Companies sue over Valley medical marijuana permit

Several business entities are suing the state over its decision to award a conditional permit to a subsidiary of a multistate cannabis operator that will allow that company to be the only grower and dispenser of medical marijuana in a designated region that includes the Shenandoah Valley, Charlottesville and Fredericksburg.

According to complaints filed in Richmond Circuit Court in November 2024, seven plaintiffs argue that the Virginia Cannabis Control Authority badly bungled the selection of a pharmaceutical processor to serve the state’s Health Service Area 1 in September 2024. AYR Virginia, the business awarded the permit, is a subsidiary of a multistate cannabis conglomerate AYR Wellness.

A hearing for the lawsuits, which were consolidated, is scheduled July 11.

“The entire process was infected by so many errors and arbitrariness that it’s hard to know where to start,” states a filing by Trulieve VA and Natures VA, which unsuccessfully applied for the permit. Other litigants are Blue Ridge Medical, Holistic Apothecary Virginia, VMCC Wellness, Pure Virginia and numerous entities connected to TheraTrue.

The authority declined to comment on the pending litigation, and AYR Wellness did not respond to inquiries from Virginia Business.

The Shenandoah region’s permit has been long delayed, meaning that patients will have to wait longer to buy medical marijuana legally near their homes. The state began issuing permits in 2018, and in other parts of the state, medicinal cannabis is a thriving industry.

PharmaCann Virginia was granted a conditional permit for HSA 1, but that permit was revoked in 2020 after the company failed to build a facility by a 2019 deadline. The HSA 1 permit was then tied up in legislation for years, until February 2024, when the cannabis authority announced it was ready to accept applications for operators to serve the region. At the time, 40 applicants threw their hats in the ring, paying $18,000 fees for consideration.

After a 33-way tie for highest score, the authority held a lottery to determine the winning entity in September 2024, using random.org, a number randomization website.

Philip Goldberg, CEO of Blue Ridge Medical, one of the entities that filed a lawsuit, called it “bizarre” that the authority didn’t use experts at the Virginia Lottery.

“It just doesn’t look like an extremely professional website,” he said of random.org. “It’s a company based out of Ireland that follows the gaming rules of Malta.”

Noah Sullivan, a partner with Gentry Locke, is representing Blue Ridge Medical and Pure Virginia, which is connected to Pure Shenandoah, an Elkton-based, family-run CBD and hemp products business. The leaders of both companies, he said, feel strongly that the best applicant didn’t win the permit for HSA 1.

“We need to make sure that this process is fair, that is transparent, and that it’s awarded on a competitive basis, which is what the what the law requires,” Sullivan said.

The plaintiffs say that the selection process violated the Virginia Freedom of Information Act and the Virginia Administrative Process Act. However, the authority argued in a demurrer that even if it violated FOIA statutes, the decision still would stand. The state added that VAPA “does not apply” to the cannabis authority.