Panel OKs $2 million to defend Ohio’s medical marijuana program in court, appeals hearings

The Ohio Department of Commerce is setting aside $2 million for legal costs associated with lawsuits and administrative appeals over its competitive medical marijuana license application process.

The department, one of three agencies administering Ohio’s medical marijuana program, is a defendant in three lawsuits challenging how it scored applications to grow medical marijuana. Of the 185 applicants, 24 were selected for grow licenses and 67 requested an administrative hearing to appeal the department’s decision.

The Ohio Controlling Board, a legislative and budget office panel that oversees state spending, approved the department’s request Monday for $5.16 million in addition to its $1.35 million budget for the 2019 fiscal year.

The new appropriation brings the total two-year budget for the program to more than $16 million, which state regulators have pledged to repay with licensing fees.

Mark Hamlin, a department senior policy director overseeing the program, said roughly $2 million of the new money will go toward legal fees, including a third-party score validator, and $2 million will cover costs with seed-to-sale tracking, electronic licensing and video surveillance systems. Hamlin said Monday he anticipates those costs are mostly one-time only.

Program officials told the Controlling Board in summer 2017 that they would make future requests for the technology expenditures. Lawsuits alleging state officials made critical mistakes in scoring applications that prevented qualified businesses from obtaining one of 24 available licenses cropped up soon after provisional licenses were awarded in November.

The department has retained Columbus law firm Squire Patton Boggs as special counsel, which hired Ernst & Young to conduct a third-party review of the scoring process. Hamlin said the third-party review will allow them to move forward with administrative appeals, which were put on hold after the agency discovered a scoring error that incorrectly prevented a high-scoring company from receiving a license.

“We believe that the process is legal and valid. We want to improve it but we think it’s absolutely a solid foundation on which to move forward with the licensing and will stand up to the Ernst & Young review, as well as to the administrative hearings and the courts,” Hamlin said.

The new funding will also fund eight new positions within the department as it switches from setting up the program to inspecting and enforcing the rules and laws for cultivators, product processors and marijuana testing labs. The State of Ohio Pharmacy Board oversees the licensing and regulation of retail pharmacies, where marijuana will be sold, and the Ohio State Medical Board oversees physicians who are qualified to recommend medical marijuana.

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