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Court shoots down challenge to Pa. medical marijuana programThe ruling noted Keystone ReLeaf raised some troubling allegations regarding the permitting process

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A company that failed last year to win permits to grow and sell medical marijuana in Pennsylvania lost a legal bid to overturn the state's permitting process.

The company, Bethlehem-based Keystone ReLeaf LLC, first needs to exhaust administrative remedies - namely, an appeal it has made directly to the Pennsylvania Department of Health, which issues permits for the medical marijuana program, according to a ruling issued Friday by Pennsylvania Commonwealth Court.

Then, if the company is unsatisfied with the result of that appeal, it can go to court.

In its complaint, Keystone ReLeaf claimed the state was too secretive in its permitting process for the medical marijuana program, did not take enough care to screen out criminals, and arbitrarily awarded points to and waived certain requirements for some applicants.

Keystone ReLeaf had sought to have the state's medical marijuana program invalidated and existing permits rescinded. 

Although the court turned back the challenge, it indicated that it may not have issued the last word on the matter.

"We note that Petitioner (Keystone ReLeaf) has raised some troubling allegations regarding the permitting process, which this court takes very seriously," said a footnote to the 22-page ruling, written by Judge Michael Wojcik. "Although petitioner has failed to exhaust its administrative remedies, we may have the opportunity to address these issues in the near future in our appellate role."

In a statement, Keystone ReLeaf said it was disappointed in the ruling but said that its administrative appeal to the Department of Health has led to the discovery of what it called "disturbing facts" about the agency's permitting process. The facts, it said, came to light during testimony presented during a hearing.

The company said it planned to press ahead.

"Keystone ReLeaf LLC remains confident in the merits of those appeals, and may be before the Commonwealth Court again with the benefit of the transcripts of this shocking testimony," said the statement.

The state Department of Health said in a statement that the court decision "reinforces that the department’s medical marijuana permitting process is fair and consistent. The department will continue to move forward with a medical marijuana program that is safe and effective for patients across Pennsylvania. Patients suffering from serious medical conditions have been and will continue to be our focus."

Keystone filed two applications for dispensary permits in region 2, which covers northeastern Pennsylvania, and an application for a grower/processor permit, also in region 2, according to Friday's ruling.

The dispensary permits were denied for not scoring high enough on the rubric used by the Pennsylvania Department of Health, according to the ruling. The grower/processor permit application was rejected as incomplete because it was not submitted on a USB drive.

Keystone filed administrative appeals in June and July 2017 but also went to court in September, arguing that the permitting process should be invalidated and that existing permits should be rescinded, according to the ruling. 

Among other examples claiming flaws in the process, Keystone ReLeaf said its dispensary applications - identical except for their addresses - were scored differently, according to the ruling.

The department and other medical marijuana companies countered, saying that Keystone had failed to exhaust its administrative remedies. 

Commonwealth Court agreed, saying the case needed to work its way first through the administrative process. Agencies typically have internal processes under which they review complaints about their actions.

"Our review of the Department's administrative review process satisfies us that it offers unsuccessful applicants an adequate remedy to challenge their permit denials and the permitting process," the court wrote. "Because Petitioner's administrative appeal is ongoing, a judgment here would be inappropriate."

(Editors' note: This story has been updated from its original version to include statements from Keystone ReLeaf and the Pennsylvania Department of Health.)

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