Missouri must issue a medical marijuana cultivation license to an applicant who was not informed that a key piece of paperwork was missing from its submission, the Eastern District Court of Appeals ruled Tuesday.

Mo Cann Do Inc., which sought a license for a growing facility in Cuba, is one of the rare instances where a challenge to a marijuana licensing decision has prevailed. In December 2021, the Missouri Administrative Hearing Commission directed the Department of Health and Senior Services to issue a cultivation license to NWGMO LLC in Marceline.

There have been numerous other appeals of the state’s initial licensing decisions. It is the first time a court has ordered the department to issue a license it had previously denied, spokeswoman Lisa Cox said.

Mo Cann Do submitted an application for a cultivation license in August 2019 as the department was implementing the medical marijuana program authorized by voters in November 2018. It also submitted applications for five dispensary licenses.

The department rejected the application because it did not include a “certificate of good standing,” a document issued by the Secretary of State’s office showing a business is properly registered. The department’s regulations require it to include specific details about why it is denying a license if the denial is based on missing information, Judge James Dowd wrote in his majority opinion.

“The DHSS cannot be allowed to undermine the express language of its own regulation by simply directing the applicant to the applicable state regulations to rescue it from its failure to be specific,” Dowd wrote.

Mo Cann Do also applied for five dispensary licenses to open retail locations in Columbia, Kansas City, Springfield and St. Louis. Those applications also lacked the certificate of good standing and were denied.

Eric Walter, the St. Louis-based attorney representing Mo Cann Do, could not be reached Tuesday for comment on the ruling and the status of other applications.

The department is considering whether to appeal, Cox said.

Under the medical marijuana section of the Missouri Constitution, the department was directed to issue no less than one cultivation license for every 100,000 residents and 24 dispensary licenses for every congressional district. When implemented, the department said it would start with those minimums – 60 cultivation licenses and 192 dispensaries.

The Mo Cann Do application scored 62nd on the list of applicants for cultivation. When the 2020 census showed Missouri should have at least 62 dispensaries, the department issued licenses to the 61st and 63rd applicants, skipping Mo Cann Do because of the missing paperwork.

   

As of Tuesday, there are 66 licensed growers and 215 dispensaries.

Mo Cann Do appealed the denial to the Administrative Hearing Commission, which upheld the department’s action, and to the courts in St. Louis County, which also affirmed the decision.

“This is an unfortunate case of a technical mistake but Missouri should be able to insist on technical compliance from a sophisticated applicant such as petitioner in the course of enacting a far-reaching new government program such as the medical marijuana scheme,” Circuit Judge Thomas Albus wrote.

The issue isn’t whether Mo Cann Do should have realized what was missing but whether the department followed its own rules requiring notification about missing elements, Dowd wrote. It did notify Mo Cann Do of three other items that were missing, but failing to do so on the certificate of good standing “impermissibly violated its own regulation which it has no authority to do.”

With the legalization of adult-use marijuana, the already-lucrative licenses to grow, process and sell pot in the state became even more profitable. Every facility that had a medical license was given the first chance to obtain a comprehensive license, allowing it to serve the medical and recreational markets.

In a dissenting opinion, Chief Judge Kelly Broniec wrote that she would have upheld the lower court ruling.

“While there is no dispute that being awarded one of these highly coveted licenses is an extremely lucrative proposition, it is also true that this brings great responsibility, given the nature of the controlled substance involved, as well as the undeniable fact that there is a  substantial market for licensed marijuana in Missouri,” Broniec wrote.

This article has been updated since it was initially published.

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