Medical marijuana Archives - Page 6 of 49 - Florida Politics

Judge strikes down proposed ‘citrus preference’ rule for marijuana licenses

An administrative law judge on Monday struck down a proposed state regulation carving out a ‘citrus preference’ for medical marijuana provider licenses, calling it “invalid.”

The decision may be moot, however, because a circuit judge last week declared the section of state law creating the preference to be unconstitutional. (That story is here.)

Louis Del Favero Orchids of Tampa challenged the proposed Department of Health rule, based on the law passed last year implementing a voter-approved constitutional amendment that broadly legalized medical marijuana.

The orchid grower argued the proposal fails to properly carry out the law, which includes giving preference for up to two medical marijuana licenses to applicants who own facilities that had been used to process citrus. It had bought a site in Pinellas County for “approximately $775,000” to qualify.

At issue was the difference between a “facility” and a “property.”

“The Legislature clearly intended to give a preference to applicants who ‘own … facilities that are, or were, used for canning, concentrating, or otherwise processing of citrus … and will use or convert the … facilities for the processing of medical marijuana,’ ” Judge R. Bruce McKibben wrote in his final order.

“The Legislature failed, however, to provide guidance by way of definitions,” he added.

“While the Legislature chose the words ‘facility or facilities’ in the Preference Statute, the Department complicated the issue by using the word ‘property’ for the most part, but also using the words ‘facility’ and ‘facilities’ at times,” McKibben wrote.

“Favero contends that a property is much broader in scope than a facility, and the Department therefore exceeded its delegated legislative authority.”

In sum: “The Department interprets the statutory language concerning ‘facility or facilities’ to include ‘property.’ It is impossible to reconcile that interpretation, especially in light of the fact the Legislature contemplated conversion of the facilities. The Department’s interpretation is hereby rejected as being outside the range of permissible interpretations.”

McKibben also found that a “packinghouse” would not qualify for the preference because “processing” means “doing something more with the raw product.”

That shuts out Mecca Farms, which filed as an intervenor in the case, because it “owns a packinghouse only, not a processing facility as that term seems to be used by the Legislature.”

McKibben’s order can be appealed to the 1st District Court of Appeal.


Background for this post provided by The News Service of Florida, republished with permission.

Judge declares parts of medical marijuana law unconstitutional

A Tallahassee judge eviscerated the state law on medical marijuana, declaring major provisions to be unconstitutional.

The ruling came in a challenge brought by Florigrown, which had been denied a chance to become a “medical marijuana treatment center” (MMTC), or provider. The company is partly owned by Tampa strip club mogul and free speech advocate Joe Redner.

In a written order, Circuit Judge Charles W. Dodson struck down several parts of the law that implements the constitutional amendment passed by voters in 2016 authorizing medicinal cannabis:

— The requirement that Florida have a vertically-integrated market, meaning the same provider grows, processes and sells its own marijuana.

Dodson said lawmakers improperly modified the amendment’s definition of an MMTC: “… an entity that acquires, cultivates, possesses, processes, transfers, transports, sells, distributes, dispenses, or administers marijuana …. (emphasis added)” The law instead uses “and” instead of “or,” Dodson wrote, which “contradicts” the amendment.

— Limits on the number of marijuana providers that can be licensed by the state.

“The amendment places no limits or caps on the number of MMTCs in Florida,” the judge wrote. “Such limits directly undermine the clear intent of the amendment.”

— Special categories of licenses, such as for owners of former citrus processing facilities.

For example, another provision in the law gives preference in granting medical marijuana provider licenses to companies with underused or shuttered citrus factories. Dodson said that violates another part of the state constitution barring a “grant of privilege to a private corporation.”

“This court understands the importance of both the Legislature and the Department (of Health) in developing a thorough, effective, and efficient framework within which to regulate medical marijuana, as directed by the amendment,” Dodson wrote.

“Florigrown has established that the Legislature and the department have such a framework … They have simply chosen to restrict access in a manner that violates the amendment.” The department regulates the drug through its Office of Medical Marijuana Use.

“Providing patient care to the citizens of Florida is exactly what Florigrown is trying to do with this suit,” company CEO Adam Elend said.

“We provided evidence that the current system threatens the availability and safe use of marijuana,” he said in a statement. “Under this broken system, there’s no way for the department to predict supply or calculate how many dispensaries are needed for the number of patients on the registry.” (Florigrown’s full statement is here.)

