A Missouri appeals court on March 10 ordered state regulators to hand over 13 medical marijuana facility licenses to Hippos LLC, blasting the state’s 2019 scoring and later rescoring of applications. The ruling is a major legal win for Hippos and piles fresh pressure on the Division of Cannabis Regulation, which is already grappling with years of lawsuits and a tough state audit focused on the program’s early licensing rounds.
Appeals Court Reverses Denials And Orders Licenses Issued
The Missouri Court of Appeals reversed a lower court and sent the case back with clear instructions: the circuit court must order the Department of Health and Senior Services to grant Hippos the 13 facility licenses it was previously denied. According to the opinion, Hippos applied for three cultivation licenses, six infused-products manufacturing permits and five dispensary licenses. One cultivation permit had already been awarded, leaving 13 denials in dispute. The judges concluded the agency’s decisions were not supported by competent and substantial evidence, according to the court opinion posted by Justia.
Audit Had Already Flagged Scoring Weak Spots
The decision lands on top of a state auditor’s report that tore into the 2019 blind-scoring process and said missteps had “cast a shadow” over the entire medical marijuana program, helping drive more than $12.5 million in litigation and administrative expenses. The review pointed to repeated examples where identical answers drew different scores and raised concerns about the outside contractor hired to do the grading. Regulators have disputed parts of the audit, arguing they turned over extensive records and stood by their procedures, as reported by Missouri Independent.
Judges Call Out Inconsistent Scoring And An Unqualified Grader
The appeals court laid out several instances where identical application responses received different raw scores. It also found that Wise Health Solutions, the contractor hired to score applications, failed to provide documentation showing its graders had the subject-matter expertise the state required. The opinion singled out one scorer whose résumé “does not list or describe any experience or background in the cannabis industry” and described the Administrative Hearing Commission’s rescoring approach as “illogical, arbitrary and unreasonable.” Those problems, the judges said, undercut the agency’s denials of Hippos’ applications and required that the licenses be granted on remand, according to Justia.
What This Means For Regulators And The Market
The ruling could force the Division of Cannabis Regulation to issue licenses it had firmly rejected and to take a hard look at how it oversees ownership and transfer rules that have already led to some license revocations. The department has pushed back on the audit and defended its review process, saying staff produced extensive records during the review, according to reporting by Missouri Independent. Hippos already runs retail locations in multiple Missouri cities and says its business includes cultivation and manufacturing, so the extra licenses could significantly boost its production and distribution footprint, according to Hippos.
What Happens Next
The circuit court will now be asked to enter an order that follows the appeals court’s instructions. Depending on how that judge rules, the department could seek a rehearing or ask the Missouri Supreme Court to weigh in. The opinion, filed March 10, joins a broader wave of legal and administrative fights over Missouri’s early licensing rounds. For more on the order and the case’s long backstory, see coverage from the St. Louis Post-Dispatch.
For patients, operators and local officials, the ruling is a fresh reminder that the fine print of scoring rules can decide who lands a license and who walks away empty-handed. Regulators and industry groups will be watching the circuit court and any follow-up filings closely, since the real-world impact hinges on whether the department complies with the remand or presses its luck with another appeal.
