15-007274 Loop&Apos;S Nursery And Greenhouses, Inc. vs. Department Of Health, Office Of Compassionate Use Status: Closed Recommended Order on Friday, October 7, 2016.

Summary: Petitioner did not prove, by a preponderance of evidence, that its application to be a dispensing organization should have been approved.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LOOPÓS NURSERY & GREENHOUSES,

INC. ,

Petitioner ,

Case No. 15 - 72 74

vs.

DEPARTMENT OF HEALTH , OFFICE

OF COMPASSIONATE US E,

Respondent .

RECOMMENDED ORDE R

Pursuant to notice to all parties, a final hearing was

conducted in this case on July 6 through 8, 11 , and

13 through 15 , 2016 , in Tallahassee , Florida, before

Administrative Law Judge (ÐALJÑ) R. Bruce McKibben of the

Division of Administrat ive Hearin gs (ÐDOAHÑ) . The parties were

represented as set forth below.

APPEARANCES

For Petitioner: Jon C. Moyle, Esquire

Karen Ann Putnal, Esquire

Robert A. Weiss, Esquire

Moyle Law Firm , P.A.

118 North Gadsden Street

Tallahassee , Florida 32301

For Respondent: W illiam Robert Vezina, III, Esquire

Eduardo S. Lombard, Esquire

Vezina, Lawrence & Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner, LoopÓs

Nursery & Greenhouses, Inc. (ÐLoopÓs Ñ ), was entitled to be a

dispensing organization under section 381.986, Florida Statutes,

and applicable rules when its application was reviewed by

Respondent, Department of Health, Office o f Compassionate Use

(the ÐDepartmentÑ or ÐOCUÑ), in July through November 2015.

Unless specifically stated otherwise herein, all

references to Florida Statutes shall be to the 201 5 version ,

as this case involves a backwards - looking, retrospective

assessmen t of the LoopÓs application .

PRELIMINARY STATEMENT

LoopÓs and other applicants seeking to become a dispensing

organization (ÐDOÑ) filed appli cations with OCU in July 2015.

LoopÓs was notified by letter dated November 23, 2015, that it

was not the highest scored applicant in the Northeast Region , as

defined in 381.986(5)(b), Florida Statutes. LoopÓs timely filed

a Petition for Formal Administrative Hearing to contest the

denial of its application and the approval of a competing

application. Subsequently, the Florida Legislature passed

amendments to section 381.986 which will be discussed more fully

below. Ultimately, the petition filed by LoopÓs resulted in the

hearing described above for the purpose of determining whether

the LoopÓs application should ha ve been approved by the

Department .

At the final hearing, LoopÓs called the following

11 witnesses: David Loop, accepted as an expert in

horticulture ; Dr. James Lieberman, accepted as an expert in

cannabis processing, extraction, laboratory design, and

operation commissioning and process optimization ; Richard

Rampell, CPA, accepted as an expert in accounting, financial

analysis, and valuation; Mark Hand, CPA , accepted as an expert

in accounting ; Gregg Connor , accepted as an expert in

transportation, dist ribution, dispensing, and security ;

Dr. Terril Nell , accepted as an expert in horticulture ; Holl e y

Mos e ley; Joel Stanley, CEO of CW Botanicals, accepted as an

expert in cannabis breeding, cultivation, processing,

extraction, and dispensing; Carla Ard, acce pted as an expert in

sales and marketing; Henry Stephen Jones, accepted as an expert

in facilities and premises security, technological security, and

data systems security; and Christian Bax, director of OCU .

LoopÓs E xhibits 1a , 1b, 1 c, 2, 7 through 9, 17 , 19, 21,

30 through 34, 36 through 38, 40, 41, 49, 58 through 64, and

66 were admitted into evidence.

OCU called the following witness: Daniel Hevia, CPA,

accepted as an expert in accounting, auditing, financial

forensics, peer review, generally accepted accounting standards

(GAAS), and auditing standards. OCUÓs E xhibit s 13 through 21,

64 through 69, 71, 72, and 75 through 77 were admitted into

evidence.

A Transcript of the final hearing was ordered; it was filed

at DOAH on August 3 , 2016 . By rule, pa rties a re allowed 10 days

after filing of the transcript at DOAH to submit proposed

recommended orders (PROs) . LoopÓ s requested additional time

(75 days) to prepare its PRO; the Department objected . The ALJ

allowed 30 days from the date of filing to subm it PROs and

extended the page limit to 45 pages. Just prior to the date the

PROs were due (which would have been Septem ber 2), the

Department filed a M otion seeking clarification of the due date.

