War and Peace: New Jersey Appellate Court Questions Cannabis Application Grading

What do baseball umpires, war and peace, cannabis, and relative error all have in common? A lot in the opinion of the Superior Court of New Jersey, Appellate Division (“Appellate Division”), which issued a ruling today related to the 2018 Request for Applications (“RFA”). While much is addressed in the seventy-five (75) page decision, the net effect is this: the New Jersey Department of Health (“DOH”) – or, as transitioned, the Cannabis Regulatory Commission (“CRC”) – must implement better training for its application reviewers, greater quality control/quality assurance protocols following initial application review, and additional due process protections in post-application denial proceedings.

By way of background, the DOH received 146 applications for 6 vertically integrated licenses. The DOH, in scoring these 146 applications, utilized 6 different reviewers from different branches of state government with differing subject matter expertise. Each of these 6 reviewers reviewed each of the 146 applications, meaning that each reviewer was charged with reviewing more than 53,000 pages over a span of 11 weeks, or, roughly 4,800 pages per week and 975 pages per day, excluding weekends and holidays. The Appellate Division noted that this was akin to having each reviewer read “War and Peace” four times a week, each week, for 11 weeks.

The goal of that process was for each reviewer to assign a point total to each subsection of the application, with zeroes being reserved for instances where the answer provided by the applicant was entirely unresponsive. The challengers noted certain discrepancies in scoring, wherein across the 6 reviewers, some gave full points with others providing no points in the same section. The Appellate Division compared these inconsistencies with the statistical concept of “relative error,” which measures the extent to which a computation may be mistaken. Applied here, the Appellate Division asked whether one would expect six reviewers, having been provided the same training and content to review, to come to drastically different conclusions in scoring the same sections.

To better conceptualize this point, the Appellate Division provided the hypothetical of four baseball umpires watching the same play, but making the following calls:

  • Batter swing and a miss;
  • Groundout to short;
  • Pop-out to the catcher;
  • Fly out to center.

Were the above hypothetical to occur, the Appellate Division noted that this would lead to “chaos and cast grave doubt on the accuracy of the game’s final score.”

After noting these inconsistencies, the Appellate Division remanded for further proceedings before the DOH to address the questions posed on the scoring procedures and “explain the basis for its resolution of the remand proceedings before [the Appellate Division] can ever adequately review whatever final agency decisions come from those proceedings.” The panel rejected, however, the argument that aggrieved applicants were entitled to “full-blown hearings” under trial like proceedings. Instead, it noted that “[i]t may be enough that the [DOH] allow a brief period of time for disappointed applicants to assert what they believe are problems with the scores they and others received, allow for responses from successful applicants, and then engage in both an examination of those complaints and an explanation of how those complaints were resolved or rejected.”

Importantly, the Appellate Division agreed as to the inequity that would follow upon the suggestion of vacating the awards of the 6 license holders from the 2018 RFA, all of whom have since become operational. The panel noted the “long delays” associated with the implementation and expansion of New Jersey’s medical cannabis program, and implicitly agreed that the program would not be served by a ruling that would cause a disruption of the supply chain to patients. The Appellate Division also rejected the argument that it could order the DOH to issue more licenses to the aggrieved applicants, though noting that nothing precluded the DOH, or the CRC, from providing such interim relief “rather than engage in the remand proceedings that [the panel] believe[s] are otherwise required.”

By way of reminder, the patient population of New Jersey is nearing 100,000 total patients, and despite projections by the DOH of the program needing between 50 to 70 dispensaries and a canopy of at least 330,000 square feet of cultivation to service this patient population, New Jersey still only has 13 dispensaries (with the 13th opening just this week) and 210,000 (+/-) square feet of canopy.

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