Dodson’s ruling, docketed last Thursday, was in the context of Florigrown’s request for a temporary injunction, which he denied. He instead set a case management hearing for Oct. 3.

“The court is concerned about findings of no irreparable harm and that granting a temporary injunction at this time is not in the public interest,” he wrote. “The passing of more time may alter those findings.” Dodson did find that Florigrown has a “substantial likelihood of success on the merits” of the case.

A request for comment is pending with Sen. Rob Bradley, a Fleming Island Republican and primary architect of the state law.

“The denial of the request for temporary injunction will allow the department to continue to work to implement the law so Floridians can have safe access to this medicine,” said Health spokesman Brad Dalton in an email.

The lawsuit began with an epic 238-page lawsuit — replete with references to Encyclopedia Britannica, ancient Roman medical texts and the Nixon White House tapes — that alleged the state was failing its responsibility to carry out the people’s will when it comes to medical marijuana.

State seeks to uphold ban on smoking medical cannabis

Pointing in part to smoking-related health effects, Attorney General Pam Bondis office on Friday filed a 57-page brief arguing that an appeals court should uphold a decision by the Legislature to ban smoking medical marijuana.

The brief, filed at the 1st District Court of Appeal, came as the state challenges a May ruling by Tallahassee Circuit Judge Karen Gievers, who said the smoking ban violates a 2016 constitutional amendment that broadly legalized medical marijuana.

The Legislature in 2017 passed a law to carry out the constitutional amendment and included the smoking ban.

Prominent Orlando lawyer John Morgan, who heavily bankrolled the constitutional amendment, filed a lawsuit last year challenging the smoking ban. Bondi’s office Friday filed an initial brief in its attempt to overturn Gievers’ ruling.

The brief raised a series of issues, including arguing that the Legislature “considered important health and safety factors” when deciding to ban smoking.

“Notably, the Legislature considered evidence of the health hazards of smoking and concluded that smoking marijuana constitutes a harmful delivery method,” the brief said. “Time and again during debate, elected members of Florida’s Legislature emphasized that the amendment is exclusively about medicine, and that smoking is antithetical to good medicine.

“In considering these health-related factors, the Legislature reasonably determined that the harms caused by smoking — including harms to patients and those exposed to secondhand smoke — were ample reason to exclude smoking from the statutory definition of ‘medical use.’

“The Legislature therefore acted under its general authority to regulate public health, safety, and welfare when it drew a reasonable line between the smoking of medical marijuana, and other delivery methods.”

But in her May ruling, Gievers found that language in the amendment “recognizes there is no right to smoke in public places, thereby implicitly recognizing the appropriateness of using smokable medical marijuana in private places consistent with the amendment.”

The “ability to smoke medical marijuana was implied” in the constitutional language “and is therefore a protected right,” Gievers wrote.


Republished with permission of The News Service of Florida. 

More money flowing into Florida’s medical marijuana market

Updated 1:30 p.m. — Toronto-based Scythian Biosciences Corp. announced on Monday it was buying Cannabis Cures Investments (see below) and renaming itself Sol Global Investments Corp., with that deal expected to close Oct. 15, pending regulatory approval.

A press release is here. The original post from earlier Monday is below.


As the state gets ready to license more providers, another potentially big deal is in the works as medical marijuana captivates private capital as the newest new thing.

A new concern called Cannabis Cures Investments (CannCure) has agreed to buy a 60 percent interest in 3 Boys Farm of Ruskin, with the closing expected in mid-August. Terms of the pending deal were not disclosed.

Florida corporation records show CannCure itself is owned by Namaste Gorgie, one of South Florida yoga entrepreneur Cathy DeFrancesco‘s companies.

DeFrancesco, who founded SOL Yoga in Miami, and her husband, Andrew DeFrancesco, also are behind private equity firm The Delavaco Group, which has invested in Aphria, a Canadian producer of medical cannabis products.

And Aphria formerly was invested in Canadian-based DFMMJ Investments, which owns Florida medical marijuana provider Liberty Health Sciences.

The current heat is likely because, as financier Justin Costello recently put it, medicinal cannabis in Florida is seen as a potential “multibillion-dollar industry.” (Costello’s Seattle-based GRN Funds is coming to the state to offer banking services to marijuana providers.)

