On Wednesday, Cole County Circuit Judge Cotton Walker delivered a pivotal decision in the ongoing legal battles between Missouri marijuana regulators and Delta Extractions.

Walker denied Delta Extraction’s bid for a Temporary Restraining Order (TRO) and granted the Missouri Department of Health and Senior Services’ motion to dismiss, stating that Delta has not yet exhausted its remedies under the Administrative Hearing Commission.

The dispute, centered around Delta Extraction, the licensee of MAN000022, and the regulating body of marijuana in Missouri, the Division of Cannabis Regulation (DCR) and the Department of Health and Senior Services (DHSS), has been escalating in recent weeks.

At the core of the matter are the suspension of Delta’s license, the subsequent administrative hold on their products, and a widespread recall notice affecting over 62,000 product SKUs.

On August 2, Delta products, as well as products from dozens of other brands around the state, were placed on administrative hold in Metrc. Simultaneously, three Missouri licensees including Delta Extraction were issued an Order of Immediate Suspension.

On August 3, Delta filed an action with the Administrative Hearing Commission (AHC) appealing the suspension order issued by DCR, the Missouri Division of Cannabis Regulation.

On August 7, representatives for Delta met for approximately 30 minutes via WebEx with Department of Health and Senior Services DHSS/DCR Deputy Director Brittany Kirkweg and other employees. During the WebEx, DCR verbally reiterated the contents of the Suspension Order, but was unable to entertain any questions from Delta regarding the suspension and administrative hold.

On August 9, the company filed an Emergency Motion for Stay with the Administrative Hearing Commission (AHC), urging the immediate retraction of the license suspension and administrative hold. The company contended that the Department failed to adequately justify these actions, which it asserted were detrimental not only to its business but also to Missouri patients reliant on their cannabis products.

On Monday, August 14, Delta’s Emergency Motion was heard by the AHC. The hearing concluded at 4:08 pm. At 4:54 PM, DCR issued a recall notice for more than 62,000 product SKUs, some of which were manufactured more than a year prior.

On August 16, Delta filed a Petition for Judicial Review and Request for Declaratory Judgement, and a Motion for Temporary Restraining Order against both DHSS and DCR asking the court to intervene following the recall.

During the hearing overseen by Judge Walker, Delta’s lead counsel, Charles Hatfield, contended that both the hold and recall orders issued by DCR were “defective and unlawful” as regulators had “failed to identify a threat or danger to the public.”

Hatfield also contended that the recall itself was improper as it was “too broad” and in conflict with the Department’s own rules, did not specify a particular product.

Hatfield pointed out that all of the final product included in the recall had successfully passed all DCR required testing before sale, none of the final product had failed testing, and no adverse reactions or safety concerns had ever been reported from the products.

The Department’s counsel, Adam Grayson, argued that because the issue was already being heard by the AHC, the circuit court had no authority to intervene.

Grayson contended that the circuit court has no authority over the administrative actions of DHSS and DCR as it pertains to actions and investigations against licensed operators, and that constitutionally, that authority rests with the AHC appeals process.

Grayson also voiced the Department’s concern over the potential conflict of a determination by the court that was in opposition to any position taken by the AHC.

In his decision, Judge Walker wrote, “The Court will not interpret the Constitutional requirement to first challenge “administrative penalties” through the Administrative Hearing Commission as excluding administrative holds and product recalls. The Court agrees with DHSS that these actions – the suspension, hold and Recall – are restrictions on Plaintiff’s license arising from alleged non-compliance with the Department’s regulations. Accordingly, the suspension, hold and Recall are penalties which must be challenged to the Administrative Hearing Commission prior to initiating judicial review.”

Because Walker granted the motion to dismiss based on the Department’s contention of venue, Walker did not issue any evidentiary findings, writing, “Because the Court sustains the Motion to Dismiss the action, it does not rule on the merits of Plaintiff’s Motion for a Temporary Restraining order.”

Walker concluded, “The Administrative Hold and Recall are penalties pursuant to Article XTV, Section 24.(4)(I) and 19 CSR 100-1.020(3) as these are agency actions limiting Plaintiff’s ability to distribute its product as it otherwise would be able to as a licensed manufacturer. As these agency decisions have not been fully litigated before the Administrative Hearing Commission Plaintiff has failed to exhaust its administrative remedies and jurisdiction before this court is not proper.”

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