IN THE MATTER OF THE APPLICATION FOR MEDICINAL MARIJUANA ALTERNATIVE TREATMENT CENTER FOR PANGAEA HEALTH AND WELLNESS, LLC. (NEW JERSEY DEPARTMENT OF HEALTH) (CONSOLIDATED)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2204-18T4
A-2219-18T4
A-2276-18T4
A-2278-18T4
A-2283-18T4
A-2288-18T4
A-2292-18T4
A-2305-18T4
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER FOR
PANGAEA HEALTH AND WELLNESS, LLC.
_______________________________________
IN THE MATTER OF THE APPLICATION
APPROVED FOR PUBLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER November 25, 2020
FOR GGB NEW JERSEY, LLC. APPELLATE DIVISION
_______________________________________
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER
FOR LIBERTY PLANT SCIENCES, LLC.
_______________________________________
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER
FOR ALTUS NEW JERSEY, LLC.
_______________________________________
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTERS
COMPASSIONATE CARE FOUNDATION,
INC.
_______________________________________
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER
FOR ALTUS NEW JERSEY, LLC.
_______________________________________
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER
FOR HARVEST OF NEW JERSEY, LLC.
_______________________________________
IN THE MATTER OF THE APPLICATION
FOR MEDICINAL MARIJUANA
ALTERNATIVE TREATMENT CENTER
FOR BLOOM MEDICINALS OF PA, LLC.
_______________________________________
Argued October 20, 2020 – Decided November 25, 2020
Before Judges Fisher, Moynihan and Gummer.
On appeal from a final agency decision of the New
Jersey Department of Health, dated December 17,
2018.
John W. Bartlett argued the cause for appellant Pangaea
Health and Wellness LLC (Murphy Orlando LLC,
attorneys; John W. Bartlett, Jason F. Orlando and
Christopher D. Zingaro, on the briefs in A-2204-18).
Joshua S. Bauchner argued the cause for appellant GGB
New Jersey, LLC (Ansell Grimm & Aaron, P.C.,
A-2204-18T4
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attorneys; Joshua S. Bauchner, of counsel and on the
briefs; Rahool Patel, on the briefs in A-2219-18).
Seth R. Tipton argued the cause for appellant Liberty
Plant Sciences LLC (Florio Perrucci Steinhardt &
Cappelli LLC, attorneys; Seth R. Tipton, of counsel and
on the briefs in A-2276-18).
Kevin J. McKeon of the Pennsylvania bar, argued the
cause for appellant Altus New Jersey (Hawke McKeon
& Sniscak LLP, attorneys; Kevin J. McKeon, Judith D.
Cassel and Melissa A. Chapaska, of counsel and on the
briefs in A-2278-18 and A-2288-18; Rachel S. Cotrino,
of counsel and on the briefs in A-2288-18).
Sean Mack argued the cause for appellant
Compassionate Care Foundation, Inc. (Pashman Stein
Walder Hayden, PC, attorneys; Sean Mack and
Matthew Frisch, on the briefs in A-2283-18).
Maeve E. Cannon argued the cause for appellant
Harvest of New Jersey LLC (Stevens & Lee, PC,
attorneys; Maeve E. Cannon and Patrick D. Kennedy,
of counsel and on the briefs; Wade D. Koenecke, on the
briefs in A-2292-18).
Stuart M. Lederman argued the cause for appellant
Bloom Medicinals of PA, LLC (Riker Danzig Sherer
Hyland & Perretti LLP, attorneys; Stuart M. Lederman,
of counsel and on the briefs; Diane N. Hickey, on the
briefs in A-2305-18).
Jacqueline R. D'Alessandro, Deputy Attorney General,
argued the cause for respondent New Jersey
Department of Health (Gurbir S. Grewal, Attorney
General, attorney; Melissa H. Raksa, Assistant
Attorney General, of counsel; Jacqueline R.
D'Alessandro, on the briefs in all appeals).
A-2204-18T4
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Christopher R. Gibson argued the cause for respondent
Columbia Care New Jersey, LLC (Archer & Greiner,
PC, attorneys; Christopher R. Gibson and Patrick M.
Flynn, of counsel and on the briefs in all appeals).
George R. Hirsch argued the cause for respondent MPX
New Jersey, LLC (Sills Cummis & Gross, PC,
attorneys; George R. Hirsch and Kenneth F. Oettle, of
counsel and on the briefs in all appeals).
Eric I. Abraham argued the cause for respondent GTI
New Jersey, LLC (Hill Wallack LLP, attorneys; Eric I.
Abraham and Henry T. Chou, of counsel and on the
briefs in all appeals).
Benjamin Clarke argued the cause for respondent
Verano NJ, LLC (DeCotiis, Fitzpatrick, Cole & Giblin,
LLP, attorneys; Benjamin Clarke, of counsel and on the
briefs in all appeals; Michael DiFazio, on the briefs in
all appeals; and join in the brief of respondent New
Jersey Department of Health in A-2276-18, A-2283-18,
A-2288-18 and A-2292-18).
Robert A. Magnanini argued the cause for respondent
JG New Jersey, LLC (Stone & Magnanini, LLP and
Frank Newel, (Loevy & Loevy) of the Illinois bar,
admitted pro hac vice, attorneys; Robert A. Magnanini
and Michael Clore, and Frank Newel, of counsel and on
the briefs in A-2278-18, A-2288-18 and A-2292-18;
and join in the brief of respondent New Jersey
Department of Health in A-2204-18, A-2219-18, A-
2276-18, A-2283-18, and A-2305-18).
A. Matthew Boxer argued the cause for respondent
NETA NJ, LLC (Lowenstein Sandler, attorneys; A.
Matthew Boxer and Steven Llanes, on the briefs in A-
2219-18 and A-2305-18; and join in the brief of
respondent New Jersey Department of Health in A-
A-2204-18T4
4
2204-18, A- 2276-18, A-2278-18, A-2283-18, A-2288-
18 and A-2292-18).
The opinion of the court was delivered by
FISHER, P.J.A.D.
In these eight appeals, which have been calendared together, appellants
contend the Department of Health made numerous errors in its selection of
entities to operate Alternative Treatment Centers to grow, process, and dispense
marijuana as part of the State's Medicinal Marijuana Program. Appellants
Pangaea Health and Wellness LLC, Harvest of New Jersey, LLC, Liberty Plant
Sciences LLC, Bloom Medicinals of PA, LLC, GGB New Jersey, LLC, Altus
New Jersey, LLC, and Compassionate Care Foundation, Inc. complain about,
among other things, the Department's selection process, including the criteria
used, the manner in which their applications were scored, and the overall
sufficiency and explanation of the final agency decisions. Because we agree
with appellants that the scoring system produced arbitrary results that have gone
unexplained, we intervene and vacate the final agency decisions in question, and
we remand for further proceedings.
I
The Applicable Legislation. The Compassionate Use of Medical
Marijuana Act, N.J.S.A. 24:6I-1 to -30, which was enacted on January 18, 2010,
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protects qualifying patients and their caregivers from arrest, prosecution, and
other penalties in New Jersey for possessing marijuana for medical purposes.
N.J.S.A. 24:6I-2(e).1 To qualify, a patient must suffer from one of the
enumerated conditions or from any condition the Department establishes as
debilitating. N.J.S.A. 24:6I-3.
The Compassionate Use Act also protects those authorized to produce,
process, and dispense marijuana pursuant to the statute's terms, N.J.S.A. 24:6I-
7, and charges the Department with implementing the State's Medicinal
Marijuana Program (the Program), N.J.S.A. 24:6I-3. See Natural Med., Inc. v.
N.J. Dep't of Health and Senior Servs., 428 N.J. Super. 259, 262 (App. Div.
2012). This includes establishing a registry of qualified patients and issuing
permits for the operation of Alternative Treatment Centers (ATCs). N.J.S.A.
24:6I-4; N.J.S.A. 24:6I-7.1; Natural Med., 428 N.J. Super. at 262.
N.J.S.A. 24:6I-7(a)(3) tasks the Department with "ensur[ing] the
availability of a sufficient number of [ATCs] throughout the State, pursuant to
need" and requires that the Department issue permits for "at least two [ATCs]
1
The Act has undergone significant revisions. See L. 2019, c. 153. Those
amendments, however, did not go into effect until July 2, 2019, and have no
bearing on our disposition of these appeals about the final agency decisions
rendered in December 2018.
A-2204-18T4
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each in the northern, central, and southern regions of the State." Beyond the
mandated six ATCs, the Department "has discretion to determine how many
ATCs are needed to meet the demand for medicinal marijuana and whether the
issuance of a permit to a particular applicant would be consistent with the
purposes of the Act." Natural Med., 428 N.J. Super. at 263. In ensuring the
availability of a sufficient number of ATCs, the Department promulgated
regulations, N.J.A.C. 8:64-1.1 to -13.11, which provide the framework through
which it issues requests for applications for the operation of ATCs.
In 2011, to fulfill its obligation under N.J.S.A. 24:6I-7(a), the Department
issued a request for applications to select entities to operate the State's first six
ATCs. In re Inst. for Health Rsch. and Abunda Life Ctr., No. A-0069-11 (App.
Div. Aug. 22, 2013) (slip op. at 1-2). A five-member reviewing committee
consisting of three Department members, one member from the Department of
Agriculture, and one from the Department of Community Affairs, evaluated
thirty-five applications and awarded scores for each criterion. Id. at 2-3. At that
time the Department decided that no applicant could hold more than one ATC
permit and that two ATCs could not be opened in the same municipality,
concluding this standard would promote accessibility to more patients and the
A-2204-18T4
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availability of more diverse products. Id. at 3-4. The reviewing committee
chose two different high-scoring applicants for each of the three regions. Ibid.
After the Department rendered decisions announcing the entities it had
chosen to proceed with the ATC permitting process, several disappointed
applicants appealed. Id. at 1. We concluded that the Department's proceedings
were not arbitrary, capricious, or unreasonable. Id. at 7-9.
In January 2018, the Governor issued Executive Order 6, which directed
the Department to review the Program's status with a mind toward expanding
access to medical marijuana. A few months later, the Department added new
conditions to the list of those qualifying for the Program, including certain types
of chronic pain, Tourette's syndrome, migraines, and anxiety. These additions
caused a rapid increase in qualified and registered patients between March and
July 2018.
The Request for Applications. In July 2018, to ensure that the growing
population of qualified patients would be adequately served, the Department
issued a second request for applications for the selection of six more entities,
two in each region, to receive ATC permits.
