Citrus ‘preference’ spurs marijuana license dispute

An orchid grower and investors spent nearly $800,000 to purchase property in Pinellas County they believed would give them a leg up in obtaining a highly sought-after medical marijuana license.

But one of the owners told a state judge Monday he now believes the business would have been better off keeping the cash, due to what his lawyers are calling a faulty rule proposed by state health officials.

Louis Del Favero Orchids is challenging the proposed rule, which is based on a law passed last year implementing a voter-approved constitutional amendment that broadly legalized medical marijuana. The orchid grower argues the proposal fails to properly carry out the law, which includes giving preference for up to two medical marijuana licenses to applicants who own facilities that were used to process citrus.

The 2017 law also required health officials to issue 10 new licenses to applicants that meet certain requirements. Overall, the state has issued licenses to 13 operators, including a handful of new operators who met the criteria laid out in the 2017 law.

But it has not started accepting applications for four new licenses from potential vendors that may not have participated in the process before. Under the law, health officials have to give special preference for up to two licenses to applicants that “own one or more facilities that are, or were, used for the canning, concentrating, or otherwise processing of citrus fruit or citrus molasses and will use or convert the facility or facilities for the processing of marijuana.”

The citrus preference is the subject of one of several marijuana-related court challenges, including the one heard Monday by Administrative Law Judge R. Bruce McKibben.

Lawyers for Del Favero contend the proposed rule is flawed because it “seeks to grant a preference to a broader group of applicants than the statute permits.”

They say the rule gives preference to applicants who own “property” that was once used for citrus-processing purposes but would be used for processing medical marijuana. That’s different than the requirement in state law that preference be given to applicants who own “facilities” that were once used for citrus processing, lawyer Seann Frazier told McKibben.

After the law was passed last year, the orchid business paid $775,000 to purchase property in Safety Harbor that included a facility once used to process orange juice.

Ormond Beach lawyer David Vukelja, who owns 20 percent of Del Favero, told McKibben he and other investors closed on the property because they believed it would give them an edge when applying for a marijuana license.

“We looked at the statute,” Vukelja said. “We took it at face value.”

But according to the Department of Health, there’s nothing in the law that requires a “facility” to be a structure.

“There are three requirements. You have to own it. You have to prove it is or was used for canning, concentrating or otherwise processing. And you have to demonstrate how you will use that,” Courtney Coppola, deputy director of the state Office of Medical Marijuana Use, said Monday.

But Frazier asked if that meant that a tent, erected where a structure previously was used to process citrus, would make an applicant eligible for the citrus preference.

“You’re saying the facility is the tent. It could also be the space it’s in. So how they will convert that space. They could put a building on it,” Coppola said.

“The facility could be dirt. Unimproved dirt, that somebody could promise to put a $1 million processing plant on top of it, they would still meet the citrus preference. Is that true?” Frazier asked.

Coppola agreed.

The health department’s interpretation of that part of the law met with approval from Mecca Farms, a Lantana-based citrus company that intervened in the challenge.

Mecca operates out of a 50,000-square-foot facility that sorts, grades and waxes fruit — processing activities that health officials said make Mecca eligible for the citrus preference.

Mecca’s lawyer, Glenn Burhans, chided Frazier, saying he found it “ironic” that the orchid grower’s attorney suggested the 2017 statute was designed to help a flailing citrus industry.

“He’s right. But that’s not his client,” Burhans said. “Let’s not kid ourselves and think that Del Favero is a longtime citrus company that has fallen on hard times. That’s just not the case.”

Mecca, which began citrus farming in Florida more than three decades ago, is challenging a different part of the rule that deals with the scoring of the applications, which Burhans said gives too much discretion to evaluators.

Del Favero, meanwhile, also is challenging a component of the rule that gives 35 additional points to the two highest-scoring applicants seeking the citrus preference. The extra 35 points — just a 3 percent bonus on top of the total 1,150 points available to all applicants — aren’t enough to make a significant difference, according to Del Favero.

Because applicants can receive up to 100 points for certified financial documents, Vukelja said the orchid company may have had a better chance of getting a license had its owners not invested the money in the old citrus plant.

“We took cash off a balance sheet in order to acquire an asset only to find out it’s a diluted asset that, at best, is worth 35 points out of 1,150 points,” he told The News Service of Florida after the meeting. “I’m sure I’m one of a long list of people who feels they’re being screwed by the Department of Health. Yeah, that thought has crossed my mind.”

Health officials’ definition of facilities “could be anything from a building to dirt,” Vukelja said.

“How dirt is a facility is beyond me,” he said.

McKibben did not indicate how he would come down on the rule challenge, but he agreed with Ed Lombard, a private lawyer who represents the health department, that the law was imperfect.

“The statute, as someone mentioned, was poorly written, and I totally agree,” he said.