Apparently, LoopÓs had contacted the Department and expres sed

its understanding that the PROs were due 45 days after the

transcript was filed at DOAH (despite the instructions given by

the ALJ at final hearing and set forth in writing in the

transcript). An Order of Clarification was entered, reiterating

the due date , September 2 , 2016 . LoopÓs then file d a request

for extension of time until September 12 , 2016 to file the PROs;

the request was granted. Each party timely submitted a PRO , and

each was duly considered in the preparation of this Recommended

Order.

FINDINGS OF FACT

1 . In 2014, the Florida Legislature enacted the

Compassionate Medical Cannabis Act, chapter 2014 - 157, Laws of

Florida , codified in part at section 381.986, Florida Statutes

(2014) . The Department was directed by the new law to author ize

the establishment of one DO in each of five enumerated regions

within the State .

2 . The Department promulgated an application form,

incorporated by reference in Florida Administrative Code Rule

64 - 4.002, to be used by applicants seeking approval as a

dispensing organization. In July 2015 , LoopÓs filed an

application to become the DO in the Northeast Region , consisting

of 18 primarily rural counties . The LoopÓs application was

comparatively reviewed with several other applications.

3 . In November 2 015, the Department notified LoopÓs that

its application had received the third - highest score during the

comparative review. San Felasco Nurseri es, Inc. (ÐSan

FelascoÑ) , received the highest score; Chestnut Hill Tree Farm,

LLC (ÐChestnut HillÑ) , received the second highest score.

However, the Department notified San Felasco that its

application was being denied on the basis of an alleged

deficiency, leaving Chestnut Hill as the approved DO in the

Northeast Region. LoopÓs and San Felasco each timely filed a

petition for formal administrative hearing to challenge their

denials. Chestnut Hill filed an Ðapproved applicantÑ petition

in support of the DepartmentÓs decision. The three petitions

were consolidated into a single case at DOAH.

4 . The Florida Legi slature, in the 2016 legislative

session , passed House Bill 307 (CS for CS/CS/HB 307) and House

Bill 1313, which were signed into law on March 25, 2016, as

chap ter 2016 - 123, Laws of Florida (referred to herein as the

Ð2016 LawÑ). The 2016 Law says, in per tinent part:

Section 3. (1 ) Notwithstanding

s. 381.986(5)(b), Florida Statutes, a

dispensing organization that receives notice

from the Department of Health that it is

approved as a regionÓs dispensing

organization, post s a $5 million performance

bond in compliance with rule 64 - 4.002(5)(e),

Florida Administrative Code, and expends at

least $100,000 to fulfill its legal

obligations as a dispensing organization; or

any applicant that received the highest

aggregate score through the departmentÓs

evaluation p rocess, notwithstanding any

prior determination by the department that

the applicant failed to meet the

requirements of s. 381.986, Florida

Statutes, must be granted cultivation

authorization by the department and is

approved to operat e as a dispensing

org anization for the full term of its

original approval and all subsequent

renewals pursuant to s. 381.986, Florida

Statutes. Any applicant that qualifies

under this subsection which has not

previously been approved as a dispensing

organization by the depart ment must be given

approval as a dispensing organization by the

department within 10 days after the

effective date of this act, and within

10 days after receiving such approval must

comply with the bond requirement in rule

64 - 4.002(5)(e), Florida Administ rative Code,

and must comply with all other applicable

requirements of chapter 64 - 4, Florida

Administrative Code.

(2) If an organization that does not meet

the criteria of subsection (1) receives a

final determination from the Division of

Administrative Hearings, the Department of

Health, or a court of competent jurisdiction

that it was entitled to be a dispensing

organization under s. 381.986, Florida

Statutes, and applicable rules, such

organization and an organization that meets

the criteria of section (1) shall both be

dispensing organizations in the same region.

During the operations of any dispensing

organization that meets the criteria in this

section the Department of Health may enforce

rule 64 - 4.005, Florida Administrative Code,

as filed on June 17, 2015.

5 . The 2016 Law thus effectively approved the applications

of Chestnut Hill and San Felasco by legislative fiat , declar ing

the DepartmentÓs preliminary agency action to be final . Those

two entities withdrew their petitions for formal adminis trative

hearing and, upon accomplishing certain preliminary

requirements, were to be granted licenses as DOs in the

Northeast Region .

6 . The petition filed by LoopÓs remained as the only

challenge to the DepartmentÓs decision vis - à - vis the Northeast

Regi on DO applications, resulting in the hearing at issue in

this Recommended Order. (Both San Felasco and Chestnut Hill

attempted to intervene in this action, but because the result in

this case would have absolutely no bearing on the status of

their DO lice nses, their petitions to intervene were denied for

lack of standing .) LoopÓs was left to prove that its

application should have been approved instead of one or both of

the now - approved applicants.