The request for applications had two sections. Part A required information
about:
A-2204-18T4
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• the applicant’s corporate form;
• proposed locations for grow sites and
dispensaries and whether these locations
complied with all local codes and ordinances;
• names of all managers, staff, contractors,
vendors, landlords, and suppliers;
• whether the applicant held any medical
marijuana-related licenses in other states; and
• disclosures of any regulatory violations,
litigation, and criminal histories.
Part A was evaluated on a pass/fail basis; the application would be rejected if
the applicant failed to respond sufficiently to each question.
Part B consisted of sixty scored criteria requiring applicants to provide
narrative responses and to attach responsive documents. The criteria covered
several topics, asking applicants about their experience, expertise, and plans to
operate an ATC in New Jersey if selected, including but not limited to:
• cultivation policies and procedures and
knowledge of botany and chemistry related to the
growing and processing of marijuana products;
• mobilization plans and time estimates for
producing first crops;
A-2204-18T4
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• past business experience with medical marijuana,
if any;
• quality assurance and quality control plans;
• plans for insect and disease control and
sanitation;
• plans to assist scientific research;
• security plans;
• proposed facility floor plans;
• financial records, records of past taxes paid, and
proposed budgets; and
• workplace and ownership diversity and collective
bargaining agreements.
The request for applications informed prospective applicants that
responses to Part B would be evaluated by a review committee on a 1000-point
scale; the request listed the maximum points that could be earned for each
criterion. The total scores awarded to an applicant by the review committee
would then be averaged, creating the applicant's final composite score. The
request for applications also clarified that winning applicants would not be
issued permits immediately; they would instead be "chosen to proceed in the
permitting process."
A-2204-18T4
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On August 9, 2018, the Department held a mandatory pre-submission
conference for applicants to explain the scoring process. It also responded in
writing to questions from prospective applicants in an official "Q&A" document
made publicly available less than a week later.
By the application closing date of August 31, 2018, the Department
received 146 applications from 103 entities, with several entities applying in
more than one region. For example, Altus applied in the central and southern
regions, Bloom in all three, and Liberty in the northern and southern regions.
Three appellants applied in only a single region: GGB in the northern region;
Harvest in the southern region; and Pangaea in the central region.
The review committee. The Department chose a six-member committee
to review and score all applications; this review committee was comprised of
four representatives from the Department, one from the Department of
Agriculture, and one from the Department of Treasury. On September 5, 2018,
before the scoring process began, the review committee members attended a
workshop, which included a discussion about the Program, guidance on scoring
applications, and training on diversity and bias. Each review committee member
completed disclosure forms and signed certifications stating that neither they
A-2204-18T4
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nor any members of their immediate family had any financial or personal ties to
any applicant.
The Department provided the review committee members additional
printed scoring instructions for the sixty criteria. For each criterion, the
instructions directed members to award points on a scale from zero to a
maximum number of points allowable, which varied. The instructions also
stated that scores of zero should be reserved for "non-responsive" answers.
Review committee members were initially given sixty days from the
application due date to complete their evaluations, but, when committee
members expressed concerns about this allotted time, the Department extended
the review period for six weeks. At times, members emailed questions to the
Department about how to score some of the criteria, to which the Department
responded.
On December 12, 2018, the review committee recommended six
applications per region for "further consideration." Five days later, the
Department issued final agency decisions to all applicants, expressing its
acceptance or rejection of their applications. Included with these collective
decisions was the Department's explanation that, as with the previous round of
ATC permitting, it would not award more than one permit to any single
A-2204-18T4
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applicant, even if that applicant was one of the two highest scorers in more than
one region. The Department believed that choosing six different entities would
benefit patients because it would lead to a greater variety of products and would
ensure that if one entity suffered a setback like a crop failure, only one ATC
would be affected.
After identifying the region with the greatest need for medical marijuana,
the Department chose two applicants for that region first. The Department
explained, in its final agency decisions, that it had ordered the regions by
greatest supply and demand by considering the
total population of the region divided by total statewide
population . . . and, utilizing the Department’s Medical
Marijuana Patient Registry, the current medical
marijuana patient population in the region divided by
total statewide medical marijuana patient population.
The two calculations were averaged to determine the
demand factor. The Department calculated a medical
marijuana supply factor using data extracted from the
inventory management systems of the current ATCs.
The supply factor was the total current medical
marijuana supply of the region in ounces divided by
total statewide supply in ounces.
The Department then divided the two factors to determine the ratio of supply to
demand for each region, with lower numbers expressing the need for greater
supply to meet the care requirements of Program patients. In this way, the
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Department ranked the regions according to need in this order: northern,
southern, and central.
Once the applications were scored, the Department ascertained the region-
by-region top scorers. For the northern region, the Department chose the two
highest scoring applicants: NETA NJ, LLC, with 932.1667 points, and GTI New
Jersey, LLC, with 927.3333 points. 2 For the southern region, MPX and NETA
scored highest, with 958.1667 and 932.1667 points, respectively, but because
NETA had already been selected for the northern region, the Department chose
MPX and Columbia Care New Jersey, LLC, which came in third with 929 points.
In the central region, MPX, NETA, Columbia, and GTI scored highest, but all
were bypassed because their applications were top finishers in other regions. As
a result, the next two highest-scoring applicants were chosen: Verano, with
920.8883 points, and JG New Jersey, LLC, with 913.3333 points.
The final agency decisions. Accepting those scores without further
apparent scrutiny, and without allowing disappointed applicants any means to
question or challenge their scores or the scores of those that were approved, the
2
Appended to this opinion is a list of the top two scorers and others that finished
close behind in each region.
A-2204-18T4
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Department rendered final agency decisions. In its brief four-page decisions,
the Department:
• recounted how the Department
called for and received applications;
• described the review committee's
formation but in no greater detail
than we have explained here;
• stated that it first reviewed
applications for completeness;
• identified the top six finishers in
each region along with their
composite scores;
• explained why it chose the top two
finishers in first the northern and
then the central and southern regions
and provided a brief explanation for
why there was an increased demand
in that order;
• declared its bottom-line ruling on the
application;
• informed applicants of the time
within which an appeal could be
filed; and
• mentioned that the fees provided by
unsuccessful applicants would be
returned.
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The final agency decisions did not explain whether or to what extent the
Department may have reviewed or verified the scores rendered by the review
committee.
The filing of appeals and attempts to expand the record. Following the
final agency decisions, several unsuccessful applicants – including some of
these appellants – submitted requests to the Department under the Open Public
Records Act (OPRA), N.J.S.A. 47:1A-1.1 to -13, for copies of the winning
applications, score sheets, and other related documents. The Department
responded by creating an online library of materials, including redacted versions
of successful applications. None of the appellants challenged the Department's
response.
Pangaea, Harvest, Liberty, Bloom, GGB, Altus,3 and Compassionate Care
appeal the Department's final agency decisions. Motions for stays pending
appeal were denied at the Department level, as well as in this court and the
Supreme Court.
Pangaea, Liberty, and Bloom also unsuccessfully moved in this court for
leave to supplement the record with expert reports in the field of statistical
3
Altus has filed two appeals, separately challenging the unfavorable final
agency decisions rendered on its central and southern region applications.
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mathematics. The Supreme Court denied Pangaea's motion for leave to appeal
the denial of its motion to supplement. In re Application for Med. Marijuana
Alt. Treatment Ctr., 240 N.J. 385 (2020).
II
Because appellants' many arguments are either similar or overlap, we
heard the appeals together. We now decide these eight appeals by way of this
single opinion.
Our response to many of the issues posed by appellants is informed by our
view of the legitimate questions posed by appellants as to the scores a ssigned
by the Department. In short, all roads lead to the same point: numerous,
indisputable anomalies in the scoring of the appellants' applications prevent us
from having sufficient confidence in the process adopted by the Department or
its results for the approval of ATCs in this important industry that provides
"beneficial use[s] for . . . treating or alleviating the pain or other symptoms
associated with" certain medical conditions. N.J.S.A. 24:6I-2(a). It is for this
chief reason that we remand to the Department to undertake further steps to
ameliorate these concerns.
To explain our disposition of these appeals, we consider and first discuss
appellants' arguments about scoring because our view of those issues impacts
A-2204-18T4
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most of the remaining issues. Accordingly, we analyze in the following order:
(a) appellants' arguments about scoring; (b) the standard of appellate review; (c)
the sufficiency of the record on appeal; (d) the lack of an intermediate step
between the results achieved by the review committee and the issuance of final
agency decisions; (e) the sufficiency of the Department's findings; (f) a handful
of discrete issues; and (g) the remedy that we believe is necessary to instill
public confidence in the Department's procedures and the results it achieved.
A
We first consider appellants' specific arguments about the scoring and
their contention that, because the Department tolerated too great a degree of
"relative error" in its scoring, its decisions were arbitrary , capricious and
unreasonable. This argument, with which we agree, is demonstrated by
numerous examples that simply cannot be rationally explained on the record
before us.
As mentioned, the review committee consisted of six members who were
required to provide a score on a given range – a range that started at zero and
finished at various numbers depending on the particular criterion. The scores of
each six members were then averaged to produce the applicant's final score on
each criterion. The Department argues that by averaging the scores of six
A-2204-18T4
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diverse members, a fair and reasonable assessment of an applicant's score on
each criterion would be obtained. But appellants argue, and we agree, that any
averaging only slightly ameliorates anomalies and tends to produce inaccurate
scores. They argue that there is such a large degree of "relative error" in some
of the criteria that no one – not this court, not the applicants, and not the public
– can have confidence in the final results.
In considering this relative-error concept, we emphasize that we are not
suggesting that either the Administrative Procedure Act or the legislation in
question somehow incorporates the world of statistics, cf. Lochner v. New York,
198 U.S. 45, 75 (1905) (Holmes, J., dissenting and observing that "[t] he
Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics") ,
but we do suggest they require the application of common sense and strive to
suggest a more accurate process than that which seems to have been adopted
here.
Moreover, in expressing concern for the relative error of some of the
examples provided by appellants, we do not mean to suggest that an agency
engaging in a similar process may not tolerate an occasional error or mistake
without running the risk of being labelled arbitrary or capricious. To the
contrary, we expect that an administrative process may lead to imperfect
A-2204-18T4
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conclusions because the participants and the public expect speed and efficiency
at that level. See, e.g., Texter v. Dep't of Hum. Servs., 88 N.J. 376, 385 (1982)
(recognizing that administrative agencies necessarily "possess the ability to be
flexible and responsive to changing conditions"). Nevertheless, the concept of
relative error – in the face of the Department's failure to offer appellants a
platform for arguing that the review committee made mistakes that ought to be
examined and corrected – is an appropriate means for examining why, if left
unexamined, uncorrected, or unexplained, the results of the Department's
process must be viewed as arbitrary, capricious, and unreasonable.