With the number of “qualified, active patients” surpassing 100,000, the state is finally beginning the process of issuing four additional medical marijuana provider licenses, as provided under state law.

But money doesn’t like to wait: The country’s biggest medical marijuana provider also is buying its way into the Florida market.

MedMen Enterprises Inc. of Los Angeles agreed last month to pay $53 million for the license held by Central Florida’s Treadwell Nursery. In Florida, providers are known as “medical marijuana treatment centers,” or MMTCs.

The most recently granted license, to a provider known as Nature’s Way after a legal challenge and settlement, now is held by Green Owl Pharms, according to state records.

The 3 Boys deal was revealed in a filing this month with the Department of Health, which regulates the drug through its Office of Medical Marijuana Use.

3 Boys is one of 14 licensed providers in the state, but now only has authority to grow. Florida has a vertically-integrated market, meaning the same provider grows, processes and sells its own marijuana.

It’s asking to be allowed to postpone having to sell its own product from this Tuesday to April 1, 2019: “It is anticipated that capital raised from the sale would be used to help build out (processing) and dispensing operations,” 3 Boys’ July 19 filing said.

“Because the production of medical marijuana in Florida is a new and evolving industry, there is a certain level of uncertainty for investors (that) has unavoidably complicated and extended the time for obtaining funding to proceed with getting product to market,” says the filing, by attorney Tana D. Storey of Tallahassee’s Rutledge Ecenia firm.

Christian Bax quits as state’s top medical marijuana regulator

Christian Bax, director of Florida’s Office of Medical Marijuana Use (OMMU), has stepped down after a controversial three-year tenure that frustrated patients, angered lawmakers, and witnessed an explosion in litigation.

His resignation is effective Aug. 10. Deputy director Courtney Coppola will serve as interim director, Department of Health spokesman Devin Galleta said Friday.

Bax’s resignation letter, released later Friday (see below), did not reveal his future plans.

News of Bax’s departure stoked an angry denunciation from Tampa strip club owner Joe Redner. In April, he won a court battle, only to be appealed by the state, allowing him to grow and make juice of his own marijuana to keep his lung cancer in remission.

“If they worked for me, I would have fired them in a minute,” Redner said, referring to Bax and Coppola. “They have no idea how a free market works … We can only hope the next governor believes in the fee market and not in cartels who gain marijuana monopolies.”

The state’s system of licensing scheme of cannabis providers, known as medical marijuana treatment centers (MMTCs), has resulted in a stream of legal and administrative challenges.

At least 11 are still pending, though some relate to matters other than licensing, including Orlando attorney John Morgan‘s constitutional challenge of the state’s ban on smoking medicinal cannabis. Plaintiffs backed by Morgan won, and that case too is now under appeal.

Morgan bankrolled the 2016 state constitutional amendment allowing medicinal cannabis, passed by a little more than 71 percent of voters as a ballot question. And Morgan leveled heavy criticism of Bax.

“He was so inept that it had to be intentional. Anyone would be better and more capable,” Morgan said. “He was to health care in Florida what Barney Fife was to law enforcement. This is a great day for the sick and injured in Florida.”

Ben Pollara, campaign manager for Amendment 2’s political committee, said it was “a shame it’s taken this long” for Bax to leave. “

“His tenure has been marked by repeated failures to meet the needs of patients throughout Florida. I sincerely hope the office’s new leadership will learn from those mistakes and act quickly to get Florida’s medical marijuana program fully functional,” said Pollara.

Bax also faced reports he “had little experience when he won a high-profile job that state officials refused to publicly advertise,” relying on his family connections with Gov. Rick Scott, including father James Bax, described as “a wealthy, wired Tallahassee insider.”

Gary Stein, a medical marijuana historian and advocate, acknowledged that Bax “had a Herculean task, made infinitely harder by his lack of experience and probable pressure from above.”

The system “created for him to manage had a flawed application process that forced him to spend far too much time in litigation and far less time in the mandated tasks of regulation and rule-making,” said Stein, a former employee of the Department of Health and the Centers for Disease Control and Prevention.

“I was very critical of him because of the high importance of his position and the great needs of hundreds of thousands of patients that relied on the efficiency of his department for critical access to medicine.

“There was no room for the kind of errors and snail’s pace of the OMMU that occurred,” Stein added. “I wish him well, but he didn’t belong there, and he didn’t get the support that he needed … Rather than giving him more infrastructure, they gave him more lawyers.”

