On June 8, 2016, the Ohio General Assembly passed the state’s medical cannabis program via § 3796.

The bill originally did not have enough votes to pass the House, but Rep. Dan Ramos bargained with minority members and secured enough votes to pass the bill by adding subsection (C) to § 3796.09. Part of subsection (C) requires at least 15% of cultivator, processor, or laboratory licenses go to entities that are owned or controlled by economically disadvantaged groups, specifically African Americans, American Indians, Hispanics, and Asian Americans.

The program took effect September 8, 2016 and licenses for growers, processors, and dispensaries were determined based on a scoring standard used on each application. Scoring was based out of 200 points and factors included financial plans, location, and prior experience — but not every applicant was happy with the results of the licensing process, and some have called into question the program’s legality under the U.S. Constitution.

The argument against constitutionality

PharmaCann — an Illinois-based medical cannabis company who applied for a cultivator license in Ohio — filed a suit December 13, 2017 after it did not receive a license.

PharmaCann alleges subsection (C) is unconstitutional because it imposes a racial quota and that PharmaCann should have received a license because it scored higher than two other applicants who received licenses. Parma Wellness Center scored 153.08 and Harvest Grows scored 142.04 compared to PharmaCann’s 158.56. PharmaCann argues it didn’t receive a license because of subsection (C) and that no applicants could be considered economically disadvantaged, considering that the application fee is $20,000, the initial operating fee is $180,000, and applicants also must be holding at least $750,000 in escrow — totaling to a required amount of nearly one million dollars upfront for any potential licensee.

A peek inside of a licensed, commercial cannabis grow in Washington state. Photo credit: Rory Savatgy

Additionally, PharmaCann points to other states who have tried to enact race-based provisions and their constitutionality (Florida Statute §381.968(8)(a)(2)(b), Maryland Statute §13-3306(a)(9)(i), and Pennsylvania Code 28 § 11.41-32). In essence, PharmaCann argues that race-based provisions cannot be mandatory. The Supreme Court has held that race-based provisions may be used as “plus” factors in determining applicants for colleges but cannot be used as the determining factor. Similar to the college application process, the Ohio license process is analogous. PharmaCann argues the race quota is unconstitutional because it is a mandatory percentage and isn’t used as a “plus factor.”

The suit also mentions the legislative history of when the bill was being passed. Rep. Bill Sietz opposed the bill on the grounds that subsection (C) was unconstitutional and unenforceable. He argued that because no discrimination was identified beforehand, there was no need for the race-based remedy with subsection (C) and that this was a quid-pro-quid agreement between Rep. Ramos and minority members to pass the medical marijuana program. PharmaCann also argued that if the list was meant to protect disadvantaged minorities, it was under-inclusive and didn’t include groups such as Vietnam veterans, Appalachian whites, or Hasidic Jews.

The argument for constitutionality

In response to PharmaCann, the Ohio Department of Commerce (ODC) has responded by stating § 3796.09(C) is constitutional because it is meant to help with the racial disparity in entrepreneurship. Historically, minority communities have been disproportionately targeted by law enforcement for cannabis and other drug-related crimes and, as a result, a disproportionate amount of incarcerated offenders are minorities — and minority communities are still affected to this day and deserve some sort of recompense. The provision, according to ODC, is narrowly made and is the least disruptive method for helping minorities achieve representation in Ohio’s medical marijuana program.

ODC also argues that PharmaCann waited over a year to challenge the statute and only did so because it did not win a license. Furthermore, ODC argues there is no constitutional violation because the provision does not discriminate based on race. If there weren’t enough economically disadvantaged applicants, the remaining licenses would go to the rest of the pool of applicants. The provision only requires that 15% go to economically disadvantaged groups when there are enough applicants and doesn’t preclude 85% of the licenses from going to non-minority applicants.

Close-up photograph of an indoor cannabis plant’s large fan leaves. Photo credit: Rory Savatgy

What are the possible outcomes?

PharmaCann has a valid claim that §3796.09(C) is unconstitutional, as the Supreme Court has ruled that mandatory racial quotas are unconstitutional. Here, it seems the mandatory 15% racial quota is exactly what the Supreme Court ruled against.

However, just because there is validity to the claim doesn’t mean the medical marijuana program has to be scrapped. The Ohio legislature could modify the bill in two ways — it could either:

  1. Sever subsection (C) from the bill and remove it entirely, or
  2. Replace the provision with language that doesn’t make the provisions mandatory.

For example, the Ohio legislature could waive certain financial requirements for any applicant who scores high enough to receive a license instead of subsection (C). If the provision is meant to serve economically disadvantaged groups, waiving the financial requirement would be race-neutral and could help economically disadvantaged groups receive licenses while remaining constitutional.

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