Relative error is a concept that simply measures the extent to which a
computation may be mistaken. It can range from a relative error of zero percent
(everyone agrees) to 100% (one judge gives the lowest possible score and
another gives the highest possible score). The higher the relative error, the
greater the doubt about the accuracy of the score derived from averaging the
scores. Stated another way, when six individuals consider the same criterion –
assuming the examiners use the same observational tools and share the same
understanding about how to score what they see – one would expect that these
individuals would produce the same or quite similar scores, meaning the relative
error would be close to zero. So, any system that produces an extensive variety
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of scores calls into question the accuracy or legitimacy of its results. For
example, if four baseball umpires watch the same play – a fly out to centerfield
– anarchy would soon follow if only one umpire said he saw a fly out to
centerfield, while the other three claimed to have seen: the batter swing and
miss; a groundout to shortstop; and a pop-out to the catcher. The two competing
teams – and spectators that tuned in to watch – would rightfully find the judging
system deeply flawed even if the "average" of those four calls amounted to an
out. That approach would soon lead to chaos and cast grave doubt on the
accuracy of the game's final score. The many scoring examples provided by
appellants similarly lead us to question whether the Department has enacted a
system that's producing non-arbitrary results that the Legislature intended in its
enactment of the Compassionate Use Act and that the participants and the public
have a right to expect.
Pangaea asserts that in eight of the sixty Part B scoring categories –
thirteen percent of the overall test – it received in the same category perfect
scores as well as zeroes. That is, in thirteen percent of the overall test, the review
committee's assessment was based on a 100% relative error factor; with the
committee giving scores that consisted of an average of both perfect scores and
perfectly bad scores.
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Three categories sought the applicant's floor plans or interior renderings
for the proposed ATC's cultivation, manufacturing, and dispensary sites, and
noted that "[n]o explanation is necessary"; these categories were scored on a
range of zero to fifteen, with zero being assessed only as to applicants who had
failed to provide the requested plan or rendering. Pangaea provided floor plans,
yet one reviewer gave scores of zero, five, and zero on these three categories.
Because Pangaea provided plans, one might expect perfect scores across the
board, but with the unexplained low scores, and their inclusion in the calculus
that produced the average for each of these categories, Pangaea's score was
brought down considerably from what one would expect in light of the fact that
the remainder of the group viewed Pangaea's response as near perfect. 4 Even if
the Department's response was correct that Pangaea's floor plans were provided
elsewhere in its application, and thus it was reasonable for a low score to be
assigned, one can only wonder about the reasonableness of the other perfect
scores.
4
Pangaea makes the further point that these scores are all the more surprising
because some applicants – who secured higher scores – did not actually have a
site for these facilities, but merely promised a particular type of facility in a
specific location. Pangaea had actually leased property in Ewing and provided
108 pages of architectural and engineering site plans in its application.
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Other Pangaea scores revealed similar anomalies. Noteworthy is the
proliferation of zeroes despite instructions given by the Department to the
review committee that a zero should only be assigned when the applicant's
answer was non-responsive.5 Additional inconsistency can be found in a
snapshot of some of the other numbers on Pangaea's scorecard:
• 10 25 16 23 0 25
• 15 15 15 15 0 15
• 20 0 23 25 18 25
• 20 25 20 25 0 25
• 15 0 15 15 0 0
The zeroes are disconcerting, particularly when other review committee
members awarded high or perfect scores when considering the same information
on the same criterion. On this record, one can only wonder what it was that the
review committee members on either side of this spectrum were or weren't
seeing or considering when assessing Pangaea's application. 6
5
The review committee members were instructed that "[a] score of 0 should
only be used when [the applicant's answer was] non-responsive to the measure
or criterion, unless otherwise indicated."
6
Some of the appellants argue this may not all be the fault of the review
committee members, suggesting they were simply asked to do far too much in
A-2204-18T4
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Liberty Plant raises similar questions about its scores. On one category –
knowledge of botany, horticulture, and phytochemistry and the application of
those sciences to the cultivation of medical marijuana – Liberty Plant observes
that it received two perfect scores of thirty, a near perfect twenty-nine, a very
high twenty-five, but then two scores of fifteen. The relative error of the scoring
here was fifty percent. On another category – inventory management – the
relative error was seventy percent, with review committee members giving a
perfect twenty, a near-perfect nineteen, three above-average scores (a sixteen
and two fifteens), and a sub-par six.
too short a period of time. To illustrate this claim of "reviewer fatigue," GGB
asserts that each review committee member was charged with reviewing more
than 100 applications consisting of more than 53,000 pages in a span of eleven
weeks or, stated another way, each member was required to evaluate more than
4800 pages per week (975 pages per day, excluding weekends and holidays).
GGB argues that each reviewer was essentially "tasked with reading [the 1225-
page novel, War and Peace] nearly four times in a single week." In response, it
has been argued that this allegation of "reviewer fatigue," even if true, does not
necessarily mean that the review committee ended up scoring appellants too low;
it is just as likely that it could have led to scoring them too high. But that only
supports another argument that we will later discuss: that without an
explanation for the inconsistent scores, no one can know for sure whether they
were produced by "reviewer fatigue," a misunderstanding of the criteria, or the
worth of the applicant's responses. Without an explanation from the
Department, one can only speculate why inconsistent scores were so frequently
rendered.
A-2204-18T4
24
Consideration of the applicant's past history of paying business taxes was
judged on a scale of zero to twenty-five. The scores received by Liberty Plant
had a relative error of ninety-six percent because it was awarded: twenty-four,
twenty, three fifteens, and a zero. Altus received similar discrepant scores:
twenty-four, twenty-three, fifteen, five, and two zeroes. Bloom's experience was
not much different, receiving: two twenty-fives, a twenty-four, a fifteen, and
two zeroes. Harvest received three twenty-fives, a twenty, an eighteen, and a
zero.
In five categories, the scoring for Liberty Plant revealed a relative error
of 100% despite the production of considerable information responsive to the
question. In one of these categories – calling for certified financial statements,
including a balance sheet, income statement, and a statement of cash flow –
Liberty Plant received two perfect twenty-fives, a twenty, a ten, and two zeroes.
Harvest received two twenty-fives, two twenties, an eighteen, and a zero. Altus
received a wide array of scores: twenty-five, twenty-three, fifteen, ten, five, and
zero. Not one of the six review committee members had the same view of Altus's
response as any other member.
Liberty Plant's response to a category about collective bargaining
agreements was awarded two perfect tens, two eights, and two zeroes. On this
A-2204-18T4
25
category, Harvest received two tens, a nine, a seven, and two zeroes. Similarly
disturbing in its variety of scores from perfect to non-responsive, was the
confusion about a category that sought information about whether the applicant
was women-owned, minority-owned, or veteran-owned. Altus received:
twenty-three, twenty, ten, and three zeroes. Bloom received two perfect twenty-
fives, an eighteen, two fifteens, and a zero. And Harvest, which asserted that its
majority owner is an African-American woman, inexplicably received only one
twenty-five, as well as a fifteen, a ten, and three zeroes. 7
Another criterion that provide inconsistent scores was one that sought the
applicant's plans to dedicate funding or other resources for research. Liberty
Plant received four perfect tens and two zeroes. 8
GGB had a similar experience but describes it in different terms that
similarly persuade us there's simply something wrong with the scoring:
7
The confusion may arise – but ought to have been explained in the final agency
decisions – from the fact that some applicants had applied for but had not by
that time received certifications about minority ownership.
8
To add to the scoring anomalies on this category, Liberty Plant refers us to the
fact that in its identical submission in another geographic region, it received five
perfect tens and one eight. This means that the two reviewers who assigned the
same answer a zero in one region gave Liberty Plant a ten or eight when judging
the same response for purposes of another region; put in statistical terms the
same reviewers on the same applicant's identical answer had relative error of
either 80 or 100%.
A-2204-18T4
26
[O]ne reviewer awarded GGB a total of 625 points
whereas two other reviewers awarded it in excess of
900 points, a difference of more than 300 points. In
other words, if these individual scores were placed on
a traditional secondary school grading scale (0-100) by
dividing the individual scores by 10, GGB received the
equivalent of an "F" from one reviewer and an "A" from
two others. More astonishingly, the delta between the
lowest individual score (625) and the second-lowest
individual score (782) is 157 points whereas the delta
between the second-lowest individual score and the
highest individual score (938) is slightly lower at 156
points.
GGB does not limit its concerns to its own situation but points out that almost
half of the 146 applicants had composite average scores that varied by more than
300 points between the highest and the lowest and, for a handful of applicants,
the composite average score varied by more than 600 points, an extraordinary
discrepancy when considering that the total amount of points available on an
application was 1000.9
Bloom's approach is similar. Bloom argues that one reviewer consistently
gave it much lower scores on all categories than the other reviewers, noting that,
collectively, five reviewers gave it scores of 912, 920, 942, 981, and 989, while
9
GGB also provided detail about the discrepancies between reviewers on
various categories like those that we already discussed with regard to Pangaea
and Liberty Plant. For brevity's sake we do not specifically mention those
categories in which, like other appellants, GGB received both perfect scores and
zeroes.
A-2204-18T4
27
the sixth gave it only a 625, and that when this anomaly is averaged with the
other consistent scores, its average was pulled down and its final score finished
out of the money.
The Department has done little to justify these anomalies or explain why
they should be disregarded. We would characterize the Department's
contentions as falling into two general assertions: (1) the divergent scores in
some instances are the product of "each member appl[ying] his or her unique
expertise to the scoring process," and (2) all applicants were subject to the same
process and, therefore, all buoyed or dragged down by the varying scores. The
former is unconvincing because it runs counter to the fact that the Department
provided each review committee member the same set of instructions that it
presumably sought to have applied in the same way, as well as the rather obvious
likelihood that the Department did not intend – nor should it have intended – to
allow reviewers' personal views to enter into the calculus. We are also
unpersuaded by the Department's false-equivalency argument. It is certainly
true that the winning and losing applicants were subjected to the same review
committee, and there may be evidence of similar inconsistent scoring of the
A-2204-18T4
28
winning applications,10 but that doesn't mean that they were entirely treated the
same way.