But Dr. Jeffrey Sharkey, founder and head of the Medical Marijuana Business Association of Florida, said he “always had a very productive working relationship with Mr. Bax.”

“… It is not surprising that he and his office have faced a lot of challenges over the last two years in trying to implement a brand new, highly regulated, fast-growing and dynamic medical cannabis industry in one of the largest states in the country, with all of its diverse players, politics and pressures,” Sharkey said.

“To his credit, he managed it professionally and the young industry is in better shape for his efforts. We wish him well.”

Patty Nelson, Bax’s predecessor and now an industry consultant, said the post is one that will draw criticism and scrutiny.

“There’s no denying it’s a hard job. It sometimes feels like an impossible job,” she said. “And you face critics from every direction, which makes it difficult to navigate.”

Coppola, Bax’s successor, began in state government as a 2013 member of the Gubernatorial Fellows Program, working for the Department of Business and Professional Regulation when she was a graduate student at Florida State University.

Kim Rivers, CEO of medical marijuana provider Trulieve, said in a statement Coppola “has a deep working understanding of the medical marijuana program in Florida, and we do not anticipate any issues or interruptions during the transition.”

Coppola appeared before lawmakers earlier this month to ask a special budget panel for another $13 million for operating costs. Legislators have been vexed over the slow-going of the office, including delays in issuing medicinal cannabis patient identification cards, though they granted the request.

They finally pushed back earlier this year when they included a provision from House Republican Jason Brodeur in the 2018-19 budget to withhold more than $1.9 million in Department of Health salaries and benefits until regulators fully implement medical marijuana.

“I can only add to the chorus of voices hoping the office will get going on the rule-making, in accordance with the clear direction given from the Legislature, to ensure people appropriately have access to the drug,” Brodeur said Friday in a text message.

One detail that troubled some lawmakers: $1.5 million of the extra money requested will go to outside lawyers hired by the office to represent it in ongoing litigation.

“Let’s stop wasting taxpayer dollars” on suits the state shouldn’t be appealing, House Democratic Leader Janet Cruz told Coppola. “Please start taking this seriously,” she added, calling the office’s actions part “intentional ineptitude” and part “simple sabotage.”

Material from the News Service of Florida was used in this post.

Saying ‘yes’ to marijuana money, new bank comes to Florida

Where the big banks say no, Justin Costello is saying ‘yes.’

Foreseeing “a multibillion-dollar industry here,” the head of Seattle-based GRN Funds says his firm has come to Florida to offer banking services to the state’s medical marijuana providers.

It already handles about $500 million in deposits for clients in the cannabis industry on the West Coast.

Costello, its chairman and CEO, was in Tallahassee last week to meet with state financial regulators “strictly as a courtesy.” (As a bank, his firm is federally chartered and not regulated by the state, he says.)

Accompanying him on that visit was Jeff Sharkey and Taylor Biehl of the Medical Marijuana Business Association of Florida, “facilitating an introduction to state policymakers,” as Sharkey put it.

“We just wanted to let them know what’s happening,” said Sharkey, who also operates the Capitol Alliance Group. “We thought it important that they understand the right way to do this … There are millions of dollars in cash going around out there.”

Costello says he already has nine marijuana banking clients signed up in Florida, whom he couldn’t name because of confidentiality regulations.

Medical marijuana providers around the country have been vexed by how to handle their money.

The big banks won’t do business with them; as The New York Times explained earlier this year, “selling marijuana violates federal law; handling the proceeds of any marijuana transaction is considered to be money laundering.”

Put another way, “while banks would love to tap into the growing market, concerns remain about how to reconcile such activities given that the possession and sale of marijuana remains illegal under federal” law, write attorneys Craig D. Miller and Anita L. Boomstein with the Manatt Phelps & Phillips law firm.

That’s led marijuana vendors keeping thousands, even millions, of dollars in cash in self-storage warehouses. Costello would like to take marijuana out of the cash-in-a-duffel-bag business model.

He worked with Chris Johnson, CEO of Integrated Compliance Solutions of Las Vegas, which specializes in “cannabis regulatory compliance software.”

The trick is being able to track every transaction, big and small, to avoid any perception of laundering. Providers, for instance, have to show sales are only to those with a Florida medical marijuana patient ID card.

