Nevada Marijuana Dispensary Lawsuit Could Put Entire Cannabis Program at Risk

Five companies whose applications were rejected by the state of Nevada have filed suit against the state and against those entities that received approval on December 1, 2014.

The lawsuit, brought by Nevada Medical Marijuana Dispensary, GB Sciences Nevada, Nevada Holistic Medicine, Fidelis Holdings, and Desert Inn Enterprises, alleges the Nevada Division of Public and Behavioral Health reversed its position and guidance on how applications would be scored and ultimately approved or denied. The suit also alleges that the Division announced that it would coordinate with the city or county regarding approvals to ensure that an entity receiving approval from the local jurisdiction would not be shut out by the state. The lawsuit also calls into question the validity of the selection process as a whole and alleges that those scoring the applications were not as knowledgeable as they should have been and that the state’s scoring process was done by “multiple unknown temporary employees.”

The question everyone here in Nevada is asking is what impact this litigation will have on those companies that did receive state approval to begin operating their marijuana businesses later this year. Needless to say, those who received such approval (including our clients) are concerned that this litigation will delay their starting operations. While we do not believe that this lawsuit will slow down those who have already been approved, delay is always possible.

In mid-December, Clark County District Court Judge Kathleen Delaney gave lawyers for the the cannabis businesses whose applications were rejected more time to file additional briefing to further articulate their positions. Meanwhile, the State of Nevada and the other defendants have filed a Motion to Dismiss the lawsuit in its entirety. It could take several months or even several years before the litigation ends. For this reason alone, we do not believe that those whose applications were approved will be delayed.

Adding to the uncertainty, however, was that Linda Anderson, Nevada’s chief deputy attorney general, admitted that the state’s process was flawed and said the state might consider disqualifying some of those to whom it gave provisional licenses, depending on how Judge Delaney decides. Such a move would likely lead to even more litigation as those with provisional licenses who are disqualified will no doubt feel wronged themselves.

We would like to see both the State and its counties re-open the application process to allow for rejected applicants to re-apply and for others who wish to be considered to apply for the first time. This next go round (and any future application windows) should employ a more developed application and scoring process, thereby alleviating the concerns of the five rejected applicants in the lawsuit. Another go-round would also provide much needed revenue for the counties and the state, while giving a legitimate chance to the most qualified applicants who for whatever reason either did not participate or were not chosen the first time.

Another round of applications would undoubtedly be a win-win for all.