7 . It is unclear why the Department takes such an

aggress ive adversarial stance against LoopÓs in this proceeding.

Should LoopÓs prove that its application should have been

approved rather than one of the other applicants, OCU would

issue a DO license to LoopÓs. If LoopÓs fails to meet its

burden of proof, OCU would not issue a license. That is the

extent of OCUÓs status in this matter. Notwithstanding, OCU

fervently opposes approval of LoopÓs as a DO in the Northeast

Region.

The Applicant

8 . LoopÓs was founded in 1949 as a greenhouse and was

organized as a corporation under the laws of Florida in 1970.

It has operated a certified nursery for well over 30 years and

has done so pursuant to a valid Certificate of Registration

issued by the Florida Department of Agriculture and Consumer

Services ( Ð DAC S Ñ ) pursua nt to section 581.131, Florida Statutes.

9 . LoopÓs is a Florida greenhouse pioneer, having led the

industry in advanced cultivation practices, such as drip

irrigation and the use of blackout shade cloths to maximize

yield. Today, LoopÓs specializes in g reenhouse - grown flowering

potted plants. It has cultivated more than 400,000 plants

annually since the early 1980s.

10 . LoopÓs is operated by a qualified nurseryman , David

Loop . LoopÓs currently has 650,000 square feet of state - of - the -

art greenhouses. The greenhouses are fully automated, with

features including automatic temperature and humidity control s .

The primary LoopÓs nursery is operated in a 150,000 square foot

greenhouse located in Jacksonville, Florida, and there is

another 500,000 square fe et of specialized greenhouses located

in St. Johns County, Florida. LoopÓs has plenty of space

available in which to cultivate medical marijuana, pending

development and approval of a security system for the nursery.

11 . LoopÓs expressed its intention to use a subsidiary

corporation or division (LoopÓs Dispensaries , LLC ) to operate

the dispensing functions of its proposed project, if approved.

This plan was in deference to the federal governmentÓs refusal

to recognize the legitimacy of medical marijuan a and t o keep the

marijuana cultivation separate and apart from the other LoopÓs

cultivation processes. OCUÓs contention that use of the LLC

constitutes a Ðmaterial misrepresentationÑ in the application is

unfounded. LoopÓs was overt and transparent conc erning this

contingency. Further, no mention was made of this perceived

misrepresentation in OCUÓs denial letter following review of the

LoopÓs application.

The Application Form

12 . The application form for applying to be a DO

identifies a number of st atutory and rule requirements which

must be met , including three basic criteria: a) Possess a valid

certificate of registration issued by DACS ; b) Show that the

nursery is operated by a Florida nurseryman as described in

section 581.011; and c) Prove cont inuous operation as a nursery

for at least 30 continuous years. LoopÓs generally satisfies

each of those criteri a .

13 . The application form is divided into four parts:

Part I requires the applicant to provide basic information about

itself . Part II re quires the a pplicant to document its

compliance with requirements which are mandated by statute.

Part III requires the a pplicant to provide OCU with information

addressing all items listed in r ule 64 - 4.002. There are five

substantive subparts in the appl ication: Cultivation

(constituting 30 percent of the weighted score), Processing (30

percent ), Dispen sing (15 percent), Medical Director (5 percent ),

and Financials (20 percent ). These subparts a re further broken

down int o sub - subparts, and weights or pe rcentages a re assigned

to each of those. Part IV of the application addresses the

application submission process , including payment of the

application fee.

14 . It is clear LoopÓs at least minimally meets the

requirements set forth in the statute and rule and identifi ed

within the application. It has the ability to cultivate,

process and dispense medical marijuana (or has set forth a

reasonable proposal for doing so in its application). It has a

qualified medical director. There is, as set forth below, some

concern about the LoopÓs financial s tatements , but LoopÓs is

generally stable and meet s minimal financial requirements.

15 . However, LoopÓs has the burden in the present case to

show that it satisfied the requirements to such an extent that

it, rat her than Chestnut Hill or San Felasco, should have

received the highest point total upon comparative review. 1/

16 . Looking at Part I of the application , LoopÓs provided

the requisite information dictated by the application form, as

did -- presumably - Î the ot her applicants. There appears to be no

dispute that all three applicants sufficiently satisfied Part I.