The Department also asserts that it ameliorated the consequences of an
occasional outlying score by taking the average of all the scores of the six review
committee members. To be sure, averaging will naturally reduce the impact of
an outlier on the overall scores, but not so much when there are multiple outlying
scores. Take, for example, one set of marks received by Pangaea that included
three perfect fifteens and three zeroes. After the committee averaged those
numbers, Pangaea received an average score of seven-and-one-half, a score that
has no kinship with a single vote that Pangaea received. 11
10
For example, of the scores of all successful applicants on the women-,
minority-, or veteran-owned business criterion, some were relatively consistent
but others weren't:
Columbia Care 2 0 0 22 0 25
GTI 15 20 15 24 0 0
JG 10 0 0 23 0 0
MPX 25 25 25 23 25 25
NETA 20 25 15 23 25 25
Verano 25 25 25 24 25 25
11
GGB and Bloom both argue that the Department could have avoided these
types of anomalies – or at least reduced their detrimental impact on the accuracy
of the review committee's work – by "censoring"; that is, by removing some of
the data to produce a more reasoned result. Bloom suggests the Department
should have eliminated the scores of one review committee member who
A-2204-18T4
29
There is no escaping the fact that some of these scores simply "don't
compute" and that, no matter how the Department and the other respondents may
attempt to slice it, the results are still unsettling.12
B
Having expressed our views about scoring, we turn to the parties'
arguments about the standard of appellate review. As observed earlier, this is
one of those issues influenced by our view of the scoring.
repeatedly gave Bloom lower scores than the other members. GGB appears to
suggest removing particular outlying scores. Due to many factors, including
bias, the scoring method in some sporting events – particularly during the Cold
War – called for the removal of the highest and lowest scores and averaging the
rest, thereby reducing the degree of relative error and rendering the score more
accurate. The simplicity of that approach is appealing but it won't result in
sufficient adjustments with some scores, such as where Pangaea received three
perfect fifteens and three zeroes; the average remains the same even if one high
and one low score are eliminated. In any event, if such adjustments are to be
made, it is for the Department to make them. Our role extends to determining
whether the Department's processes are or are not arbitrary, capricious, or
unreasonable; we will not intervene to the point of imposing a better system or
determining what a better system would be.
12
The Department and other respondents argue that we have already given
approval of a similar selection method when reviewing final agency decisions
rendered in 2011. See In re Inst. for Health Rsch., No. A-0069-11 (App. Div.
Aug. 22, 2013). We need not recount the differences between the arguments
posed in that case and those presented here. It suffices to observe that our
decision in that case was not published and has no precedential impact or
interest. R. 1:36-3. We have referred to this unpublished opinion elsewhere in
this opinion only for historical-background purposes.
A-2204-18T4
30
Bloom, GGB, Liberty, and Pangaea argue that we need not afford any
deference to the Department's evaluation process, the scores, or the ultimate
selection of winning applicants. They claim the Department lacks specialized
knowledge in the area of medical marijuana, lacks expertise because it has
conducted only one prior request-for-application process related to ATC
permits, and because, as Bloom puts it, the review committee members were
"representative[s] of different State agencies and largely evaluated matters
outside the scope of their individual skills and expertise." Because our view of
the scoring issues requires a remand even if we were to apply the most
deferential standard of review, we find it necessary to add only a few comments
on this issue.
As a general matter, the judicial capacity to review agency actions is
"limited." Pub. Serv. Elec. and Gas Co. v. N.J. Dep't of Env't Prot., 101 N.J. 95,
103 (1985). An agency's "final quasi-judicial decision" should be affirmed
unless there is a "clear showing" that it is "arbitrary, capricious, or unreasonable,
or that it lacks fair support in the record." In re Herrmann, 192 N.J. 19, 27-28
(2007). In examining a challenge to a final agency decision, we are generally
limited to determining whether the agency action violates "express or implied
legislative policies," whether the decision is supported by "substantial evidence
A-2204-18T4
31
in the record," and whether, "in applying the legislative policies to the facts, the
agency clearly erred by reaching a conclusion that could not reasonably have
been made upon a showing of the relevant factors." Pub. Serv. Elec. and Gas,
101 N.J. at 103. An appellate court's "strong inclination" must be to "defer to
agency action that is consistent with the legislative grant of power." Lower
Main St. Assocs. v. N.J. Hous. and Mortg. Fin. Agency, 114 N.J. 226, 236
(1989). This inclination is strong "when the agency has delegated discretion to
determine the technical and special procedures to accomplish its task," In re
Application of Holy Name Hosp. for a Certificate of Need, 301 N.J. Super. 282,
295 (App. Div. 1997) – as the Department claims here – and should be
"construed liberally when the agency is concerned with the protection of the
health and welfare of the public," Barone v. Dep't of Hum. Servs., 210 N.J.
Super. 276, 285 (App. Div. 1986). But, "[t]he interest of justice" is always a
valid invitation for intervention, and a reviewing court is free "to abandon its
traditional deference . . . when an agency's decision is manifestly mistaken."
Outland v. Bd. of Trs. of the Teachers' Pension and Annuity Fund, 326 N.J.
Super. 395, 400 (App. Div. 1999).
In short, when we defer, we defer because of an agency's "technical
expertise, its superior knowledge of its subject matter area, and its fact -finding
A-2204-18T4
32
role." Messick v. Bd. of Review, 420 N.J. Super 321, 325 (App. Div. 2011).
This rationale, however, "is only as compelling as is the expertise of the agency,
and this generally only in technical matters which lie within its special
competence." In re Boardwalk Regency Corp., 180 N.J. Super. 324, 333 (App.
Div. 1981). See, e.g., Clowes v. Terminix Int'l, Inc., 109 N.J. 575, 588 (1988)
(deferring to Division on Civil Rights' expertise in recognizing acts of
discrimination, but not to its findings on an employee's diagnosis of alcoholism,
which it was "no better able to evaluate . . . than is a reviewing court"); Cooley's
Anemia & Blood Rsch. Found. for Child., Inc. v. Legalized Games of Chance
Control Comm'n, 78 N.J. Super. 128, 140 (App. Div. 1963) (recognizing that
courts "generally defer to the special expertness and broad experience of an
administrative agency in its general field, but not in the same degree in all
cases[;] [i]t depends upon the issues . . .").
As we have already observed, the Department established a review
committee consisting of members purportedly possessing the Department's own
expertise, as well as members of other disciplines, since it included a member
from the Department of Agriculture and one from the Department of Treasury. 13
13
We see no reason to question this approach. The Legislature charged the
Department with the task of ascertaining the best applicants, and we find nothing
A-2204-18T4
33
Yet, each member was required to vote on all criteria, meaning that the
Agriculture member was called upon to assess applicants' financial capacities,
while the Treasury member was required to appraise applicants' horticultural
capabilities. Despite this cross-over into areas not likely within a member's
bailiwick,14 each member's vote was equally weighed; in other words, the
Agriculture member's vote on financial matters possessed the same value as the
Treasury member's vote on that same subject.
We do not know who the review committee members were, nor do we
even know what their backgrounds might have suggested about the caliber of
their opinions concerning matters beyond what their Department affiliation
might suggest. Accordingly, it is unclear on this record the extent to which we
should defer to the scores rendered by the review committee and adopted by the
Department.
arbitrary, capricious, or unreasonable in the Department's fulfillment of that
obligation in creating a multi-member review committee by enlisting
representatives from other departments, including the Departments of
Agriculture and Treasury. We are satisfied that the Department acted i n
accordance with the legislative mandate in taking this approach. We question –
but do not now decide in light of the remand we mandate today – whether the
votes should have been weighted whenever a member voted on a matter outside
the member's expertise or, if the Department chooses not to weight such votes,
whether a score left un-skewed is entitled to deference.
14
The record contains nothing about the alleged expertise or background of any
member because the Department has kept their identities confidential.
A-2204-18T4
34
The Department must address the numerous questions posed about its
scoring procedures and explain the basis for its resolution of the remand
proceedings before we can ever adequately review whatever final agency
decisions come from those proceedings. So, we need not reach any definitive
conclusion about the standard of appellate review applicable here. We would
urge the Department, however, to make findings that take into consideration our
concerns.
We commend to the Department the standard expressed by our Supreme
Court sixty years ago. Even then, the Court recognized that this standard was
nothing new; instead, the Court stated that it was already then "axiomatic in this
State" that
an administrative agency acting quasi-judicially must
set forth basic findings of fact, supported by the
evidence and supporting the ultimate conclusions and
final determination, for the salutary purpose of
informing the interested parties and any reviewing
tribunal of the basis on which the final decision was
reached so that it may be readily determined whether
the result is sufficiently and soundly grounded or
derives from arbitrary, capricious or extra-legal
considerations.
[Application of Howard Sav. Inst. of Newark, 32 N.J.
29, 52 (1960); see also In re Issuance of Permit by Dep't
of Env't Prot., 120 N.J. 164, 172 (1990).]
A-2204-18T4
35
Whether the Department's process may be labelled quasi-judicial is beside
the point. The Department clearly relied in its final agency decisions on the
values assigned by its review committee and the mathematical results that those
values yielded; it claims those are its findings. In justifying the reasonableness
of its determinations, the Department refers to its processes but without
explaining away the questions patently arising from them. The Department's
final agency decisions provide only a net opinion by giving us nothing more
than the computations made from the raw data lacking the "why and wherefore"
of the decisions rendered. Cf. Davis v. Brickman Landscaping, Ltd., 219 N.J.
395, 410 (2014) (recognizing that an expert renders an inadmissible net opinion
when failing to provide "the why and wherefore" that supports the opinion) .
Instead, the Department – by issuing final agency decisions without first
allowing disappointed applicants an opportunity to challenge the findings at the
agency level – has left it to us to hear those arguments for the first time while
simultaneously arguing that we must defer to its findings and conclusions on
issues it has not yet had the opportunity to hear. To ensure the production of a
final agency decision worthy of deference, the Department must find a way to
listen to and resolve questions from the disappointed applicants , and then
A-2204-18T4
36
explain its resolution of those complaints before expecting our endorsement of
the results.
C
Compassionate Care argues that the record on appeal is insufficient to
provide a basis for review because the Department did not release the
applications of the selected applicants without "heavy" redactions. GGB makes
the same argument, and further complains that the Department redacted the
names of the six review committee members, making it "impossible" for
applicants to "ascertain whether any of the reviewers held [any] bias[es]."
