G.A. (§ 16-12-210(a)) granted several powers, duties, and responsibilities to the Commission to implement the law. In this sense, as signaled by Trulieve, the Commission had the authority to:

  • Establish “procedures for granting medical licenses”;
  • Establish “applications and forms necessary to carry out the provisions of this part;
  • Establish “criteria for applicants and licensees as necessary to ensure market stability and adequate supply.”

Furthermore, the Commission stated in the RFP that the statutory framework set forth in the “Hope Act” provides them considerable authority to conduct the competitive application process. 

It also states that if the “terms, conditions, instruction processes, procedures or other actions or requirements” in the RFP are “inconsistent with or conflicts with the Georgia Procurement Manual (GPM)” such deviations are permitted. 

Trulieve disagrees by alleging that the “RFP does not and cannot state that any deviations from HB 324 or the codified laws are permitted”.

And although the RFP mostly tracks and incorporates the relevant statutes and the requirements for the application stated in O.C.G.A., the RFP contains requirements that differ from the statute. The plaintiff pointed out three of these requirements:

First, the O.C.G.A. states that “an applicant must be a Georgia corporation or entity” without defining what constitutes a Georgia corporation. Trulieve footnoted to the famous case out of Maine that threw out residency requirements for an out of state operator that wanted to participate in the Maine cannabis industry.

The RFP on the other hand requires that the applicant can satisfy to demonstrate evidence of Georgia ownership, for which an applicant may submit documentation showing either:

    • “Ownership or controlling ownership of more than 50% by Georgia legal residents who have been legal residents for not less than 1 year immediately preceding the date the application was submitted” or 
    • “Annual registration or business tax returns to document that the corporation or entity “has been actively registered to do business in the State of Georgia for not less than 5 years immediately preceding the date the application was submitted”.

Second, the O.C.G.A. requires a “demonstration of significant involvement in the business by one or more minority business enterprises as defined in Code Section 50-5-131, either as co-owners of the business or as significant suppliers of goods and services for the business”.

The RFP eliminates the option that minority business enterprises can be a part of an applicant’s team as either a co-owner or a significant supplier and instead requires that it has to be involved both through ownership and as a supplier.

Lastly, Trulieve alleges that in the RFP FAQ’s document, the Commission modified and restricted the statutory definition of “product” away from the Georgia legislature’s text:

The Hope Act defined “product” in an expansive manner to mean in relevant part “low THC oil delivered through an oil, [or] tincture”.

However, The Commission’s FAQ stated that “Georgia law does not allow Production Licensees to manufacture or produce cannatol, tinctures, topicals, rapid onset sublinguals, edibles, inhalable, etc. These products are prohibited for manufacture and sale in Georgia.”

In all respects, Trulieve alleges that the Commission exceeded its authority by issuing the RFP contrary to the terms of the Hope Act and as such, it should be stopped from legislating inappropriately. 

ACC, LLC Responses to Trulieve’s Bid Protest

On the 4th of January of 2021, the company “ACC, LLC” (“ACC”) submitted a response to Trulieve’s bid protest.

ACC is a Georgia company that was allegedly prepared to submit its application for both a Class 1 and a Class 2 Low-THC Oil Production License, based on the existing RFP. 

They claim that the Commission has acted within the explicit framework and guidelines of the Act codified in O.C.G.A.

Also, they insist that the bid protest submitted by Trulieve misconstrues the RFP, by reading suggestions and references contained in the RFP as mandatory, not recognizing the explicit authorizations from the legislature provided to the Commission, and failing to appreciate the guidelines provided by the legislature to the Commission.

It is also claimed that the modification of the RFP and the extension of the proposal deadline would end up harming Georgia residents and patients by creating delay and confusion, unduly prejudice minority-owned applicants, and add additional burdens to those who have spent time and resources in reliance on the RFP.

In this sense, ACC requested that the protest should be denied, and the RFP should remain unchanged. ACC responded to each of the arguments made by Trulieve on their bid protest the following way:

First, about the three sections of the RFP which Trulieve’s Bid Protest attacked, claiming that it contained requirements that contradicted the O.C.G.A., ACC claims that the Protest mischaracterizes the application as mandating criteria which it “clearly isn’t”. 

ACC claims that, in fact, the Application itself differentiates the mandatory nature of certain requirements, and differentiates those requirements from the other which are scored or informative, but not mandatory. According to the company, the Commission explained the distinction when it responded to Q67, which states:

“Q67: Is any component of any Schedule of the Application optional vs. Mandatory?

