Alabama Judge Strikes Down Verano's Lawsuit, What Happens Now With Companies Still Fighting State Cannabis Regulator?

Last week, Montgomery County Circuit Court Judge James Anderson decided to dismiss a lawsuit against the Alabama cannabis regulator brought by Verano Holdings Corp. VRNO VRNOF, reported Alabama Daily News.

The news came ahead of Verano getting the green light to begin trading its Class A subordinate voting shares on Canada's Neo Exchange Inc., operating as Cboe Canada, on October 18, 2023. The Chicago-based company said its shares will continue trading in Canada on Cboe Canada under the same symbol "VRNO," and in the U.S. on the OTCQX under "VRNOF."

What Happened?

The lawsuit was initially filed by Verano In August, alleging that the Alabama Medical Cannabis Commission (AMCC) had no right to revoke licenses and that its exercise of power "both exceeds and conflicts with the authority provided to it by the Alabama Legislature."

Verano first secured a highly sought-after Integrated Facility License in June as part of the AMCC's attempt to award cannabis licenses. Verano then lost the permit in the process of redoing the license allocation in August following the discovery of "scoring errors" in the initial application process. The AMCC proceeded to choose Insa Alabama LLC instead, offering no explanation.

Verano's lawsuit and its Alabama chapter are just one among several that have been filed against the AMCC for its faulty medical cannabis licensing process.

On Tuesday, before the judge's ruling on Wednesday, Saxon Main, an attorney for Verano, made his case.

"The agency decision was to void the award of a license," Saxon said. "They don't dispute that we were awarded a license, we were awarded a license and we paid a $50,000 fee."

Verano's claim was based on the assumption that the licenses would be granted, which was disputed by Anderson and Mike Jackson, the AMCC's counselor, as the permits were never issued in the end.

"We have this unique situation where we use the word 'award' a license, but there was no license issued," Anderson told Saxon.

What Does This Mean For Other Companies In Legal Spats With The AMCC?

William Somerville, an attorney for the medical marijuana company, Alabama Always LLC, which has been in legal disputes with the AMCC for months as it was also left without a license under the commission's two failed attempts to allocate cannabis permits, said the ruling in Verano case might benefit Alabama Always' case outcome.

"I think it (motion to dismiss) helps our case because it means that the commission had the authority to resend the license awards that it made in June, and then implicitly the ones that it made in August as well," Somerville said.

Either way, the AMCC seems to be set to redo the allocation of medical cannabis licenses.

Third Time's The Charm?

According to Alabama Reflector, the AMCC adopted new application and licensing rules at its Thursday meeting.

Now, the commission will be able to maintain scores given to previous applications while granting applicants the chance to highlight any deficiencies. Applicants could do that in a public meeting.

"The proposed rule would permit an expeditious, yet transparent, process for all applicants to address the issues that have been raised regarding their applications, including any suggested deficiencies in the scoring process, including the technical issues they may claim had prevented them from providing their full exhibits," said AMCC attorney Mark Wilkerson.

Commission chair Rex Vaughn said the ongoing litigation with applicants will determine the selection of license winners, reported the Associated Press.

Medella LLC also sued the commission. In September, the company filed a defamation lawsuit alleging that AMCC's assessments of various license candidates misleadingly insinuated that either one of the company's owners or its senior directors had a criminal background.

Vaughn said the awards could potentially be made by the end of 2023.

VRNOF Price Action

Verano’s shares traded 1.4118% higher at $4.31 per share at the market close on Friday afternoon.

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