An appellate court lifted the stay on the 2019 medical cannabis Request for Application process Feb. 18, opening the gates for the Department of Health to finish grading nearly 200 applications and release 24 alternative treatment center licenses.
Applicants and the DOH have been bound by the stay since December 2019 after an RFA period lasting from July 1 to Aug. 22 of that year. A two-judge panel ordered the stay (and clarified it two weeks later) due to a technical error that six applicants say they experienced with the portal.
However, in response to the question “How does the applicant gain confidence that the electronically submitted application has, in fact, been received by [the Department] in its entirety as originally sent?” included on the RFA’s Frequently Asked Questions page, published in July 2019, the DOH said:
“Applicants assume sole responsibility for the complete effort involved in the application submission. Allow plenty of time for the application submission process as applications received after the application period closes will not be considered. Following the submission deadlines, the Department will conduct a completeness review . . . . Applications will be rejected and not evaluated if received after the submission deadline.”
On the Aug. 21 and Aug. 22 deadline days, court documents said the DOH “monitored its online submission portal website to ensure it was functioning properly and to keep track of how many submissions for each type of permit had been filed.” No technical issues or system outages with the NoviSurvey portal were noted by the DOH on those days, and 196 applications were recieved.
The court Thursday affirmed the disqualifications, along with several disqualifications on grounds of late submission.
Ansell Grimm & Aaron Partner Josh Bauchner, who represented multiple appellants, called the decision “unfortunate” and said “it kind of missed the point.”
A separate disqualification of applicant ZY Labs Inc. was reversed and remanded back to the DOH for further evaluation. The DOH had disqualified ZY Labs on grounds that it was found to be unresponsive on one or more RFA criteria by not including proof of municipal support within its application.
The court found, however, that the application’s true wording required proof of community support ‘or’ municipal support, not ‘and’ municipal support. Therefore, the DOH must grade ZY Labs’ ATC application along with all other applications not disqualified.
ZY Labs was represented by Chiesa Shahinian & Giantomasi Partner Lee Vartan, who said his clients are “incredibly happy” with the decision.
“It’s obviously a very long process for them and everyone who’s been a part of it. We felt not only did we have a complete application, but we had a really strong application; and when they heard in Nov. 2019 that their application wasn’t going to be scored, after all the time and effort and expense, you can imagine how they felt,” Vartan said.
Vartan said he and client ZY Labs tried to resolve it amicably with the DOH before making it a court issue.
“We’re very happy to be at the end, and we’re excited to have the application scored,” he said.
Beyond those involved in the lawsuits, still-in-the-running applicants breathed a sigh of relief at the decision Thursday morning. Travis Ally, founder of vertical integration license applicant 93 ID Inc., said he felt like “a burden has been lifted” and that he “can’t wait to hear who the actual winners are now.”
In the last 14 months, Ally’s outfit has spent between $20,000 and $25,000 monthly to retain site control of their could-be ATC in Orange, adding up to more than a quarter-million dollars in rent over time.
Beyond the financial challenges, Ally noted the lengthy stay has resulted in opportunity loss, too: now into 2021, 2019 RFA awardees don’t get any real first-mover advantage in the soon-to-be-legal adult-use market.
“We could’ve waited a year,” he said. “And emotionally, it’s taken a toll – you plan for something and do everything you’re supposed to do, and you’re told to wait. But now that’s all in the past, and it’s time to celebrate. Hopefully now whatever happens there’s no more law suits, so they can fix whatever they need to fix, so the verdicts can be accepted.”
Jeff Brown, the assistant commissioner of the Health Department who oversees the medical marijuana program, told NJBIZ via email he had “no comment on the decision at this time.”
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