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Natural Medical, Inc. and Nir Shalit v. New Jersey Department of Health and Senior Services*Fn1

October 4, 2012


On appeal from the New Jersey Department of Health and Senior Services.

The opinion of the court was delivered by: Parrillo, P.J.A.D.



Argued September 10, 2012

Before Judges Parrillo, Sabatino and Fasciale.

The opinion of the court was delivered by PARRILLO, P.J.A.D.

At issue is whether the New Jersey Compassionate Use Medical Marijuana Act (Act), N.J.S.A. 24:6I-1 to -16, grants appellants, a for-profit corporation and its principal, an unqualified right to apply for permits to operate alternate treatment centers (ATCs) to cultivate and distribute marijuana and to have their applications processed and evaluated irrespective of need. Subsumed within this issue is the question of whether in limiting the initial permitting to the statutorily-mandated minimum of six ATCs, the Department of Health (Department) acted arbitrarily, unreasonably, or in contravention of the Act. For reasons that follow, we answer both questions in the negative.

By way of background, the Act, originally made effective six months after enactment on January 18, 2010, L. 2009, c. 307, § 19, was later amended to extend the effective date to October 1, 2010. L. 2010, c. 36, § 1. See N.J.S.A. 24:6I-1 (discussing the amendment in the historical and statutory notes following the Act and committee statement). It vests the Department with the responsibility for implementing the State's medicinal marijuana program. N.J.S.A. 24:6I-1 to -16. These responsibilities include establishing a registry of qualified patients and primary caregivers, N.J.S.A. 24:6I-4, and processing applications for permits to operate ATCs, N.J.S.A. 24:6I-7. The Legislature authorized ATCs as the entities to cultivate and distribute medicinal marijuana to qualifying patients and their caregivers. N.J.S.A. 24:6I-7(a); N.J.S.A. 24:6I-3.

The Act charges the Department with responsibility to "ensure the availability of a sufficient number of [ATCs] throughout the State, pursuant to need . . . ." N.J.S.A. 24:6I-7(a) (emphasis added). To this end, the Legislature fixed a statutory minimum number of ATCs: "at least two each in the northern, central, and southern regions of the State," ibid., and expressly designated they be operated by non-profit entities, ibid. No such restriction, however, attends subsequent permits, as they may be issued to either for-profit or non-profit entities. Ibid.*fn2 Beyond the mandated minimum, 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. N.J.S.A. 24:6I-7(e).*fn3

The Department also has discretion to determine the kind and amount of information necessary to process permit applications and to regulate the ATCs. N.J.S.A. 24:6I-7(b) and (i). In this regard, the Act tasks the Commissioner of Health (Commissioner) with the responsibility to "promulgate rules and regulations to effectuate the purpose of this [A]ct, in consultation with the Department of Law and Public Safety." N.J.S.A. 24:6I-16(a). In advance thereof, the Commissioner and the Director of the Division of Consumer Affairs are authorized to "take such anticipatory administrative action . . . as may be necessary to effectuate the provisions of this [A]ct." L. 2009, c. 307, § 19.

To that end, on November 15, 2010, the Department proposed regulations for implementing the Act and establishing the medicinal marijuana program. 42 N.J.R. 2668(a) (Nov. 15, 2010). However, on December 13, 2010, the Legislature passed a concurrent resolution declaring that portions of the proposed rules were inconsistent with the Act. S. Res. 130; Assemb. Res. 151; cf. 43 N.J.R. 340(a) (Feb. 22, 2011). Pertinent here, one of the proposed regulations would have only permitted four ATCs to actually dispense marijuana as opposed to the six required by the Act.*fn4 Consequently, the Department published new rules in

February 2011. 43 N.J.R. 340(a) (Feb. 22, 2011). "The reproposed new rules differ from the rules proposed at 42 N.J.R. 2668(a) by providing for six alternative treatment centers (ATCs) that cultivate and dispense medicinal marijuana. . . ."

43 N.J.R. 340(a). Following a comment period, the Department adopted the rules on November 23, 2011, apparently without any amendments. 43 N.J.R. 3335(a) (Dec. 19, 2011). The rules became effective December 19, 2011. Ibid.*fn5

While formal adoption of the regulations was pending, on or about January 13, 2011, the Department posted a Request for Applications (RFA) for ATC permits on its website and required that completed applications be filed by February 14, 2011. In the applicant eligibility section of the RFA, the Department provided that, consistent with the statute, applicants must be non-profit entities organized under the laws of the State of New Jersey*fn6 since the agency had determined not to issue more than six permits for ATCs at the outset.*fn7 Moreover, in response to several inquiries about the RFA, the Department, on its Frequently Asked Questions (FAQ) webpage, reiterated that only non-profit applicants may apply. According to the ...

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