By Matt Fair
Law360, Philadelphia (October 5, 2017, 6:04 PM EDT) — A company claiming it lost out on a lucrative medical marijuana growing and processing permit after a rival failed to tell Pennsylvania regulators about a criminal probe it was facing agreed Wednesday to drop a lawsuit challenging the state’s decision in the bidding process.
BrightStar Biomedics LLC, which has said it would have won the permit but for a Vireo Health LLC subsidiary’s disclosure failures, withdrew its Commonwealth Court lawsuit in lieu of what a spokesman said would be efforts to resolve its issues through administrative channels under the state’s new Medical Marijuana Act.
“After discussions with counsel at the Department of Health, BrightStar decided to voluntarily withdraw its suit without prejudice and continue with the administrative appeal process,” said BrightStar spokesman Daniel Fee. “BrightStar continues to believe strongly in the merits of its position and looks forward to getting to the truth of what happened here.”
BrightStar had asked the Commonwealth Court last month to bar Vireo unit Pennsylvania Medical Solutions LLC from receiving the permit in light of the fact that officials with a company affiliate in Minnesota had been charged for diverting cannabis oil to another state, and that permits awarded to another affiliate in Maryland had been revoked.
PMS was one of two companies in Pennsylvania’s northeast region that the state’s Department of Health announced in June had been selected to receive coveted grower-processor permits under the state’s recently legalized medical marijuana program.
But BrightStar argued in its lawsuit that the score PMS received on its application to the department’s Office of Medical Marijuana was artificially inflated as a result of its failure to disclose the allegations of criminality its Minnesota affiliate faced.
While BrightStar has administratively appealed the OMM’s licensing decision, the company argued in its suit on Friday that the process was “illusory,” as the office had already made it clear in correspondence that it would not change its decision.
With its decision to withdraw its lawsuit on Wednesday, BrightStar signaled its commitment to go through with the administrative appeal before moving forward with any potential challenge in Commonwealth Court.
Vireo has cast the lawsuit as nothing more than sour grapes from a losing bidder.
“It is unfortunate, but not entirely unexpected, when a company turns to the courts after failing to win a medical cannabis license in a merit-based process,” the company said in a statement last month. “We participated in the process fully and transparently, just as we have in other states such as Minnesota and New York, where our licenses were recently renewed. We will not let matters like these distract us from our mission of providing medical cannabis products to patients suffering from life-threatening and debilitating conditions.”
In the meantime, the department is facing another Commonwealth Court challenge from Keystone ReLeaf LLC asking that licenses be revoked due to what the company claims was a “fundamentally flawed, secretive, inequitable, unconstitutional and illusory permitting process.”
That lawsuit remains pending and is scheduled for a hearing at the end of the month, according to court records.
BrightStar is represented by Mark Sheppard, Michael Witsch, Arianna Goodman and Ernest Holtzheimer of Montgomery McCracken Walker & Rhoads LLP.
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