A state court on Friday rejected as premature a company’s lawsuit claiming that it was unfairly denied a permit to grow and process medical marijuana.
Commonwealth Court ruled that the company, Elemental Health Group LLC, had not exhausted its administrative options for appealing its permit denial directly to the Pennsylvania Department of Health.
Elemental had applied for a permit to grow and process medical marijuana in northcentral Pennsylvania, known as region 4 under the state’s permitting system, which split the state into six regions.
Two other companies, however, won the grower/processor permits for region 4: GTI Pennsylvania LLC and Terrapin Investment Fund 1 LLC, with GTI scoring highest, according to the ruling.
Elemental claimed that Terrapin provided false information on its application about where its grower/processor facility would be located, according to the ruling.
Terrapin’s alleged misstatement, Elemental has argued, allowed Terrapin’s application to score higher. As a result, Elemental claims it should have been awarded the second permit instead.
Elemental has appealed to the Department of Health but said the agency’s process for hearing appeals is flawed, which is why the company turned to Commonwealth Court, according to the ruling.
In its ruling, the court said Elemental first had to go through with the health department process.
“The time to invoke this Court’s jurisdiction to seek such relief is after the conclusion of the administrative appeal process, not before,” said the ruling, written by Judge P. Kevin Brobson.
The ruling is the second to go against a company denied a permit. The first came in April in a case involving Keystone ReLeaf LLC, which challenged the entire permitting program.
But as in the earlier case, the court expressed concern about the state process for medical marijuana even as it sent arguments back to the health department.
“Just as in Keystone ReLeaf, this Court finds itself concerned regarding the troubling allegations cast by Elemental, particularly those that, if true, might later prove to have unreasonably hindered Elemental’s ability to develop fully a record to support its challenge to its non-selection,” the court wrote.
Terrapin Investment does business as Terrapin Pennsylvania and is a subsidiary of Colorado-based Terrapin Care Station, founded in 2010. In a statement, it praised the ruling: “Terrapin Pennsylvania is pleased to have this dispute resolved in its favor and looks forward to continuing to provide needed medical marijuana for Pennsylvania patients at a time when demand is critically high.”
A company spokesman declined to comment on Elemental’s underlying claims.
Terrapin Pennsylvania operates a grower/processor facility in Avis, in Clinton County, where it employs about 45 people. The parent company also operates retail and cultivation facilities in Colorado and is licensed for retail and cultivation in Oregon.
Andrew Foster, one of the attorneys with Philadelphia-based firm Drinker Biddle & Reath LLP who is representing Elemental, declined to comment. Efforts to reach Elemental and the health department were not successful.
Based on applications to the health department, Elemental is based in Conshocken.