Liberty Plant makes similar arguments.
By way of background on this point, we initially observe that the request
for applications advised that applications would be "generally subject to public
release pursuant to [OPRA] and/or [sic] the common law," but that "proprietary
and other types of information contained in the applications may be exempt from
public disclosure," and an applicant could designate "specific information" that
it felt should be exempt from disclosure. The request for applications explained
that if the Department withheld a designated part of an application when
responding to an OPRA request, and the requester posed a challenge, the
A-2204-18T4
37
applicant might be required to intervene and defend its assertion that the
information was exempt from disclosure.
The Department also informed prospective applicants at the mandatory
pre-application conference of their ability to designate portions of their
submissions as "confidential, trade secrets, proprietary, commercial or financial
information, or information which, if disclosed, would give a competitive
advantage or disadvantage." The Q&A document stated that any disclosure of
information by the Department would be "consistent with [OPRA's]
requirements" and that applicants would need to submit a memo delineating
those portions of their applications they felt were confidential, proprietary, or
otherwise exempt from disclosure if they wanted such portions redacted in
responses to OPRA requests. The names of the review committee members were
also redacted in the Department's response to OPRA requests.
In their submissions to this court, appellants have not provided full
versions of every successful application, even with redactions. GGB and
Liberty Plant, the appellants who have asserted that the Department should have
released the winners' materials without redactions, included only portions of
their own applications in their appendices: GGB submitted its entire application
A-2204-18T4
38
but with very significant redactions and many blacked out passages; Liberty
Plant submitted just four pages of its application.
In considering these arguments about the sufficiency of the record on
appeal, we first recognize that appellants were given notice of the possibility
that if they filed an OPRA request asking for any other entities' applications,
they might receive redacted versions. The request for applications afforded
every applicant the opportunity to ask the Department to withhold specific
portions of its application. Some applicants, including those chosen to proceed
with the permitting process, apparently requested significant redactions of their
submissions. The Department honored the terms of its request for applications
and should not now be put in the position of dishonoring that understanding
because of the happenstance of these appeals. In fact, N.J.A.C. 8:64-6.4 states
that the record in an appeal from a final agency decision in this context "shall
be" the applications at issue with attached supporting documents "excluding
information deemed exempt pursuant to [OPRA]."
Second, N.J.S.A. 47:1A-6 provides that a person who is denied access to
a record by its custodian may "institute a proceeding to challenge the custodian’s
decision by filing an action in Superior Court . . . ; or . . . file a complaint with
the General Records Council established pursuant to [N.J.S.A. 47:1A-7]."
A-2204-18T4
39
Appellants did not avail themselves of either of these avenues to address their
dissatisfaction with the redactions in the documents they received in response to
their OPRA requests. Had they done so, the chosen tribunal could have decided
whether the winning applications or the names of the review committee
members were exempt from disclosure under OPRA.
Third, even if the current appeals were an appropriate forum to address
appellants' arguments, OPRA permitted the Department to withhold the
information it had redacted. N.J.S.A. 47:1A-1.1 states that the definition of
"government record" does not include: "trade secrets and proprietary
commercial or financial information obtained from any source"; "emergency or
security information or procedures for any buildings or facility which, if
disclosed, would jeopardize security of the building or facility or persons
therein"; "security measures and surveillance techniques which, if disclosed,
would create a risk to the safety of persons, property, electronic data or
software"; or "information which, if disclosed, would give an advantage to
competitors or bidders."
The request for applications required applicants to submit several types of
highly technical and scientific information about their marijuana strains,
growing methods, pest-control methods, manufacturing procedures, and
A-2204-18T4
40
available products. It also sought information about applicants' proposed site
layouts, security measures, and financial information. While we can only
hypothesize about the likely outcome, it seems reasonable to assume that any
redacted portions contained information exempt from disclosure under OPRA.
That GGB and Liberty Plant submitted heavily redacted or reduced versions of
their own bids into the record on appeal suggests they view this information as
proprietary and are unwilling to reveal to their competitors or the public the
technical details of their operations. For the same reason, the argument that such
information from others should have been included in the record on appeal is
without merit.
In short, we must recognize that we are hampered by the record's
limitations in our ability to assess whether the final agency decisions were
arbitrary, capricious, reasonable, or unsupported by the record. Had – among
other possible approaches – the Department conducted a brief internal review
process after inviting those disappointed by the results to express their
objections or questions and after allowing respondents an opportunity to respond
to those exceptions – the Department could have pinpointed the areas of
controversy and explained for us its view of the exceptions filed. That way,
once an appeal was filed, we could have better appreciated the need for a record
A-2204-18T4
41
containing those materials – whether still redacted or submitted confidentially –
that would assist our determination of whether the final agency decisions were
arbitrary, capricious, unreasonable, or unsupported by the record.
So, while we draw no specific conclusion about appellants' arguments on
this point, in remanding we leave the matter for the Department's further
consideration with the hope that it will appreciate the difficulties we face in
reviewing a final agency decision absent a full and understandable record.
We would add, however, that we see no merit in the argument that the
Department was obligated to reveal the identities of the review committee
members. N.J.S.A. 47:1A-1.1 exempts "inter-agency or intra-agency advisory,
consultative, or deliberative material" from disclosure under OPRA. This
deliberative process privilege "permits the government to withhold documents
that reflect advisory opinions, recommendations, and deliberations comprising
part of a process by which governmental decisions and policies are formulated."
In re Liquidation of Integrity Ins. Co., 165 N.J. 75, 83 (2000). Upholding this
privilege is "necessary to ensure free and uninhibited communication within
governmental agencies so that the best possible decisions can be reached."
Educ. Law Ctr. v. N.J. Dep't of Educ., 198 N.J. 274, 286 (2009). In this regard,
the Supreme Court observed that
A-2204-18T4
42
[f]ree and open comments on the advantages and
disadvantages of a proposed course of governmental
management would be adversely affected if the civil
servant or executive assistant were compelled by
publicity to bear the blame for errors or bad judgment
properly chargeable to the responsible individual with
power to decide and act.
[Id. at 286 (quoting Kaiser Aluminum & Chem. Corp.
v. United States, 157 F. Supp. 939, 945-46 (Ct. Cl.
1958)).]
Knowing that their identities could ultimately be revealed could have an
impact on review committee members. Moreover, advance revelation of their
identities could lead to mischief; applicants could use that knowledge to attempt
to lobby or influence members. And even if we assume that these public
officials would be beyond such influence, the mere potential of such lobbying
could have the effect of diminishing public confidence in the committee's
performance.
We, thus, respond to the arguments about the content of the record by
referring them to the Department for further consideration in light of what we
have said. But we do reject on its merits the argument that the Department was
required to divulge the identities of the review committee members.
A-2204-18T4
43
D
Bloom argues that the Department improperly failed to provide any
agency-level procedure for unsuccessful applicants to protest the Department's
rejection of their applications and selection of the six winners. GGB, Liberty
Plant, and Pangaea make the same argument. Harvest similarly argues that the
absence of an agency hearing "violat[ed] longstanding tenets of New Jersey
administrative law" and deprived disappointed applicants of a chance to
"address errors or otherwise present law and facts challenging [the
Department's] decisions."
We agree that the Department was required to do more than compile and
tabulate the votes and declare winners based on that raw computation. As
appellants have demonstrated, and as we discussed earlier, there are many scores
that are patently discordant. Capable review committee members, armed with
the same instructions, should not produce such inconsistent results. Red flags
should have gone up in instances where, for example, two reviewers gave perfect
scores, two reviewers gave middling scores, and two reviewers gave zeroes or,
for that matter, anytime that a zero was scored on a criterion on which other
reviewers gave high scores. N.J.S.A. 24:6I-7(e) imposed on the Department to
"verify" its results, and we believe that charge required more than just checking
A-2204-18T4
44
its arithmetic. The very nature of the undertaking required not just accurate
computations but a search for odd or outlying scores that could unfairly skew
the results. We have already demonstrated how in many instances the "relative
error" in judging a criterion was too high to be acceptable, whatever the
undertaking. And, beyond the Department's bald assertion that it engaged in
quality control, 15 there is no evidence of that in the record on appeal. We believe
that the statutory obligation that the Department "verify" its results obligated the
Department to invoke procedures that would allow parties to question their
scores and obtain an explanation before the rendering of final agency decisions.
Some appellants have argued they were entitled to a full-blown hearing
that would require the calling of witnesses and cross-examination. We're not so
sure. It may be enough that the Department 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
15
In the review committee's recommendation report to the Department, it is
asserted – without further explanation – that scoring was completed on
December 10, 2018, and that the scoring "was subjected to a quality control
review, which was completed on Wednesday, December 12, 2018." Absent is
any evidence that the review committee or the Department attempted to
harmonize the scoring discrepancies or to explain why those scores are not
inconsistent or questionable.
A-2204-18T4
45
how those complaints were resolved or rejected. A further analysis and
verification of the winning applicants may not require an evidentiary hearing,
but we leave to the Department in the first instance to determine the best way of
going about its statutory obligation to verify its results.
In the final analysis, we conclude that by failing to engage in such an
additional process, the Department has essentially left it for us to field – in the
first instance – appellants' objections to the scoring and to determine whether
there is something wrong with the results without receiving from the Department
an adequate explanation for why the scores aren't wrong or – in legal terms –
aren't arbitrary, capricious or unreasonable. We do not think the Legislature
intended for this court to be the clearing house for any problems in the process,
or to determine the mathematical reasonableness of the results obtained through
the process devised by the Department. In deferring to the idea that it is the
Department that should decide who are the winners and losers, we decline the
invitation to be the Department's quality-control committee.
In fact, in deferring to the idea that it is the executive branch, not the
judicial branch, that must make the ultimate decision as to who should move on
in the permitting stage, we will not dictate to the Department what it is that it
should do following today's remand, other than to hold that it must engage in
A-2204-18T4
46
some sort of additional process for receiving and considering the appellants'
contentions and must explain its determinations on those contentions. We will
not decide or impose on the Department whether it should conduct a plenary
hearing, whether it should create a quality control committee to hear, consider,
and make recommendations about appellants' concerns, or whether it should
devise some other system for resolving appellants' complaints. We hold only
that in the absence of some procedure for ensuring and verifying the reviewing
committee's conclusions, the results previously produced and adopted in the
final agency decisions must be deemed arbitrary, capricious, unreasonable, and
untethered to the record, and cannot, therefore, be sustained at this time.