“It’s all about transparency,” Johnson said. “We take every single thing that’s sold in the retail store and ensure what gets deposited in the bank is traced back, seed to bank, legally to the entity.”

The Office of Medical Marijuana Use, which regulates the drug in Florida, is required to have its own statewide “seed to sale” tracking system but has not yet selected a vendor.

“It’s funny: A lot of cannabis people lived a cowboy life and don’t trust the system,” Costello said. “You have to engage with them until it becomes a close business relationship.”

Lawmakers grudgingly OK more money for marijuana regulators

The Legislature opened the state’s wallet again Thursday, granting a request from the state’s medical marijuana regulators for another $13 million in operating costs.

The approval from the Joint Legislative Budget Commission didn’t come without some grousing, however. The Department of Health, under Gov. Rick Scott, regulates the drug through its Office of Medical Marijuana Use (OMMU).

House Democratic Leader Janet Cruz of Tampa told department officials she had “lost some sleep over this,” mentioning her and other lawmakers’ frustration over the slow-going of the office, including delays in issuing medicinal cannabis patient identification cards. 

Legislators had pushed back earlier this year when they included a provision from House Republican Jason Brodeur in the 2018-19 budget to withhold more than $1.9 million in Department of Health salaries and benefits until regulators fully implement medical marijuana.

Moreover, $1.5 million of the extra money requested Thursday will go to outside lawyers hired by the office to represent it in ongoing litigation.

For example, the state is appealing two high-profile cases: Tampa strip club mogul Joe Redner’s circuit court win to grow and juice his own medicinal cannabis, and plaintiffs backed by Orlando attorney John Morgan who won a decision allowing them to smoke medical marijuana.

“Let’s stop wasting taxpayer dollars” on suits the state shouldn’t be appealing, Cruz said. “Please start taking this seriously,” she added, calling the office’s actions part “intentional ineptitude” and part “simple sabotage.”

Other OMMU needs include covering the cost to review applications for four new provider licenses now that the number of medical marijuana patients is over 100,000, and to procure “a computer software tracking system that traces marijuana from seed-to-sale,” according to the request. (Details from the request are here.)

The Commission, which acts as a joint committee of the Legislature, is charged with reviewing and approving the equivalent of mid-course corrections to the current year’s state spending plan. The budget went into effect July 1. 

But Sen. Rob Bradley, the Fleming Island Republican who chaired Thursday’s meeting, said lawmakers “should have dealt with these issues” during the 2018 Legislative Session “while the budget was being prepared.”

“I’m disappointed that we are dealing with this now,” added Bradley, the Senate’s Appropriations Committee chair. “But we’re dealing with it. And we need to get these things done.”

In other action, lawmakers:

— Approved a request from Secretary of State Ken Detzner for authority to distribute $19.2 million from the feds for heightened elections security. All 67 counties have applied for funds, he said. The money may be spent on “cybersecurity” needs, among other things.

— OK’d a request from the Department of Emergency Management to dole out $340 million from a federal grant to farmers and grove owners to aid the citrus industry’s recovery from recent hurricanes. The money will go toward “purchasing and planting replacement trees,” ” repair of damages to irrigation systems,” and to repay growers for “economic losses.”

— Agreed to nearly $3.2 million more for the state Office on Homelessness to “support local homeless agencies in their efforts to reduce homelessness throughout Florida.”

Medical marijuana regulators withdraw licensing fee rule

State regulators have given up for now on a contentious rule requiring a hefty fee from medical marijuana suppliers.

The Department of Health, which regulates the drug through its Office of Medical Marijuana Use, had first proposed in April a “supplemental licensing fee” of $174,844 from each provider.

But the office on Monday, without explanation, announced it was withdrawing the proposed fee from further consideration.

It already had drawn a legal challenge from Liberty Health Sciences, a state-licensed “medical marijuana treatment center” (MMTC).

Its lawyer had argued the state set the fee too high.

“I understand the department will conduct future rulemaking proceedings on this subject and my client looks forward to discussing their concerns,” said John Lockwood, the company’s Tallahassee-based attorney.

In an email, Health Department spokesman Devin Galetta added that the department “is working to ensure that input presented by stakeholders during the rulemaking process is addressed.”

The fee in question was to be an “annual payment by a registered (provider) to cover the (state’s) costs of administering” the law governing medicinal cannabis.