17 . As to P art II, LoopÓs provided its DACS certification

and submitted successful l evel 2 background screens for all of

its own ers and managers. OC U suggested that some individuals

who may be involved with the LoopÓ s operation , if a pproved,

should have undergone l evel 2 background screening. There is no

persuasive evidence, however, that such persons were Ðowners or

managersÑ as contemplated by stat ute and rule so as to be

subject to the background screening .

18 . LoopÓs raised a legitimate question as to whether

competing applicant Chestnut Hill satisfied the requirement to

have Ðoperated for 30 continuou s years as a registered nursery, Ñ

as requi red by section 381.986(5)(b)1 . Chestnut Hill was formed

as a limited liability company in Florida on August 29, 2005.

By law, Chestnut Hill became a corporate ÐpersonÑ at that time.

See § 607.01401(19), Fla. Stat. Thus, argues LoopÓs, Chestnut

Hill cou ld not have operated a registered nursery for 30 years

because it has not been in existence for 30 years.

19 . The Department takes the position that a ÐnurseryÑ may

be certified by DACS and , even if the nursery owner ship chang es

its name or corporate str ucture, the ÐnurseryÑ will continue to

be certified. ÐNurseryÑ is defined in section 581.011(20) as

Ðany grounds or premises Ñ used for growing nursery stock.

20 . A DACS letter dated August 4, 2015, addressed to

LoopÓs states: ÐAccording to the Departmen tÓs records, your

nursery has operated as a regis tered nursery since May 1,

1963 and has a current inventory of 951,781 plants.Ñ A DACS

letter to San Felasco dated July 6, 2015 , states: ÐAccording to

the DepartmentÓs records, your nursery has operated as a

registered nursery since October 23, 1973 and has a current

inventory of 561,200 plants.Ñ DACS issued a letter dated

August 3, 2015, to Chestnut Hill which states: ÐAccording to

the DepartmentÓs records, your nursery has operated as a

registered nurse ry since November 23, 1981 and has a current

inventory of 406,337 plants . Ñ

21 . OCU interpreted the statutory requirement in section

381.986 (5)(b)1 . to mean that if the applicant operated a

registered nursery (rather than itself being a registered

nurser y), that would s atisfy the requirement . OCU reputedly

relied upon the DAC S certification of the nursery premises to

deem Ches tnut Hill compliant with the 30 year requirement .

Again, no one from Chestnut Hill was called as a witness to

explain this conund rum.

Comparative Review

22 . The five subparts in Part II of the application

addressing the statutory criteria were carefully considered by

OCU in its comparative review of the applicants. OCUÓs process

for reviewing the applications is set forth below.

2 3 . Applicants were to submit their applications and a

$60,000 filing fee to OCU no later than July 8, 2015. At that

point the applications were initially reviewed for completeness

by OCU Director Bax. If any items or responses were missing

from an appli cation, Bax would send the applicant an omissions

letter, giving the applicant an opportunity to supplement its

application. In the case of LoopÓs, Bax noted that LoopÓs had

not provided proof of operat ing a registered nursery for

30 continuous years and the financial statements provided in the

application had not been audited. LoopÓs timely provided the

missing items requested by the Department.

24 . Once the applications were deemed complete, three

individuals evaluated and scored the applications com paratively.

The scorers were: Christian Bax; Patricia Nelson, a member of

the Statewide Drug Policy Advisory Council; and Ellyn Hutson, a

certified public accountant. Nelson and Hutson were appointed

by the State Surgeon General.

25 . Instructions for scoring the applications were

provided by the DepartmentÓs general counsel, Nicole Geary.

Pursuant to those instructions, the scorers performed their

comparative evaluations independently, not communicating with

one another during the review process. Th ey were, however,

allowed to make inquiries t o certain experts in various areas

within the applications outside the scorerÓs knowledge or

expertise.

26 . The scorers each assigned scores on the various

sections of the application and compiled the scores in a

spreadsheet. The three spreadsheets were then consolidated into

a single spreadsheet and the scores were totaled. San Felasco

receive d the highest aggregate score Î - 3.9750; Chestnut Hill

re ceived the second highest score - Î 3.7917; and LoopÓs received

th e third highest score - Î 3.5708. Each applicantÓs score was an

aggregate score totaling all sections of the application.

Scoring higher in one section ( e.g., cultivation) would not

necessarily mean the applicant had the highest aggregate score.

The applic ation as a whole had to be scored higher than the

others in order to be approved. ( See , however, ALJ Van

LaninghamÓs September 8, 2016 ÐInformational Order on the Multi -

Criteria Evaluation, etc.,Ñ entered in Plants of Ruskin, Inc. v.