A67: All statutory components of the application are mandatory requirements that each applicant must submit in order to be considered. While omitting scored section or submitting an incomplete application is an option, the applicant is responsible for understanding no scored points or evaluation can be given for any omitted items.”

About the complaint made in the Protest that “the RFP contained two requirements that the applicant can satisfy to demonstrate evidence of Georgia ownership”, ACC responded that the Schedule D (cited by the protest for the alleged requirement) states that “the applicant may provide additional supporting evidence documenting the applicant is a Georgia corporation or entity through Ownership or Registration“. 

In this sense, they claim that nowhere in the application or supporting materials is there any requirement that an applicant has to satisfy the two conditions but only that the applicant has to be a Georgia corporation.

Next, according to ACC the protest complains that the RFP “eliminates the option that minority business enterprises can be part of an applicant’s team as either a co-owner or a significant supplier and instead requires both ownership and as a supplier”. 

Again, to ACC, the Schedules that the protest cites (Schedule D) doesn’t contain any mandatory requirements but are simply examples of suggested documents and information that may impact the scoring as the Commission considers the legislatively mandated requirement of minority involvement. 

Lastly, the Protest complains that the definition of “product” is modified by the Commission in the RFP because in response to Question No. 14 the Commission provides that tinctures are not allowed when the O.C.G.A allows for tinctures. 

In response to this, ACC claims that the Commission clarified this in Addendum 1, Schedule G, specifically addressing the Protest’s concern. The definition, according to this Addendum, encompasses all “low THC oil”, therefore the complaint made by Trulieve is deemed as debatable. 

ACC considers that the RFP doesn’t modify or change the definition of “product” from the statute, although in the responses to the FAQs there may have been ambiguity. Addendum 1 tracks the statute and explains that “Product” means “low-THC oil”, in this sense, it didn’t eliminate products that were allowed in the statute and did not allow products that were eliminated in the statute either. 

ACC claims that there has been no action taken by the Commission which directly conflicts with the requirements of the Act, so the Bid Protest is inapposite.

Furthermore, ACC claims that the Commission is authorized to administer and effectuate the enactment of the Georgia General Assembly under its guidelines, as the legislature gave specific directives to the Commission when it explicitly provided the powers outlined in O.C.G.A.

So, based on this, and contrary to the Protest’s assertion, the Commission would be administering and effectuating the legislation by utilizing the explicit powers delegated to it by the General Assembly.

“The commission is not ‘exercising the functions of’ the legislature, in that it is not making a purely legislative decision but is acting administratively pursuant to the direction of the legislature.”

Besides these points, ACC claims that the Bid Protest is untimely, as it should’ve been filed “within ten (10) calendar days after the protesting party knows or should have known of the occurrence of the action which is protested, or two (2) business days prior to the closing date and time of the competitive application request for proposals as published on the Georgia Procurement Registry at the time that the protest was received, whichever date is earlier.

In this case, as the alleged “requirements” were contained in the original application published on November 23, 2020, ACC claims that the deadline to protest these were ten (10) calendar days after the publication of the application, or December 3, 2020. Furthermore, if Trulieve were to be protesting the responses to the FAQs, which were last revised on November 24, 2020, the deadline would be on December 4, 2020. 

How the Trulieve Suit May Impact Georgia Cannabis

Georgia Cannabis: Trulieve sues the state over medical licenseIf the bid protest is not dismissed for procedural reasons, the agency must, within 30 days of the filing of a protest, provide a report addressing the protest arguments. 

The protester must file comments responding to the agency report within 10 days of receiving the report (failure to file comments will result in dismissal of the protest). After the comment period, DOAS may request additional filings from the parties, conduct alternative dispute resolution, or hold a hearing. 

A protest is concluded when it is “withdrawn” by the protester, “dismissed” because the protest had a technical or procedural flaw (such as lack of timeliness or jurisdiction) or because the agency takes corrective action that addresses the protest, “denied” because the court found no merit to the protest, or “sustained” by a court because it agrees with the protest arguments.

If the bid protest were to be sustained, DOAS should require that the Commission amend the RFP to make it consistent with the Hope Act, which would eliminate any length of time requirements for an entity to be a Georgia corporation, make minority business enterprise participation either as owner or supplier and make the RFP’s definition of “product” identical to the statutory definition.

According to Trulieve, doing so would “ensure that the Commission acts within its powers rather than attempting to legislate and create a level playing field for all interested applicants.”

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Thomas Howard

Thomas Howard

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Thomas Howard has been in business for years and can help yours navigate towards more profitable waters.

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