So, in this spirit, we conclude that appellants are correct that they were
not afforded the process due under the applicable legislation and the
Administrative Procedure Act, and we remand so the Department may provide
that process. We intervene in the administrative proceedings that have taken
place so far to ensure the public's confidence in both the results achieved at the
agency level so far and to ensure that future similar proceedings will be likewise
subjected to a measure of scrutiny at the agency level that will guarantee the
process does not produce determinations that are arbitrary, capricious or
unreasonable. We so hold not because it betters our ability to review the agency
A-2204-18T4
47
decisions but because of the overriding public interest. As we have said before
in bidding matters, 16 "[b]oth the public interest and the public's perception" that
the process is "fair, competitive and trustworthy are critical component s and
objectives." Muirfield Constr. Co. v. Essex Cty. Improvement Auth., 336 N.J.
Super. 126, 137-38 (App. Div. 2000).
E
For the same reasons, it follows that the final agency decisions do not
contain the type of findings sufficient to command appellate deference. As
noted earlier, the final agency decisions in question outline the manner in which
the Department went about its task and then set forth the raw scores that
culminated in a rejection of appellants' applications. Those decisions present
little more than sets of numbers that declare the appellants placed out of the
money. Appellants argue that those sets of numbers inadequately express the
decisions rendered. We agree.
As is well-established, if an administrative agency's findings are
"supported by substantial credible evidence in the record as a whole," a
16
There are many similarities in the Department's manner of finding worthy
entities to move on in the permitting stage to the way in which public bidding is
conducted. We do not, however, need now to decide whether our approach in
reviewing bidding matters is applicable in all respects here.
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48
reviewing court "must accept them." Outland, 326 N.J. Super. at 400. But, an
agency's discretion "must be exercised in a manner that will facilitate judicial
review." R & R Mktg., LLC v. Brown-Forman Corp., 158 N.J. 170, 178 (1999).
As a result, when "acting quasi-judicially," the agency "must set forth basic
findings of fact, supported by the evidence and supporting the ultimate
conclusions and final determination." Howard Sav. Inst. of Newark, 32 N.J. at
52. This practice allows a reviewing court to "readily determine[]" whether the
agency's decision is "sufficiently and soundly grounded or derives from
arbitrary, capricious or extralegal considerations." Ibid.In short, administrative agencies must "articulate the standards and
principles that govern their discretionary decisions in as much detail as
possible." Van Holten Grp. v. Elizabethtown Water Co., 121 N.J. 48, 67 (1990)
(quoting Crema v. Dep't of Env't Prot., 94 N.J. 286, 301 (1983)). And they must
make findings "to the extent required by statute or regulation, and provide notice
of those [findings] to all interested parties." In re Issuance of a Permit, 120 N.J.
at 173. If "the absence of particular findings hinders or detracts from effec tive
appellate review," a matter may be remanded to an administrative agency "for a
clearer statement of findings and later reconsideration." In re Vey, 124 N.J. 534,
544 (1991). See, e.g., Green v. State Health Benefits Comm'n, 373 N.J. Super
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49
408, 416 (App. Div. 2004) (reversing and remanding where agency decision
contained only "bald assertion" that certain care was not covered under
insurance plan); Lambertville Water Co. v. N.J. Bd. of Pub. Util. Comm'rs, 153
N.J. Super. 24, 29 (App. Div. 1977) (remanding where agency decision was
"devoid of any analysis" explaining choice and use of formula for calculations).
A court may also remand a matter "[w]here the agency record is insufficient,"
so that it may be "fully develop[ed]." ACLU of N.J. v. Hendricks, 233 N.J. 181,
201 (2018).
In expressing our agreement with those appellants that have argued the
final agency decisions do not contain sufficient findings or the expression of an
adequate rationale for the conclusions reached, we again observe that the
absence of any explanation for those scores that seem – on the present record –
at least in part inexplicable demands that we remand for further proceedings. To
be sure, "[a]ll of the evidential data" before an agency "need not be repeated or
even summarized, nor need every contention be exhaustively treated." Howard
Sav. Inst. of Newark, 32 N.J. at 53. But an agency decision must reveal enough
of the agency's thought process so that a reviewing court may determine
"without question or doubt what facts and factors led to the ultimate conclusions
reached." Ibid. We have traditionally striven to accept an agency's findings
A-2204-18T4
50
even when they "are not nearly so clear, full and well organized" as they could
be, but, in the final analysis, we must be able to "understand fully the meaning
of the decision and the reasons for it." Ibid.We have been given numerous reasons to doubt the sufficiency of the final
scores that led to the decisions under review. As noted, these final agency
decisions were the product of the scoring instructions given to the review
committee members. They were directed to "[e]valuate each application and
assign a score up to the maximum point value for each measure," then "tally
[those] scores on the paper copy" of the application. The instructions then
directed the members to "provide a short[,] written description to justify the
assigned score." The review committee's recommendation report did not include
any descriptions of individual reviewers' scores, the final agency decisions
distributed to applicants did not refer to any, and the Department's OPRA
response did not include any documents like those described in the instructions.
The final agency decisions provide only the scores resulting from the work
of the review committee. We do not have any evidence that the Department
ensured that the members understood or followed instructions, and there is no
evidence that the scores were either verified in some manner or whether
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51
anomalies, which are revealed even in the limited record before us, have been
harmonized in some reasonable, non-arbitrary way.
F
Appellants have raised some discrete issues that should not go
unmentioned but, because we remand, will for the most part be left to the
Department to consider further and provide an explanation for its disposition of
these arguments:
(1) mainly Bloom, but others as well, argue some of the
criterion are "vague and subjective" and confused
applicants about what was being sought;
(2) Bloom, GGB, Liberty Plant, and Pangaea argue in
various ways that some of the Department's criteria
were based on regulations that had been proposed but
not adopted by the time the request for applications was
issued;
(3) Harvest argues that the Department acted
improperly by deciding – after applications were
submitted – to limit applicants for approval to one ATC
permit;
(4) Compassionate Care argues that the Department's
selection of MPX to proceed with the permitting
process for an ATC in Atlantic City should be
overturned because the Department did not take into
consideration Compassionate Care's intention to open a
satellite location in the same city;
(5) GGB argues that Verano engaged in misconduct that
should have precluded its selection; and
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52
(6) Bloom's contention that the approval of NETA's
application improperly authorized its operation of "a
facility within 1,000 feet of a school zone."
As for those contentions we leave undecided here, we will endeavor to be brief
because the Department should consider them during the remand proceedings.
First, we agree with appellants about the importance of a "common
standard of competition," Twp. of Hillside v. Sternin, 25 N.J. 317, 323 (1957),
and, for that reason, the request for applications should be "as definite, precise
and full as practicable in view of the character" of the undertaking, James
Petrozello Co. v. Twp. of Chatham, 75 N.J. Super. 173, 178 (App. Div. 1962)
(quoting Waszen v. Atlantic City, 137 N.J.L. 535, 537 (Sup. Ct. 1948)). We
don't agree that the inclusion of subjective criterion necessarily runs counter to
that goal. In revisiting these applications and appellants' arguments about the
process, the Department should entertain appellants' arguments and provide an
explanation for any criterion so criticized in the remand proceedings to fol low.
Second, some appellants argue that this court should intervene because
the Department used criteria that were either unadopted by regulation or
inconsistent with existing regulations. Bloom argues that the Department
improperly waived the requirement in N.J.A.C. 8:64-6.2(a)(2) that ATC
operators be involved with an acute care hospital without engaging in formal
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53
rulemaking, particularly when considering that the Department informed
applicants that its evaluation of applications would be based on its then-current
2011 regulations. Despite those representations, the Department – according to
Bloom – improperly based several other criteria on new regulations proposed in
2018 that had not been adopted by that time in accordance with the
Administrative Procedures Act. For example, Bloom asserts that criteria
seeking financial information from applicants "had no basis" in the 2011
regulations and that the injection of criteria discussed in as-yet-unadopted
regulations deprived applicants of "notice of the standard to which they were to
be held." GGB and Liberty Plant make the same arguments. Pangaea makes the
same arguments as well, while adding an argument that "[t]he development of a
scoring system may itself be considered a rule-making."
The Department informed prospective applicants at its pre-submission
conference that it had proposed changes to the medicinal marijuana regulations
in 2018 but that the public comment period was not over and the changes had
not been officially adopted. As a result, the Department declared that
"applicants [were] subject to the regulations currently in effect" at the time of
submission, meaning the 2011 regulations; this was reiterated in the Q&A
document. The Department also stated during the conference that it was waiving
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54
the requirement in N.J.A.C. 8:64-6.2 that a permit holder have "documented
involvement [with] an acute care hospital," explaining that the Department had
found this to be "somewhat impracticable" and advising that the formal repeal
of this requirement had been proposed in the new regulations. At the pre-scoring
meeting, the review committee was also told to evaluate applications in
accordance with the original 2011 regulations.
N.J.S.A. 52:14B-4 mandates that prior to the adoption of a regulation, an
agency must give at least thirty days' notice of its intended action and provide
"an opportunity for all interested persons to submit data, views, or arguments in
writing or orally." George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 18
(1994). Any proposed agency rule that "revises, rescinds or replaces" an
existing rule is considered a "new rule" subject to these provisions. N.J.S.A.
52:14B-4.9. Once a regulation is in effect, it has "the force and effect of
statutory law," and an administrative agency "ordinarily . . . may not disregard
[it]." Van Note-Harvey Assocs., P.C. v. N.J. Sch. Dev. Auth., 407 N.J. Super.
643, 650 (App. Div. 2009).
While an administrative agency's actions must not exceed the powers
conferred to it by the Legislature, "the breadth of an agency's authority
encompasses all express and implied powers necessary to fulfill the legislative
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55
scheme that the agency has been entrusted to administer." In re Application of
Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422-
23 (2008). Thus, agencies are "allowed some leeway to permit them to fulfill
their assigned responsibilities." Id. at 423.
Notwithstanding, due process requires that substantive procedural
standards control agency discretion. Crema, 94 N.J. at 301. The regulated
community reasonably expects "that known and uniform rules, standards,
interpretations, advice and statements of policy" will be applied by state
agencies. Cath. Fam. & Cmty. Servs. v. State-Operated Sch. Dist. of Paterson,
412 N.J. Super. 426, 442 (App. Div. 2010). An agency also may not use its
power to interpret its regulations as a means of amending them or adopting new
ones. Venuti v. Cape May Cty. Constr. Bd. of Appeals, 231 N.J. Super 546, 554
(App. Div. 1989). Overall, when an agency's action "could not have been fairly
anticipated or addressed" because neither the enabling statute nor applicable
regulations provided for it, the action is not a proper exercise of discretion .