Lockwood said in a filing with the agency that the calculation requires the state’s 13 currently licensed MMTCs “to bear the burden of the supplemental licensure fee when the fee should be borne by at least 17 MMTCs” — which would bring it down to around $133,000, a 24 percent decrease.

The money from the fee would help fund the Coalition for Medical Marijuana Research and Education within the H. Lee Moffitt Cancer Center and Research Institute in Tampa.

Lawmakers gave it a mission “to conduct rigorous scientific research, provide education, disseminate research, and guide policy for the adoption of a statewide policy on ordering and dosing practices for the medical use of marijuana.”

Liberty Health Sciences’ other challenge on a “variance procedure” for MMTCs is still pending; a hearing is set for next Friday. Both challenges were filed in the state’s Division of Administrative Hearings.

The idea behind the latter rule, for one example, was to allow providers who had originally applied to use a certain marijuana processing procedure to later ask to use a newer, better technology.

But Liberty’s challenge there suggests it could also cause administrative nightmares by “requiring an MMTC to request a variance before hiring or firing any employee or manager.”

Liberty Health Sciences is a subsidiary of Canadian-based DFMMJ Investments, which itself was formerly partly owned by Aphria, a Canadian producer of medical cannabis products. Liberty has dispensaries in Summerfield, St. Petersburg, Tampa and Port St. Lucie.

Appellate court calls out ‘abuse of discretion’ in medical marijuana case

An appellate court delivered the equivalent of a judicial smackdown Tuesday following its decision last month to reinstate a delay on the effect of a lower court’s ruling that medical marijuana can be smoked in Florida.

A unanimous three-judge panel of the 1st District Court of Appeal (DCA) issued a 5-page order calling Circuit Judge Karen Gievers‘ ruling to allow patients to smoke pending appeal “an abuse of discretion.”

The state’s appeal after Gievers’ decision had placed an automatic stay, or hold, on the ruling pending review.

Gievers lifted that stay. She found that the ban – written into state law – violates the constitutional amendment on medicinal cannabis, passed by 71 percent of voters in 2016.

But the appellate judges said the smoking plaintiffs “have not shown that compelling circumstances exist to support the order vacating the stay in this appeal,” nor have they “sufficiently demonstrated a likelihood of success on the merits.”

That also counters Gievers, who previously said “there is no likelihood of success” by the state on appeal.

The 1st DCA left the door open, however, saying in a footnote that Tuesday’s move “do(es) not intend to preclude full review of the issues on appeal.”

John Morgan – the Orlando attorney, entrepreneur and medical marijuana advocate behind the 2016 amendment – organized the smoking ban lawsuit. Smoking was outlawed by lawmakers and Gov. Rick Scott in an implementing bill approved last year.

The plaintiffs include Cathy Jordan, a woman with Lou Gehrig’s disease who has testified she wouldn’t be alive but for smoking marijuana.

The suit is against the Department of Health, which regulates the drug through its Office of Medical Marijuana Use.

Morgan has called on Republican Gov. Rick Scott, now running for U.S. Senate, to drop further court challenges of Gievers’ ruling.

And he has since said he’s “going to look at starting a fund” toward an initiative to legalize marijuana, including recreational use, on the 2020 ballot.

Attorneys in the smoking case and in a separate case brought by Joe Redner — the Tampa strip club mogul who won a decision allowing him to grow and juice his own medical marijuana — had asked the state’s Supreme Court to take over the appeals. Those requests were denied.

“This is not surprising and why it should go to the Supreme Court now,” Morgan tweeted in response to the latest ruling. “It’s not a matter of if but when. So why waste taxpayers money. Vacating a stay is impossible. This issue will haunt @FLGovScott in November when his ‘stay’ will be over!”

Tuesday’s order was by a unanimous three-judge panel of Joseph Lewis Jr., Lori S. Rowe, and M. Kemmerly Thomas.

Citrus ‘preference’ spurs marijuana license dispute

An orchid grower and investors spent nearly $800,000 to purchase property in Pinellas County they believed would give them a leg up in obtaining a highly sought-after medical marijuana license.

But one of the owners told a state judge Monday he now believes the business would have been better off keeping the cash, due to what his lawyers are calling a faulty rule proposed by state health officials.