DepÓt. of Health , DOA H Case No. 15 - 7270, wherein he calls into

question the entire process by which OCU ÐscoredÑ the competing

applications , deeming the so - called scores to actually be

rankings and thus inconsistent with the statutory mandate .)

27 . At final hearing, LoopÓs called one of the scorers,

Bax, to discuss his evaluation and review of the applications,

but did not call the other two scorers. The findings and

conclusions reached by the other two scorers were not addressed.

Nor were principals from the competing app licants called in

order to compare or discuss their applications. Thus, LoopÓs

attempted to prove that its application was superior by

affirming the appropriateness of its own application ,

superficially presenting portions of the competing applications ,

a nd showing that only one of three scorers deemed its

application superior . That is not a legitimate or appropriate

comparison.

28 . As to the technical and technological ability to

cultivate, LoopÓs provided ample proof that it has that ability .

LoopÓs w ill rely in part on assistance from CW Botanicals (i.e.,

the Stanley brothers), and will utilize some of that entityÓs

policies and procedures. 2 / Although it has no experience

cultivating cannabis, LoopÓs is very skilled in cultivating

other flowe ring pla nts. With the help of CW Botanicals, LoopÓs

undoubtedly w ould be able to successfully cultivate cannabis.

29 . It is the intention of LoopÓs to cultivate the

specific strain of medical cannabis known as ÐCharlotteÓs Web.Ñ

That strain was developed by the Stanley brothers and has proven

effective in treating many conditions, especially severe,

intractable epilepsy. There are many strains of medical

marijuana, however, as evidenced by the fact that the Stanley

brothers themselv es grow hundreds of different strains . San

Felasco proposes to cultivate a strain known as Anovia Medical;

Chestnut Hill plans to grow one known as Green Solution s. Other

than its notoriety, there was no competent evidence that

CharlotteÓs Web is superior to any other strain.

30 . T he LoopÓs proposal to cultivate CharlotteÓs Web is

based entirely on an oral agreement with Ray of Hope, an entity

which holds the rights to CharlotteÓs Web in Florida. There is

no binding written agreement between LoopÓs and Ray of Hope.

N othing prohibi t s Ray of Hope from granting other Florida

growers the right to use that strain as well.

31 . T he suggestion that LoopÓs could comply with th e

cultivation requirement better than the other two applicants i s

purely speculative. LoopÓs pointed out that Ch estnut Hill was a

tree farm and that San Felasco dealt with outdoor plants. Both

are operating registered nurseries within the State, even if

they are not currently growing marijuana. However, each of

those applicants presumably submitted plans for culti vating

medical marijuana in some fashion. No competent evidence was

presented to infer that the proposals of Chestnut Hill and/or

San Felasco were inferior to LoopÓ s , or, conversely, that the

LoopÓs proposal was superior to those application s .

32 . LoopÓ s provided an expert to explain the nature of the

LoopÓs plan for securing its operations and personnel. The plan

was well - developed and seemed to address all of the issues

LoopÓs would face once it began cultivation. There were,

however, some glitches p ointed out in the LoopÓs plan, e.g., its

24 - hour on - site security was to be provided by a single

individual who, presumably, would need to sleep sometimes. But

again, there is no evidence that the security plans proposed by

the other two applicants are in any way inferior.

33 . The same is true of the three applicantsÓ ability to

maintain accountability of their raw materials and finished

products. LoopÓs had a good plan for doing so, but did not

specifically demonstrate how its plan was superior to the

others.

34 . As for a reasonably located infrastructure to dispense

the product, LoopÓs reasonably showed that it had a broader

(geographic) distribution plan tha n its competitors. However,

there is no requirement that a DO dispense its product

statewid e, only that each DO must cover its designated region,

in this case the Northeast Region . Thus, the fact that the

other applicants did not propose as wide a distribution of its

product as LoopÓs is not consequential. In the LoopÓs

application, 12 distinc t dispensing sites are proposed. Eight

of those s ites have been clearly identified, but zoning and

other approvals have not yet been obtained. San Felasco

proposes six sites for dispensaries ; Chestnut Hill proposes only

one, with an option for one more. It is clear LoopÓs intends to

distribute its product on a wider scale than San Felasco or

Chestnut Hill, but there is no requirement for doing so. (The

application form does include references to such things as being

centrally located to several populate d areas and proximity to

patient populations, but those are examples of what an applicant

might want to show OCU. There is no statutory mandate for those

items ) . The statutory and rule provisions relating to

dispensing of the cannabis product does not sa y that ability to

distribute more product is necessarily better. Further, LoopÓs

did not explain how its product would successfully compete with

the DOs approved in the other regions around the State. So, in

total, LoopÓs did not prove that its distribut ion plan was

superior to the other applicantsÓ plans.

