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Could local lawsuit delay Ohio's medical pot plans?

Posted at 1:59 PM, Dec 01, 2017
and last updated 2017-12-01 15:55:59-05

CINCINNATI - Just as Ohio is learning who its first medial marijuana growers may be, a local firm is threatening legal actions that could delay the state's legal pot plans.

Downtown-based CannAscend is among dozens of firms that applied and were denied a license by Ohio to grow medical marijuana, an announcement made Thursday.  More than 100 firms filed applications for just 24 licenses made available across Ohio.

RELATED: It's 'don't ask, don't tell' for Ohio medical pot growers

CannAscend said it's planning to file a lawsuit against the state for what it calls a "flawed" grading process used to award licenses. Among other allegations, the firm claims:

  • The state provided information to at least one applicant that was used to gain a competitive advantage. 
  • The state overlooked flaws -- including missing documentation for background checks -- in another winning application.
  • One winning application has plans for a growing facility in a community that has moratorium in place for any medical marijuana venture.

The lawsuit, which has not been filed, will include other applicants that share CannAscend's concerns, said the firm's CEO James Gould, who had pitched plans for a growing facility in Wilmington, Ohio.

"Whether we end up with an license or not, that's not what this is about," Gould said. "I care that this process was broken. I care that there should have been better oversight over this process, and I care where this ends up."

According to Ohio's Department of Commerce, which will regulate the state's licensed growers, CannAscend's application was disqualified for failing to land a minium score in all of the key areas graded: Facility security, operational plans, financial plans and quality control plans.

"The Ohio Department of Commerce conducted a comprehensive, fair and impartial evaluation of all applications," said Stephanie Gostomski, a spokeswoman for the department. "It was a very competitive process and we understand that anyone who didn't receive a license may be frustrated and want more information."

All denied applicants can request a hearing with state regulators and have the right to appeal the decision, Gostomski said.

Gould said Friday that he had not contacted the state to schedule a hearing or discuss why his firm's application was rejected. He's calling for the entire application review process to be redone.

"We are not accepting their decisions and we will not stop until we get a fair process," he said. 

Ohio is under a September 2018 deadline to have its medical cannabis program fully functioning. It's not uncommon for lawsuits to crop up that challenge licensing decisions, said Chris Walsh, of Marijuana Business Daily, a Colorado-based news and research firm.

"There's always the possibility for delays, and you've seen that in many states that people who didn't win a license fight the decision," Walsh said. 

Gould's group isn't the only local investor to be denied a license. 

The founders of Rhinegeist Brewery  had applied to launch a growing operation in Camp Washington at the former Kahn's facility on Spring Grove Avenue.

Bob Bonder, founder of Rhinegeist, told WCPO that he was "disappointed" that his group didn't land a license. Still, his group is still pursuing its plans for the property - which include expanding the firm's brewing operations on a portion of the site and a hoped-for medical marijuana dispensary elsewhere on the property. 

Earlier this month, more than 300 firms filed applications to be among 60 companies tapped to sell medical marijuana at dispensaries across the state. 

Meanwhile, the closest operation to Southwest Ohio to land a growing license is Columbia Care, LLC, which is planning an indoor growing facility at 223 Homan Way in Mt. Orab in Brown County. The firm's president and CEO Nicholas Vita couldn't immediately be reached for comment.  

According to plans included in the firm's application, the facility is near Western Brown High School. But the property is outside of the 500 feet-minium buffer zone set up by the state for marijuana-related ventures and certain public spaces.  

RELATED: The race is on to be among Ohio's first legal pot farmers

Those who applied and were denied to be a grower in Ohio had substantial amounts of money riding on their bid. 

Ohio has set some of the highest fees of any state for companies applying to break into the legal marijuana market. The funds will go to cover the costs associated with ensuring the new industry complies with Ohio’s rules – a job that the newly created Ohio Medical Marijuana Control Program will lead.

For large growers with operations of up to at least 25,000 square feet, the initial application fee is $20,000, with a $180,000 annual licensing fee. Smaller growers -- those with operations 3,000 square feet and under -- must pay a $2,000 application fee and an $18,000 license fee annually. Those who apply and don’t make the cut lose their application fee.

Those firms that have landed a growing license now have nine months to get their businesses fully operational, which will require a final round of inspections and reviews by the Department of Commerce.