TALLAHASSEE, Florida – Leafly sites and the like will be able to resume contracts with Florida medical marijuana operators to allow patients to order products online, under a ruling by an administrative judge on Monday.
This year, Florida health officials blocked medical marijuana operators from using Leafly and other third-party sites to process patient orders, saying the provisions violated a state law prohibiting operators from outsource services “directly related to the cultivation, processing and distribution” of cannabis.
But Seattle-based Leafly Holdings has argued that it does not engage in any business related to the distribution of cannabis products because the company does not accept payment or distribute cannabis products. to patients. The company has filed a petition asking an administrative judge to find that the Florida Department of Health used an “unenacted and invalid rule” to find that online services violated the law.
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Judge Suzanne Van Wyk didn’t go as far on Monday as Leafly requested, but found the ban on using third-party sites amounted to a rule not passed and ordered the state agency to “immediately stop relying on its policy … regarding online ordering of medical marijuana through third party websites.”
Until February, many of the state’s medical marijuana operators relied on Leafly and another well-known cannabis e-commerce company — I Heart Jane — to help provide online shopping services to consumers. Florida patients.
But many operators — if not all — canceled contracts with e-commerce companies after receiving a February 1 note from the Department of Health threatening to impose fines of $ 5,000 on those who continued to depend on services.
The memo said the services were banned under a 2017 law that set up a structure for the cannabis industry in Florida. The law requires operators of medical marijuana to control all aspects of the business, from seed to sale, including the cultivation, processing and distribution of the product, rather than allowing companies to manage the operations. individual components of the trade.
“Contract with Leafly.com, or any other third party website, for services directly related to distribution is a violation of this provision,” Courtney Coppola, then chief of staff at the Department of Health, wrote in the February memo. .
Health officials argued that the February memo reflected the agency’s application of the law to a particular set of facts and was not a rule.
“The ministry does not have a duty to promulgate what is clear from the wording of the law,” said General Counsel for the Ministry of Health, Louise Wilhite-St. Laurent said at a hearing in September in the case. The February memo “is just a reiteration of the law,” she said.
But Van Wyk disagreed.
The memo “doesn’t just reiterate the law, but places an interpretation of the law that is not obvious at first glance. The law does not deal with third-party websites or online orders, ”she wrote in Monday’s 25-page order.
“The letter constitutes the ministry’s interpretation that online ordering is a service directly related to the dispensing of medical marijuana; thus, the letter implements the law and prescribes the policy. The letter has the direct and consistent effect of banning the practice of CMWMs from contracting with third-party websites for the online ordering of medical marijuana, ”she added, using an acronym for processing centers. of medical marijuana, the state name for marijuana operators.
Seann Frazier, a lawyer who represents Leafly, asked Van Wyk to determine whether the agency’s policy amounted to an invalid rule, which in administrative law is different from a rule not adopted. But Van Wyk said she did not have the power to determine whether or not the rule that was not adopted was valid.
“In practice, the ministry may simply stop relying on the agency’s statement, rather than choosing to adopt the statement as a rule. In this case, a decision on the validity of the declaration would generally be advisory in nature, ”she wrote.
Leafly and similar sites allow patients to shop online, compare prices and view product availability at dispensaries. Patients can order products and be notified when their orders are complete, but customers must collect and pay for items in person at dispensaries. MMTCs pay e-commerce companies for marketing, advertising, and ordering services on a subscription basis.
Prior to the February memo, Leafly had contracted with 277 medical marijuana outlets statewide. After the letter, some of those dispensaries canceled their subscriptions and all stopped ordering online, Leafly COO Ross Moulton said during last month’s hearing. Moulton estimated the loss to Leafly from the canceled contracts to be at least $ 300,000.
In Monday’s ruling, Van Wyk also dismissed the state’s arguments that Leafly lacked standing to sue the Department of Health because the company couldn’t show the exact amount of economic damage it had. suffered after the letter was issued.
Leafly “suffered the cancellation of actual contracts,” she wrote.
The administrative judge also dismissed the state’s contention that Leafly lacked standing to challenge the Department of Health’s action because the company is not regulated by the state agency.
Van Wyk acknowledged that the department does not directly regulate Leafly, the petitioner in the case.
But the February 1 letter “had the collateral effect of regulating the activities the petitioner may undertake as a third-party operator of an online website and app-based resource for cannabis information” , she wrote.