A legal morass is thwarting Alabama’s medical marijuana program

For months, Oliver Washington has been experiencing a kind of bureaucratic whiplash unique to entrepreneurs in nascent marijuana markets.

After learning that he had won one of Alabama’s five coveted medical marijuana licenses in June, the fourth generation nursery owner was excited to finally plant some cannabis in the heart of Dixie.

But since Washington celebrated his win, he’s seen his license voided, re-awarded and then put on hold due to numerous lawsuits challenging the state’s licensing process. Now, Washington’s unsure if or when he’ll be able to do what he does best: cultivate plants.

“It’s deflating and costly for a farmer like myself,” he said.

Across the country, companies that lost out on cannabis licenses have filed lawsuits challenging those decisions, often stalling market rollouts for months or even years. Legal disputes have proven particularly messy in states like Alabama with a cap on the number of cannabis businesses and a merit-based application process.

In response to the initial lawsuits, the Alabama Medical Marijuana Commission promptly voided its original licensing decisions and then re-awarded them in August, to the same group of winners except one.

That only sparked more litigation, and a court order has prevented the agency from issuing the licenses awarded in that round. The agency passed emergency rules last week in hopes of getting licenses out by the end of the year. But some applicants fear it will merely invite even more litigation.

“This legal strategy here has been death by a thousand cuts,” said Brian Vicente, an attorney who is working with Washington. 

The legal morass means successful applicants cannot move forward with their business plans, keeping legal cannabis out of reach for patients more than two years after Alabama lawmakers passed legislation establishing the program.

The most difficult application

Alabama became one of the first states in the Deep South to legalize medical marijuana through the Legislature in May 2021. Perhaps understanding the political tides changing — 74 percent of Mississippi voters had approved a medical marijuana initiative at the ballot box in 2020 — the Republican-dominated Legislature managed to pass medical cannabis legislation.

"It was a very long journey to get to where we are," said Mike Ball, a former state representative who spearheaded legalization efforts in the Legislature.

Ball, a former cop, did a 180 on the issue after receiving an email from a woman whose granddaughter experienced relief from epileptic seizures with cannabis oil. When he first introduced cannabis legislation, Ball recalled, other lawmakers reacted as if "I was unleashing potheads, having them running naked in the streets."

Despite that wariness, he spearheaded efforts to pass a low-THC cannabis oil bill in 2014, which helped pave the way for legalizing a comprehensive medical program.

Cannabis entrepreneurs and attorneys who worked on applications for Alabama’s medical program described the process as the most rigorous of any state marijuana market.

Applicants had to submit detailed drawings for everything from HVAC to plumbing systems. Those who applied for the five vertically integrated licenses — which allows businesses to grow, process and sell marijuana — also had to show that they had $250,000 in the bank.

Nearly 40 applicants, including Washington, tried to get an integrated license. Washington, who is Black, had been courted by about 10 potential business partners looking to get into the Alabama market.

“One, they knew I could grow,” he said. “Two, they knew my ethnicity would help them.”

Alabama’s medical marijuana law requires that one of the five integrated licenses go to a minority-owned business. A quarter of licenses in other categories like cultivation and retail are also set aside for minority-owned businesses.

Washington ultimately decided to collaborate with Chuck Smith, an industry veteran who co-founded Dixie Elixirs in Colorado in 2009. Smith introduced Washington to Vicente, a lawyer who helped draft Colorado’s legalization initiative that passed in 2012 and co-founded a cannabis-focused law firm.

Initially, Smith said, he was concerned about potential “backroom dealings and the collusion that so many states are accused of.” Cannabis corruption scandals have hit numerous cannabis markets, from liberal states with recreational weed to conservative states with restrictive medical programs.

But Smith’s initial concerns were assuaged by the way Alabama set up merit-based licensing, hiring third-party evaluators for a blind scoring process. The identities of the evaluators are unknown to the public, preventing applicants from seeking to influence their scores.

But that hasn’t prevented the process from getting mired in a wave of lawsuits.

AMCC's voiding of licenses and settlement negotiations in response is worrying applicants who have been awarded licenses. And now, neither the critics or defenders of the agency's licensing decisions are happy with the emergency rules that are aimed at moving the process forward.

Warren Cobb, co-owner of Sustainable Alabama, was awarded an integrated license twice. He fears that the emergency rules will unfairly favor some applicants over others, and lead to even more litigation.

The AMCC says it has to go through the legal process that all the litigation has brought.

“We participated in those discussions in good faith; we've listened to all parties,” Justin Aday, general counsel for the AMCC, said in an interview.

Some businesses, however, question whether the lawsuits are raising legitimate legal concerns. They’re concerned that some litigants are following a familiar playbook of challenging licensing decisions in hopes of eventually winning a license.

"The lawsuits seemed more like technicalities than getting at the substantive issues," said Vincent Schilleci, chief legal officer of CCS of Alabama, which was awarded a dispensary license twice.

One plaintiff, Alabama Always, has filed four different lawsuits against the AMCC.

William Somerville, an attorney for Alabama Always, disputes that the lawsuits aren't substantive. Alabama's medical marijuana law requires cultivators to begin growing within 60 days. Somerville points out that Verano Holdings, one of the license winners in the first round, admitted in court that it hadn't started constructing its facility, which means it wouldn't be able to meet that requirement.

"That to me proves that the scores are not just a technical problem, they're a substantive problem," Somerville said.

Rumors are swirling that if the medical program isn't able to move forward by the time the Legislature comes back in session in January, lawmakers may scrap the whole program or open up a licensing free-for-all.

"This needs to play out before the Legislature gets involved," said Ball. He called for the AMCC to "bite the bullet and do the best they can and issue the damn licenses."

Meanwhile, a judge recently said that he was considering modifying the temporary restraining order to allow applicants who applied for license types that aren’t being contested in court — like lab testing and transportation — to move forward.

That still wouldn't speed up the launch of the program. On Thursday, the AMCC will consider rescinding its second round of licensing decisions from August.

Washington, for his part, is eager to start cultivating medical cannabis, which will help his farm diversify. He says growing cannabis isn’t much different from other plants, likening it to “half tomato, half poinsettia.”

Shore Acres Plant Farm in Theodore, Ala. has weathered various challenges since Washington’s grandfather first started selling azaleas in coffee cans out of the back of his truck in the 40s. The family business eventually started selling to local stores. As they were replaced by big-box chains, Shore Acres became a vendor for Walmart. Still, it maintained its small storefront for the community.

But it’s unclear when Washington will be able to put his horticultural skills to use for Alabama’s medical marijuana program.

“It's restricting product that [patients] could be receiving right now,” Washington said. “I have to keep the faith, and keep moving, pressing forward.”