35 . As for transportation of the product to its

dispensaries and users, LoopÓs plans to use a high - roofed van

with a refrigerated cargo space and a lockbox or safe. The van

appears to be a very compe tent means of transporting the

product. San Felasco proposes the use of one armored van and

several small Prius - model automobiles. Chestnut Hill plans to

use two Prius automobiles to transport its product. Each

applicantÓs proposal seems adequate for th eir projected

distribution of medical marijuana.

36 . In the area of financial ability to maintain

operations for two years, LoopÓs cast some reasonable doubt as

to the showing Chestnut Hill made to satisfy this requirement.

There was no similar failing noted for San Felasco. LoopÓs own

financial ability to operate is somewhat suspect due to the

conditional nature of its audited financial statements .

37 . LoopÓs initially submitted a ÐreviewedÑ financial

statement with its application. A reviewed state ment is one

prepared internally and then reviewed by a certified public

accountant for general correctness. OCU asked LoopÓs to submit

an audited financial statement instead, and LoopÓs complied with

that request.

38 . The audited financial statement wa s prepared by Steven

Hand, a self - employed CPA whose major business was doing

business evaluations. The LoopÓs audit was the only one he had

prepared since 1998. Mr. Hand was familiar with LoopÓs and had

some history with the company. He was asked, on e xtremely short

notice, to prepare an audited financial statement for LoopÓs .

The amount of time he had to prepare the statement was probably

insufficient, but he did the best he could in that time.

39 . Mr. Hand did not do a written audit plan before

co mmencing the audit although that is a requirement for a bona

fide audit. Mr. Hand said that he had a ÐplanÑ of sorts based

on his conversation s with Mr. Loop , but such oral discussions

are not sufficient under GAAS to constitute a plan . The audited

finan cial statement he issued did not have the requisite

headings required by GAAS , but the financial statement was

generally acceptable as to content. Again, failure to include

the headings is a violation of GAAS, but the violation seems

minimal in this conte xt.

40 . Mr. Hand could not issue an unqualified (a/k/a

unmodified or clean) opinion regarding the LoopÓs financial

situation. That is because he was unable to verify the

inventory due to his having been engaged to do the work more

than a year after the a udit period. T he verification of

accounts receivables was done by LoopÓs, not by the CPA , another

violation of auditing guidelines . Thus, Mr. Hand issued a

ÐqualifiedÑ opinion, i.e., a much weaker opinion that those

submitted by the competing applicants.

41 . There is no evidence of record as to the validity or

appropriateness of the audited financial statement submitted by

San Felasco in its application . Thus, no comparison of

information contained therein can be made.

42 . Some concerns were raised by LoopÓs about Chestnut

Hill Ós finances related to the way that entity valuated its

inventory. Further, only the balance sheet on Chestnut HillÓs

financials was audited ; the auditor issued a disclaimer as to

the income statement portion of the financial report. But,

ultimately, the auditors were able to issue a valid audited

financial statement for the entity.

43 . San Felasco was alleged to have a suspect financial

ratio which could have an effect on its ability to continue

operations for two years, as required by statute. But no

di screet comparison between the LoopÓs financials and those of

the competing applicants was presented at final hearing.

44 . LoopÓs has retained a qualified physician to act as

its medical director and to supervise the DOÓs activities.

There is no evidence the physician is better than the medical

directors proposed by the ot her parties.

45 . The evidence at final hearing was abundantly clear

that low THC, high CDB marijuana can have enormously successful

results in children with significant medical conditions. The

stories of how this drug has helped children overcome

debilitating seizure activity were miraculous in nature. It is

difficult to conceive how such a beneficial medication could be

objected to by some uninformed p ersons or groups.

CONCLUSIONS OF LAW

46 . The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding pursuant to s ection s 120.569 and 120.57(1), Florida

Statutes (2016) .

47 . Section 120 . 57(1)(k) states: ÐAll proceedings

conducted under this subsection shall be de novo.Ñ The de novo

standard has not been altered by section 381.986 , or any other

statute relating to the subject matter in this case. Thus,

under section 120.57(1), the final hearing at DOAH was conducted

Ðto formulate final agency action, not to review action taken

earlier and preliminarily.Ñ J.D. v. Fla. DepÓt of Child . &

Fams . , 114 So. 2d 1127, 1132 (Fla. 1st DCA 2013), (quoting

McDonald v. DepÓt of Banking & Fin. , 346 So. 2d 569, 584 (Fla.