Crema, 94 N.J. at 302.
When the Department issued its 2018 request for applications, N.J.A.C.
8:64-6.2(a) provided that a committee would evaluate applications for ATC
permits "on the following general criteria":
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56
1. Submission of mandatory organizational
information;
2. Documented involvement of a New Jersey acute care
general hospital in the ATC's organization;
3. Ability to meet overall health needs of qualified
patients and safety of the public;
4. Community support and participation; and
5. Ability to provide appropriate research data.
[See 50 N.J.R. 1398(a).]
The new version of this regulation, which became effective on May 20,
2019, removed the requirement of an acute care hospital's involvement and
added new criteria to be evaluated: "experience in cultivating, processing, or
dispensing marijuana in compliance with government-regulated marijuana
programs"; "history of compliance with regulations and policies governing
government-regulated marijuana programs"; "ability and experience of the
applicant in ensuring adequate supply of marijuana"; and "workforce and job
creation plan, including plan to involve women, minorities, and military
veterans in ATC ownership and management and experience with collective
bargaining in the cannabis and other industries." N.J.A.C. 8:64-6.2(a).
In proceeding on the basis of anticipated changes in its regulatory scheme,
the Department did not necessarily act arbitrarily, capriciously, and
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57
unreasonably. N.J.A.C. 8:64-7.11, which was effective at the time of the request
for applications, provides that the Department "may waive a requirement
regarding the operations of [an] ATC" if it determines that it "is necessary to
achieve the purpose of the [Compassionate Use] Act and provide access to
patients who would otherwise qualify for the use of medicinal marijuana . . . and
does not create a danger to the public health, safety or welfare." The Department
informed prospective applicants in advance of the submission date that it was
waiving the requirement that applicants be involved with an acute care hospital
before this requirement was formally removed by the 2019 update to the
regulations because it was "impracticable." We reject the argument that this was
improper in light of the Department's power to waive such an obligation under
N.J.A.C. 8:64-7.11; indeed, the waiver increased the pool of possible applicants
and may have raised the quality of the pool as well. Because applicants were
advised of this in advance, the waiver was fair and treated all applicants equally.
We also reject the argument that the Department improperly considered
elements of pending regulations. When the request for applications was issued,
the Compassionate Use Act did not set forth any particular standards under
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58
which the Department was required to evaluate applications. 17 Instead, N.J.S.A.
24:6I-7(b) stated that the Department must require that an applicant "provide
such information as [it] determines to be necessary pursuant to regulations
adopted pursuant to [the Compassionate Use Act]." The Department had set
forth some mandatory evaluation criteria in N.J.A.C. 8:64-6.2, but N.J.A.C.
8:64-6.1(b)(1) more generally provides that the Department must give notice of
"eligibility criteria and a statement of the general criteria by which [it] shall
evaluate applications."
We agree that, as a general matter, the Compassionate Use Act afforded
the Department considerable discretion in selecting applications. It did not
"shackle" the Department to a set of specific standards but instead allowed it the
"ability to be flexible and responsive to changing conditions." Natural Med.,
428 N.J. Super. at 271 (quoting Texter, 88 N.J. at 385). Because all prospective
applicants were fully informed of the criteria in the request for applications, at
the pre-application conference, and in the Q&A document, the criteria were
"fairly anticipated" by the regulated community. Crema, 94 N.J. at 302.
17
N.J.S.A. 24:6I-7.2(c), (d), and (e), effective as of July 2, 2019, set forth in
detail many criteria the Department must now evaluate when reviewing
applications for cannabis cultivator, manufacturer, and dispensary permits.
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59
We further reject Pangaea's argument that the Department's scoring
system could be considered "rulemaking" subject to the requirements of the
Administrative Procedure Act. "Not every action of an agency, including
informal action, need . . . be subject to the formal notice and comment
requirements." In re Dep't of Ins.'s Ord. Nos. A89-119 and A90-125 and the
Adoption of N.J.A.C. 11:3-16A, 129 N.J. 365, 382 (1992).
Third, Harvest argues that the Department acted improperly when it
decided, after applications were submitted, that vendors could be approved for
only one ATC permit and that it should have included its method for ranking the
three regions of the state in the request for applications instead of waiting until
applications were submitted. Harvest goes so far as to say this action "[left] the
award process subject to . . . [the] possibility of partiality and fraud" because
applicants that did not have the best scores in a region could be chosen, while
applicants with higher scores could be passed over because they had already
been chosen elsewhere, raising the possibility that reviewers could "steer[]"
awards toward "favored vendors."
We reject this contention because the process was similar to that utilized
in the first round of ATC permitting in 2011. In its final agency decisions in
that prior proceeding, the Department explained that it had decided not to allow
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60
any applicant to hold more than one permit; the fact that in this second round
the Department informed applicants after the fact that they would be limited to
one permit each was hardly surprising. The Department also explained its
reasoning: a more diverse pool of ATC operators would limit the effects of one
operator's crop failures or other difficulties on the Program as a whole. This
rationale is not arbitrary, capricious, or unreasonable. The timing is a little more
troublesome – the Department waiting until after applications were submitted –
but there is nothing in the record to suggest that Harvest or other applicants
would have decided to apply in more or fewer regions if they had known they
could hold only one permit.18
Fourth, Compassionate Care argues that the Department's selection of
MPX to proceed with the permitting process for an ATC in Atlantic City should
be invalidated because the Department improperly failed to evaluate whether
applicants' proposed ATC locations would promote "geographic diversity" and
"how the location[s] . . . will increase patient access across the state," which
Compassionate Care argues it was "required to do."
18
In fact, all other things being equal, had applicants been allowed to hold
multiple permits, only three entities would have been chosen to proceed with
permitting: MPX and NETA in the central and southern regions, and GTI and
NETA in the northern region.
A-2204-18T4
61
Compassionate Care, one of the six entities selected in the first round of
ATC permitting in 2011, operates an ATC in Egg Harbor Township. In April
2018, the Department invited the original six ATC owners to submit applications
to waive the prohibition on satellite locations in N.J.A.C. 8:64-7.9, so they could
open dispensaries in additional places. Later that same month, Compassionate
Care applied for "satellite waivers" for three dispensaries, one in Atlantic City
and two in Camden County. 19
In September 2018, Compassionate Care submitted a street address for its
proposed location in Atlantic City and was quickly advised by the Department
that it could pursue the permitting process for an Atlantic City dispensary. The
following month, Compassionate Care told the Department it was
"reconsidering its satellite locations and was looking at other potential sites ."
Through the proceedings now in question, the Department selected for the
southern region MPX, which planned to locate its dispensary in Atlantic City.
When ruling on Compassionate Care's motion for a stay pending appeal on this
issue, the Department stated that it did not consider "the potential locations of
theoretical satellite dispensaries," not only characterizing that information as
19
In May 2018, Compassionate Care advised the Department that it was no
longer pursuing one of the Camden County locations but was looking into a
location in Burlington County.
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62
"speculative," but also finding that Compassionate Care’s "conduct and
discussions with the Department over the [previous] several months" showed a
"lack of commitment to opening a satellite location in Atlantic City."
Specifically, the Department referred to several pieces of information and
documents Compassionate Care had not provided regarding its plan to operate
the satellite dispensary. It declared that considering Compassionate Care's or
any other existing ATC permittee's proposed satellite location when selecting
applicants under the 2018 request for applications would have been
inappropriate because it would have allowed "maneuvering" by such permittees
to limit their future competition's location options. We find no merit in
Compassionate Care's argument.
N.J.S.A. 24:6I-7(a)(3)20 states that there must be "at least two [ATCs] each
in the northern, central, and southern regions of the State." Nothing else in the
Act or the regulations DOH has promulgated pursuant to N.J.S.A. 24:6I-16
refers to the specific location of ATCs. It is true that the result of the 2011
request for applications led to the Department choosing Foundation Harmony,
the applicant with the highest score that had not yet been chosen in another
20
In the version of N.J.S.A. 24:6I-7 in effect during the administrative
proceedings in question, L. 2013, c. 160, the same language was employed at
subsection -7(a).
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63
region, as the first northern region winner. Because both Foundation Harmony
and the next-highest scorer had proposed to locate their ATCs in Secaucus, the
Department bypassed the second-place finisher and chose the next entity in line,
explaining: "Taking into account the need for geographic diversity to improve
patient access . . . [t]he Department does not believe that locating two ATCs in
the same municipality to serve the seven-county [n]orthern region is in the best
interest of the public." Inst. for Health Rsch., slip op. at 4. Compassionate Care
argues that the Department has departed from this view by allowing an entity to
operate in Atlantic City near where Compassionate Care has contemplated
opening a satellite facility and has instead adopted a new view that geographic
diversity may frustrate the purpose of the ATC Program.
In rejecting Compassionate Care's argument, we need not consider
whether what was once deemed by the Department as important in 2011
precludes a different view in 2018 or after. The fact is that the Department did
not choose an applicant to operate an ATC in a municipality where another
existed. MPX will be the first ATC in Atlantic City, which will further the
Compassionate Use Act's mandate that the Department ensure a sufficient
number of ATCs to serve the needs of eligible patients. When MPX was
selected, Compassionate Care had not been issued a permit for a dispensary in
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64
Atlantic City, and the record suggests that it was far from committed to opening
a satellite facility there. It was not arbitrary or capricious of the Department to
fail to consider the hypothetical possibility that Compassionate Care might
pursue an interest in Atlantic City. Indeed, consideration of noncommittal plans
by one ATC to open a satellite office in another location could have had the very
undue affect of impeding worthy applicants. We find nothing arbitrary or
capricious in the Department's approach on this discrete issue.
Fifth, GGB argues that Verano engaged in "highly unethical" or even
"criminal conduct" in formulating its application and, therefore, should not have
been selected to go forward with permitting in the central region. GGB
specifically alludes to the fact that Verano's application revealed that it entered
into "host community agreements" (HCAs) with Elizabeth and Rahway, where
it intended to locate its dispensary and cultivation site, as part of its efforts to
demonstrate the community support required by the request for applications.
