Busted: Florida appeals court says state’s marijuana memo is an illegal rule

A Florida appeals court said state health care regulators overstepped their authority in February 2021 when they issued a memo telling medical marijuana treatment centers they could not contract with Leafly, a third-party company that helped with online ordering.

The 1st District Court of Appeal this week rejected the Department of Health’s (DOH) assertions that Leafly could not challenge the memo as an improperly drawn-up rule on the grounds that the Washington-state-based company lacked standing.

The three-judge panel — composed of Chief Judge Timothy D. Osterhaus and Judges Ross L. Bilbrey and Rachel E. Nordby — also rejected DOH’s arguments that its memo wasn’t a rule and that it was just restating existing law.

Leafly hosted a website that advertised medical marijuana products sold by licensed vendors in Florida. Visitors could select products and place them in an online cart.

Leafly would send the orders to marijuana medical treatment centers (MMTCs). The centers would then tell Leafly when the products were available for pickup from the center itself. Leafly would either relay that to the customer or communicate about delivery options.

Administrative court records detail that one vendor, Curaleaf, requested permission to use Leafly services, but state regulators said no. Curaleaf then complained other treatment centers were using Leafly services, prompting the director of the state’s Office of Medical Marijuana Use to send a letter “ASAP” to all treatment centers. The memo threatened a $5,000 fine against companies that contracted with Leafly.

That February 2021 memo told the treatment centers that contracting with Leafly violated state laws regarding the use of third-party companies in the dispensing or delivery of medical marijuana. As a result, the centers canceled contracts with Leafly, leading the company to file a rule challenge with the Division of Administrative Hearings.

An administrative judge sided with Leafly, and the Department appealed the decision. In its ruling, the appeals court said Leafly clearly had standing to challenge the memo since it “explicitly targeted Leafly’s online ordering business.” 

The judges also asserted the Department went beyond the wording of existing law to block Leafly’s business and that regulators came up with their own interpretation, which requires rules.

“Leafly supplies an online ordering interface that displays product information and supplies order information. If an MMTC offers delivery services, it might communicate the shipment information through Leafly, but Leafly does not prepare or deal out the product itself,” Osterhaus wrote in the opinion, and Bilbrey and Nordby concurred.

“We recognize that Leafly’s relationship to the dispensing work completed by the MMTC’s might bring it within the reach of the statute. But, at the same time, the MMTCs arrangement with Leafly doesn’t make it ‘readily apparent’ that the ‘dispensing’ language (in the law) prohibits MMTCs from using online ordering services in support of their work. Rather, it appears that the Department’s interpretation of ‘dispensing’ and its prescription as applied to Leafly’s business constitutes a rule.”

The ruling pointed out the law is not clear what types of contracts with third-party vendors are prohibited, pointing out, for example, that automated teller machines run by third-party vendors are allowed to be in treatment center lobbies.

The DOH did not reply to Florida Politics’ request for comment.