Louis Del Favero Orchids is challenging the proposed rule, which is based on a law passed last year implementing a voter-approved constitutional amendment that broadly legalized medical marijuana. The orchid grower argues the proposal fails to properly carry out the law, which includes giving preference for up to two medical marijuana licenses to applicants who own facilities that were used to process citrus.

The 2017 law also required health officials to issue 10 new licenses to applicants that meet certain requirements. Overall, the state has issued licenses to 13 operators, including a handful of new operators who met the criteria laid out in the 2017 law.

But it has not started accepting applications for four new licenses from potential vendors that may not have participated in the process before. Under the law, health officials have to give special preference for up to two licenses to applicants that “own one or more facilities that are, or were, used for the canning, concentrating, or otherwise processing of citrus fruit or citrus molasses and will use or convert the facility or facilities for the processing of marijuana.”

The citrus preference is the subject of one of several marijuana-related court challenges, including the one heard Monday by Administrative Law Judge R. Bruce McKibben.

Lawyers for Del Favero contend the proposed rule is flawed because it “seeks to grant a preference to a broader group of applicants than the statute permits.”

They say the rule gives preference to applicants who own “property” that was once used for citrus-processing purposes but would be used for processing medical marijuana. That’s different than the requirement in state law that preference be given to applicants who own “facilities” that were once used for citrus processing, lawyer Seann Frazier told McKibben.

After the law was passed last year, the orchid business paid $775,000 to purchase property in Safety Harbor that included a facility once used to process orange juice.

Ormond Beach lawyer David Vukelja, who owns 20 percent of Del Favero, told McKibben he and other investors closed on the property because they believed it would give them an edge when applying for a marijuana license.

“We looked at the statute,” Vukelja said. “We took it at face value.”

But according to the Department of Health, there’s nothing in the law that requires a “facility” to be a structure.

“There are three requirements. You have to own it. You have to prove it is or was used for canning, concentrating or otherwise processing. And you have to demonstrate how you will use that,” Courtney Coppola, deputy director of the state Office of Medical Marijuana Use, said Monday.

But Frazier asked if that meant that a tent, erected where a structure previously was used to process citrus, would make an applicant eligible for the citrus preference.

“You’re saying the facility is the tent. It could also be the space it’s in. So how they will convert that space. They could put a building on it,” Coppola said.

“The facility could be dirt. Unimproved dirt, that somebody could promise to put a $1 million processing plant on top of it, they would still meet the citrus preference. Is that true?” Frazier asked.

Coppola agreed.

The health department’s interpretation of that part of the law met with approval from Mecca Farms, a Lantana-based citrus company that intervened in the challenge.

Mecca operates out of a 50,000-square-foot facility that sorts, grades and waxes fruit — processing activities that health officials said make Mecca eligible for the citrus preference.

Mecca’s lawyer, Glenn Burhans, chided Frazier, saying he found it “ironic” that the orchid grower’s attorney suggested the 2017 statute was designed to help a flailing citrus industry.

“He’s right. But that’s not his client,” Burhans said. “Let’s not kid ourselves and think that Del Favero is a longtime citrus company that has fallen on hard times. That’s just not the case.”

Mecca, which began citrus farming in Florida more than three decades ago, is challenging a different part of the rule that deals with the scoring of the applications, which Burhans said gives too much discretion to evaluators.

Del Favero, meanwhile, also is challenging a component of the rule that gives 35 additional points to the two highest-scoring applicants seeking the citrus preference. The extra 35 points — just a 3 percent bonus on top of the total 1,150 points available to all applicants — aren’t enough to make a significant difference, according to Del Favero.

Because applicants can receive up to 100 points for certified financial documents, Vukelja said the orchid company may have had a better chance of getting a license had its owners not invested the money in the old citrus plant.

“We took cash off a balance sheet in order to acquire an asset only to find out it’s a diluted asset that, at best, is worth 35 points out of 1,150 points,” he told The News Service of Florida after the meeting. “I’m sure I’m one of a long list of people who feels they’re being screwed by the Department of Health. Yeah, that thought has crossed my mind.”

Health officials’ definition of facilities “could be anything from a building to dirt,” Vukelja said.

“How dirt is a facility is beyond me,” he said.

McKibben did not indicate how he would come down on the rule challenge, but he agreed with Ed Lombard, a private lawyer who represents the health department, that the law was imperfect.

“The statute, as someone mentioned, was poorly written, and I totally agree,” he said.

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