1st DCA 1977)). 3 /

48 . The general rule is that the party asserting the

affirmative of an issue has the burden of presenting evidence as

to that issue. DepÓt of Banking & Fin., Div. of Sec. & Investor

Prot. v. Osborne Stern & Co. , 670 So. 2d 932, 933 (Fla. 1996),

citing Fla. DepÓt of Transp. v. J.W.C. Co. , 396 So. 2d 778 (Fla.

1st DCA 1981) . In this case, LoopÓs has the burden.

49 . According to section 120.57(1)(k), ÐFindings of fact

shall be based upon a preponderance of the evidence . . .

except as otherwise provided by statute, and shall be based

exclusively on the evidence of record and on matters

officially recognized.Ñ

50 . In the instant matter, LoopÓs was required to prove ,

by a preponderance of evidence, that the Department shoul d have

approved its application to become a DO in the Northeast Region

instead of approving San Felasco and/or Chestnut Hill. The

2016 Law specifically says that the applicant must show that Ðit

was entitled to be a dispensing organization.Ñ That is, tha t

the application as submitted to OCU was superior to all

competing applications in the same region. This proceeding,

therefore, is a b ackward - looking, retrospective assessment of

the applica tion s at the time they were filed and reviewed by

OCU. (See Jud ge McArthurÓs excellent description of this

process in her May 13, 2016 , Order Regarding Impact of [the

2016 Law], entered in McCroryÓs Sunny Hill Nursery v. DepÓt. o f

Health , DOAH Case No. 15 - 7275 . )

51 . I n this case, it must first be determined whethe r

Chestnut Hill should have been comparatively reviewed with the

other applicants due to the 30 continuous years of operation

issue. Although an agencyÓs interpretation of its own statutes

is given deference ( S ee Humana, Inc. v. DepÓt of Health & Rehab.

S ervs. , 492 So. 2d 388 (Fla. 4th DCA 1986) ), that interpretation

cannot be contrary to the plain language of the statute. In the

present case, the statute at issue dictates that Ðthe applicant

must . . . have been operated as a registered nursery in the

st ate for at least 30 continuous years.Ñ § 381.986(5)(b)1, Fla.

Stat. ÐNurseryÑ is defined as Ðany grounds or premises on which

nursery stock is grown .Ñ § 581.011(20), Fla. Stat. A nursery

is not a person, corporate or otherwise; it is grounds or

premise s. Thus, none of the corporate applicants to be a DO in

Florida could have literally satisfied the requirement to have

been operated as a Ðnursery.Ñ DACS also issues certificates of

registration to stock dealers, agents, or plant brokers, each of

which i s defined as a ÐpersonÑ in section 581.131 . But receipt

of a certificate of registration by a stock dealer, agent, or

plant broker does not make that person a Ðnursery.Ñ

52 . Inasmuch as no applicant could have literally

complied with the requirement to be a registered nursery, the

DepartmentÓs interpretation of the statute to allow applicants

who operate -- rather than operate as -- a registered nursery for

30 continuous years to be deemed compliant with the statutory

requirement is accepted. ( S ee Chiles v. DepÓt of State, Div.

of Elect . , 711 So. 2d 151 (Fla. 1st DCA 1998 . ) If Chestnut

Hill had a letter from DACS that it had operated a nursery for

30 continuous years, then its application should have been

comparatively reviewed with the other applicants . 4 /

53 . This is the first proceeding under the 2016 Law, which

generally establishes the parameters for an applicant such as

LoopÓs to obtain approval of its initially denied application.

Chapter 381, Florida Statutes , wherein portions of the 2016 Law

are c odified, sets forth the criteria each applicant must

satisfy . Those criteria , paraphrased, are:

a) Technic al and technological ability to

c ultivate and produce low - THC cannabis;

b) Ability to secure the premises,

resources, and personnel necessary to

operate a s a DO;

c) Ability to maintain accountability of all

raw materials, finished products, and any

byproducts to prevent diversion or

unlawful access to or possession of these

substances;

d) An infrastructure reasonably located to

dispense low - THC cannabis to regi stered

patients statewide or regionally as

determined by the Department;

e) Financial ability to maintain operations

for th e duration of the 2 - year approval

cycle;

f) Fingerprinting and l evel 2 background

screening for all owners and managers;

and

g) Employment o f a medical director who is a

physi cian licensed under chapter 458 or

chapter 459, Florida Statutes, to

supervise the DOÓs activities.

54 . Those criteria a re incorporated into the application

form. Under the present stature of this case, LoopÓs is then

required to prove, by a preponderance of evidence, that its

application met or exceeded those criteria in ways that were,

in the aggregate, superior to the competing applicants.

