How Pangaea Will Shape New Jersey’s Cannabis Marketplace

According to the Appellate Division’s published opinion In re the Application for Medicinal Marijuana Alternative Treatment Ctr. for Pangaea Health and Wellness, LLC. et al. ___ N.J. Super. ____ (App. Div. 2020) the Department of Health (“the Department”) has some explaining to do about its Alternative Treatment Center licensing process. In Pangaea, eight unsuccessful applicants for Alternative Treatment Center licenses filed separate appeals based on alleged scoring irregularities and other alleged flaws in the review process. Their applications, along with 138 others, were evaluated based on several categories scored by a Committee that the Department formed. The Committee awarded licenses only to the top six scoring applicants.

Upon review of the applications’ scoring, the eight applicants filed their appeals based on unexplained irregularities in the Committee’s scorings. For example, one applicant received a “proliferation” of zeros in its score. Noting that the score of zero was reserved was for non-responsive answers in most instances, the Court was particularly troubled by these scores given that the applicant received nearly perfect numbers from other scorers for the exact same information.

The glaring discrepancies in the members’ scoring clouded the Court’s confidence in the selection process, leading it to hold the Department acted arbitrarily. In the Court’s view, the determination by the Department in awarding licenses was brief and similarly lacked the necessary why and wherefore to explain the decision-making process. The Court was similarly unconvinced the committee members had the relevant experience for the undertaking and whether the Committee’s analysis followed the Department's instructions. Coupled with the short time for review, the Court was hesitant to accept the selection process and remanded the matter to the Department with instructions to the Department to develop a procedure where the Department can address the applicant’s arguments about claimed errors during the agency process.

Bottom Line

The Court’s ruling highlights its expectation that the Department should find a way to listen to and resolve questions from disappointed applicants as part of its own internal process. Pangaea makes it clear that only once such an internal record is created may an administrative agency seek deference to its expertise.

For additional guidance on the cannabis industry, please contact please contact Jennifer Roselle, Esq., Counsel in the firm’s Cannabis, Labor, Human Resources Counseling & Compliance Practice Groups via email here or Daniel Pierre, Esq., Associate in the firm’s Cannabis, and Labor Practice Groups via email here.