GGB claims these HCAs were unethical because they provided that if Verano
was selected it would make contributions to these municipalities. GGB would
have these donations characterized as "bribes" to the municipalities in exchange
for written letters of support that Verano could use in its application.
A-2204-18T4
65
Among other things, the request for applications asked applicants to
provide "written verification of the approval of the community or governing
body of the municipality in which the [ATC] is or will be located" and for the
applicants to "describe their ties to the local community and history of
community involvement," including but not limited to involvement with local
non-profits and community organizations, business and investment ties, and
local hiring plans. At the pre-application conference, the Department explained
that it was "looking for some form of documentation that the municipal
government [was] in favor of an [ATC] operating in that jurisdiction and
[would] not . . . interfere and impede the [permitting] process."
Verano's HCAs with Elizabeth and Rahway state that in the event Verano's
application was successful and it completed the permitting process to operate its
dispensary in Elizabeth and its cultivation center in Rahway, it would make
immediate "contributions" to those cities and further contributions at the end of
every year it was in business. Verano also agreed to give priority to local
businesses to provide services like plumbing and waste removal to its facilities,
to hire local employees whenever possible, and to participate in "community
cleanup/rehabilitation initiatives," and Elizabeth and Rahway agreed to work
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66
with Verano to advise it regarding "research, community benefits, and employee
training programs."
The HCAs, however, also stated that Elizabeth and Rahway were "under
no obligation" to use Verano’s contributions "in any particular manner," but that
they would use them "in accordance to prior conversations and agreements."
They also explained that by accepting Verano's "donations," the municipalities
made "no representation or promise that [they would] act on any license or
permit request in any particular way other than by [their] normal and regular
course of conduct and in accordance with their rules and regulations and any
statutory guidelines." Verano also included an Elizabeth resolution in its
application that stated the mayor and council believed Elizabeth would benefit
from the location of an ATC within its borders, "subject to compliance with
terms and conditions to be agreed upon, provision of an agreed upon host
community benefit fee, and compliance with all applicable City Ordinances,
Permits and Approvals."
Other applicants included materials in their applications related to
agreements made with municipalities. For example, JG submitted a letter from
Ewing Township in which the mayor expressed support for its application and
stated that JG had shown a "commitment to invest in Ewing" and "collaborate
A-2204-18T4
67
with the Township." JG’s application also included a "Letter of Intent for Host
Community Agreement with Ewing Township," which is completely redacted in
the record. Pangaea entered into a "memorandum of understanding" with Ewing
Township in which it promised to "provide financial assistance" to the
municipality for purposes of rehabilitating and upgrading local parks and
recreational facilities in exchange for Ewing offering "support and assistance to
Pangaea in securing facilities and necessary approvals" in the town to operate
its ATC. Ewing issued letters stating its approval of Pangaea's intent to locate
its operations in the town and passed a municipal resolution to that effect.
It is not readily apparent to us that there is something wrong or unethical
about the HCAs in question. Indeed, such agreements are actually required in a
similar Massachusetts program. Massachusetts requires applicants for medical
marijuana permits to negotiate HCAs with municipalities where they propose to
locate. 935 Mass. Code Regs. 500.101(1)(a)(8) – (2019). An HCA "may include
a community impact fee for the host community," provided that the fee is
"reasonably related to the costs imposed upon the municipality by the operation
of the marijuana establishment." Mass. Gen. Laws ch. 94G, § 3(d) – (2017).
Although the Compassionate Use Act does not contain those requirements, and
New Jersey need not model its methods after Massachusetts's, it is worth noting
A-2204-18T4
68
that another state has found HCAs valuable to the expansion of its program,
rather than rejecting them as unfair tactics by permit applicants.
More importantly, the question posed by GGB has not yet been addressed
by the Department in explaining the reasons for granting and denying the
applications submitted under the 2018 request for applications. We think that
GGB's assertion – assuming it has any bearing on its own application 21 – should
be in the first instance taken up in the Department, and we do not foreclose its
consideration in the remand proceedings that will follow today's decision.
Sixth, Bloom has argued – in a footnote in its appeal brief – that NETA
should not have had its application approved because it was seeking to operate
a facility within 1000 feet of a school zone. Other than that bald assertion and
NETA's equally bald denial – calling Bloom's allegation "unfair and untrue" –
we have little more in the record to consider whether this argument has merit.
As we have for some of these other issues, we will leave this for further
consideration in the remand proceedings.
21
We are unsure of the relevance of GGB's opposition to Verano's accepted
application since GGB applied in the northern region and was not in competition
with Verano in the central region.
A-2204-18T4
69
G
The parties have also offered different views about potential remedies or
how the status quo should be altered or remain unchanged if – as we have now
determined – a remand is required. Some contend that we should vacate the
final agency decisions in question and remand for more fulsome proceedings in
the Department. Others argue we should grant them approval in their chosen
region or remand for rescoring. For example, Harvest argues – in relying on our
bidding decision in Van Note-Harvey, 407 N.J. Super. at 651 – that we should
simply "direct [the Department] to add Harvest to its list of approved
applicants." Harvest argues that if its application had been properly scored, it
would have been awarded one of the six top spots and that the equitable result
is not to deprive one of the successful applicants of its award but to simply add
Harvest to the list. One respondent – Verano – while seeking to vindicate the
final agency decisions also expresses some support for application of the remedy
imposed in Van Note-Harvey, arguing that "if the [c]ourt is inclined to grant any
relief at all, it should be relief that expands the roster of licensed ATC operators,
not relief that continues and prolongs the current bottleneck situation, which is
contrary to the Legislature's declared policy of compassion." Verano's position
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70
is that, whatever we do, we should not upset the progress made by the successful
applicants to date:
The worst thing that could happen from these appeals,
and the one thing that should not be allowed to happen,
is to backslide or regress. The six selected applicants
should be allowed to move forward with their planned
operations, even if the [c]ourt finds Pangaea or any of
the other applicants to be entitled to some relief.
There is some appeal in that argument, considering the long delays in
implementing the Compassionate Use Act.
Granting appellants relief in the form of awarding them additional
positions without depriving the successful applicants of their positions may be
tempting, but it is too facile a result even when considering that voters just
approved the legalization of recreational marijuana use 22 that will likely generate
an increased need for permits. But we think it is not our place to alter the amount
of permits that may issue; such questions reside with the Legislature and
whatever direction given by the Legislature to the Department.
22
New Jersey voters were given the opportunity to answer the following
question: "Do you approve amending the Constitution to legalize a controlled
form of marijuana called 'cannabis'?" At the polls on November 3, 2020, two-
thirds of the voters said yes. See Tracey Tully, Recreational Marijuana
Legalized by New Jersey Voters, N.Y. Times (Nov. 3, 2020),
https://www.nytimes.com/2020/11/03/nyregion/nj-marijuana-legalization.html
(last visited Nov. 12, 2020).
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Van Note-Harvey is a narrowly-defined decision in inapposite
circumstances. There, the Schools Development Authority requested proposals
for site consultants for school construction projects for a three-year period. Id.
at 646. In ranking the applicants, the Authority took steps that we found were
inconsistent with applicable regulations; those steps caused Van Note to fall in
the rankings, ultimately depriving it of eligibility. Id. at 648. After finding the
Authority had failed to properly apply its regulations, we considered the
appropriate remedy and concluded "the fairest outcome" was to "expand" the
Authority's list of eligible consultants to include Van Note. Id. at 651.
Importantly, unlike what some appellants argue here, we did not override the
agency's determination as to the number of eligible consultants that would be
permitted. Instead, we noted that when the request for proposals was issued, a
determination had not been made as to "the final number of site consultants to
be selected," only an "estimate[] that up to nine firms might be chosen." Id. at
646. After we compelled the addition of Van Note, the list of eligible
consultants was increased to eight and, so, did "not expand the list of eligible
contractors beyond the number that had originally [been] contemplated." Id. at
651.
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Appellants argue that we should take a similar approach here, but that
would require us to disregard the Department's decision to limit licensing to six
entities – two in each region. As we have emphasized throughout this opinion,
our power to intervene is limited; to put it simply, we may determine only
whether the agency proceedings and the results obtained were arbitrary,
capricious, or unreasonable. We have no license to increase the number of
successful applicants beyond six as the means for moving these proceedings
more quickly to the next step. In fact, it is far from clear that any further
proceedings will move any appellant into the top six. We are too far in the dark
to approve or reject the final agency decisions, so how could we possibly
conclude that some of these unsuccessful applicants should be permitted to move
forward in the process?
Beyond remanding for further proceedings, we decline to impose any of
the interim relief sought by appellants and otherwise leave the status quo
undisturbed. We do not, however, preclude the Department from rendering
relief to the appellants pending – or in place23 – of its fulfillment of our mandate.
23
That is, we see no reason why the Department could not grant Van Note-
Harvey-type relief to appellants rather than engage in the remand proceedings
that we believe are otherwise required. We simply conclude that it is beyond
our jurisdiction to impose that relief.
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III
For all these reasons, we have considerable concerns about the
Department's processes and the results produced that – without further agency
proceedings and explanation – would leave us to conclude that the decisions in
question are arbitrary, capricious and unreasonable. We therefore vacate the
final agency decisions in question and remand for further administrative
proceedings in conformity with the spirit of this opinion. All requests for
interim relief are denied without prejudice to the completion of any further
proceedings, which we assume will occur expeditiously.
Vacated and remanded. We do not retain jurisdiction.
***
Appendix
Northern Region
*NETA NJ, LLC 932.17
*GTI New Jersey, LLC 927.33
Bloom Medicinals of PA, LLC 894.83
Liberty Plant Sciences, LLC 894.67
GGB New Jersey, LLC 823.67
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Southern Region
*MPX New Jersey 24 958.17
#NETA NJ, LLC 932.17
*Columbia Care New Jersey, LLC 929
Harvest of New Jersey, LLC 911.17
Altus New Jersey, LLC 901.67
Liberty Plant Sciences, LLC 897.17
Bloom Medicinals of PA, LLC 894.83
Central Region
#MPX New Jersey 958.17
#NETA NJ, LLC 932.17
#Columbia Care New Jersey, LLC 929
#GTI New Jersey, LLC 927.33
*Verano NJ, LLC 920.67
*JG New Jersey, LLC 913.33
Altus New Jersey, LLC 901.67
Bloom Medicinals of PA, LLC 894.83
Pangaea Health & Wellness, LLC 801.67
24
The asterisk (*) denotes a chosen applicant. The pound sign (#) denotes a
bypassed applicant selected in another region.
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