In 2016, Florida voters approved a constitutional amendment legalizing the sale of medical marijuana. The voter approved amendment specifically delineated what entities could distribute marijuana defining a Medical Marijuana Treatment Center (“MMTC”) as: “an entity that acquires, cultivates, possesses, processes . . . transfers, transports, sells, distributes, dispenses or administers marijuana, products containing marijuana, related supplies or educational materials to qualifying patients.”

In June 2017, Florida’s legislature passed regulations to implement the amendment and set forth a statutory framework for the registration of MMTCs through the Department of Health. Included in the implementation statute was the creation of a vertically integrated business model, whereby an entity must undertake all of the primary activities described in the amendment before they can receive a MMTC license (as opposed to performing only one function in the distribution chain). Specifically, Section 381.986(8)(e), Florida Statutes, states in pertinent part, “A licensed medical marijuana center shall cultivate, process, transport and dispense marijuana for medical use.” The statute also capped the number of MMTC facilities that can operate in the state, allowing only 17-21 treatment centers depending on demand.

Since its enactment, the statute has been widely criticized as being inconsistent with the amendment’s language and for limiting MMTC licenses to a handful of businesses, creating a limited oligopoly of providers for such a populous state.

Last year, after being denied a license, a Tampa based company, Florigrown, sued the Department of Health in state court over the regulations, requesting a declaratory judgment and permanent injunction declaring part of the statute unconstitutional.

The trial court judge agreed with Florigrown, finding that the Department had failed to draft rules in accordance with the plain language of the amendment and therefore the court required the Department of Health to register Florigrown along with other marijuana businesses. The State appealed the ruling and the trial court’s order was stayed pending appeal.

Last week, in a victory applauded by the marijuana industry, Florida’s First District Court of Appeal affirmed the trial court’s decision. Specifically, the appeals Court concluded that the Department’s creation of a vertically integrated business model directly conflicted with the constitutional amendment’s definition of an MMTC and created a more restricted definition than provided by the amendment. The Court explained that “the State may not regulate an industry governed by a constitutional amendment in such a manner that would severely restrict or diminish the industry.” The Court went on to find that the vertically integrated system conflicts with the constitutional amendment and renders the statutory cap on the number of facilities under the statute unreasonable. The Court also directed the department to come up with a different regulatory structure that allows for a “reasonable number of licenses.”

It is unclear if the Department will appeal this ruling although Florida’s governor, Ron DeSantis, has previously stated that he would drop appeals in marijuana-related cases regarding limited licenses and vertical integration. Alternatively, the legislature may rewrite the law. For now, however, the ruling is a big win for businesses and growers trying to participate in Florida’s expanding medical marijuana industry.

The First District Court of Appeal’s decision, Florida Department of Health v. Florigrown, LLC, is attached here.