55 . As set forth in the Findings of Fact above , LoopÓs did

not provide comp arative proof that its application satisfied

those criteria better than Chestnut Hill or San Felasco such

that its application should have been approved. While LoopÓs

did prove definitively that it was approvable and had a very

good proposal, that fact al one did not establish that it was

better than the other two applicants at issue. LoopÓs stated

correctly in its Proposed Recommended Order that, Ð o ther than

uncorroborated hearsay, there is no evidence in the record that

either San Felasco or Chestnut Hil l [satisfied the various

criteria for approval].Ñ By the same token, there was no

competent evidence to prove that those two applicants did not

satisfy the criteria, or that their proposals were qualitatively

inferior to the LoopÓs application. It was Lo opÓs duty to show

how its application was superior to the other applicants. It

was LoopÓs duty to present whatever evidence about San Felasco

and Chestnut Hill was necessary to make that comparison. LoopÓs

failed to do so.

56 . The 2016 Law refers to a Ðfinal determination from the

Division of Administrative Hearings , the Department of Health,

or a court of competent jurisdiction .Ñ Inasmuch as DOAH does

not have final order authority in this matter, the

recommendation below is not dispositive of the Loo pÓs

application until a final o rder is entered by the Department.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that a final order be entered by Respondent,

Department of Health, Office of Compassiona te Use, finding that

Petitioner, LoopÓs Nursery & Greenhouses, Inc., failed to prove

by a preponderance of evidence that its application to become a

distributing organization in the Northeast Region should have

been approved , and therefore, denying LoopÓs application to

become a dispensing organization in the Northeast Region .

DONE AND ENTE RED this 7 th day of October , 2016 in

Tallahassee, Leon County, Florida.

S

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Adm inistrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 7 th day of October , 2016 .

ENDNOTE S

1/ This matter is unique in its stature at DOAH. LoopÓs is

charged with proving, by comparative revi ew, that its

application was Î - at the time OCU made its decision Î - superior to

the applications of Chestnut Hill and San Felasco. This case is

a kin to the comparative review done by an ALJ in certificate of

need cases, but the facts here are limited to those existing at

the time the applications were reviewed by OCU. However,

neither of the competing applicants was involved in the final

hearing ( after being denied intervenor status) and all evidence

concerning their applications was essentially uncorroborated

hearsay. This fact significantly impair ed LoopÓs ability to

meet its burden of proof. LoopÓs m ight have remedied this

problem by calling w itnesses from the competing applicants, but

that will never be known.

2/ The Stanley brothers developed the low THC, high CDB strain

of medical marijuana known as ÐCharlotteÓs Web.Ñ They have

gained notoriety in the industry as pioneers and recognized

experts in the cultivation of medical marijuana strains.

3/ Note, however, Judge Van LandinghamÓs well - reasoned

conclusion to the contrary in Plants of Ruskin, Inc. v. DepÓt .

of Health , DOAH Case No. 15 - 7270, Order Granting RuskinÓs Motion

in Limine, Sep tember 12, 2016. Judge Van Lan ingham concludes

that an applicant that has no t been in existence for over

30 years cannot satisfy the requirement, regardless of whether

it holds a certificate from DACS .

4/ The Department continues to suggest that an Ðab use of

discretionÑ standard should be applied to the instant case.

That argument is again rejected. Besides, no evidence was

presented at final hearing directed to whether OCU abused its

discretion; the evidence addressed whether the LoopÓs

application w as superior to the competing applicants.

COPIES FURNISHED:

William Robert Vezina, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Megan S. Reynolds, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Eduardo S. Lombard, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Jon C. Moyle, Esquire

Moyle Law Firm , P.A.

118 North Gadsden Street

Ta llahassee, Florida 32301

(eServed)

Karen Ann Putnal, Esquire

Moyle Law Firm, P.A.

118 North Gadsden Street

Tallahassee, Florida 32301

(eServed)

Robert A. Weiss, Esquire

Moyle Law Firm, P.A.

118 North Gadsden Street

Tallahassee, Florida 32301

(eServe d)

Shannon Revels, Agency Clerk

Department of Health

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1703

(eServed)

Nichole C. Geary, General Counsel

Department of Health

4052 Bald Cypress Way, Bin A02

Tallahassee, Florida 32399 - 1701

(eServe d)

Celeste Philip, M.D., M.P.H.

Interim State Surgeon General

Department of Health

4052 Bald Cypress Way, Bin A00

Tallahassee, Florida 32399 - 1701

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.