Green Healthcare Sol'ns v. Med. Cannabis Comm'n ( 2022 )

Green Healthcare Solutions, LLC v. Natalie M. LaPrade Maryland Medical Cannabis
Commission, No. 766, September Term, 2021. Opinion by Graeff, J.
ADMINISTRATIVE LAW — EXHAUSTION OF REMEDIES —
ADMINISTRATIVE MANDAMUS
The General Assembly gave the Medical Cannabis Commission broad authority to regulate
the medical cannabis industry. Although there is no explicit statutory language providing
an administrative remedy for high-ranking applicants to challenge the denial of a grower
or processor license, the broad language of the statute gives the Commission implied
authority to set up an administrative review remedy. If the Commission had adopted
regulations to provide for such a remedy, it could have created a requirement that the
administrative remedy be exhausted prior to instituting judicial action. The Commission
did not, however, enact a regulation providing for an administrative remedy for
unsuccessful applicants for a processor license. Where no administrative review remedy
was authorized by statute or an administrative scheme, there was no exhaustion
requirement. The circuit court erred in finding that GHS’s petition should be dismissed for
failure to exhaust administrative remedies.
Administrative mandamus involves judicial review of a quasi-judicial order or action of an
administrative agency where such review is not expressly authorized by law. In concluding
that the request for administrative mandamus failed to state a claim upon which relief could
be granted, the circuit court improperly focused on the availability of administrative review
instead of whether judicial review of the Commission’s actions was expressly authorized
by law.
Circuit Court for Anne Arundel County
Case No. C-02-CV-21-000328
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 766
September Term, 2021
______________________________________
GREEN HEALTHCARE SOLUTIONS, LLC
v.
NATALIE M. LAPRADE MARYLAND
MEDICAL CANNABIS COMMISSION
______________________________________
Graeff,
Nazarian,
Eyler, James R.
(Senior Judge, Specially Assigned),
JJ.
______________________________________
Opinion by Graeff, J.
______________________________________
Filed: April 28, 2022
Pursuant to Maryland Uniform Electronic Legal
Materials Act
(§§ 10-1601 et seq. of the State Government Article) this document is authentic.
*Ripken, Laura, J., did not participate in the
2022-04-28 09:22-04:00
Court’s decision to designate this opinion for
publication pursuant to Md. Rule 8-605.1.
Suzanne C. Johnson, Clerk
Green Healthcare Solutions, LLC (“GHS”), appellant, appeals from the order issued
by the Circuit Court for Anne Arundel County dismissing its Petition for a Writ of
Mandamus, or in the alternative, for a Declaratory Judgment. The petition requested that
the court order that the Natalie M. LaPrade Medical Cannabis Commission (the
“Commission”), appellee, award stage-one preapproval of GHS’s application for a medical
cannabis processor license.
On appeal, GHS presents the following questions for this Court’s review, which we
have rephrased slightly, as follows:
1. Did the circuit court err in granting the Commission’s motion to
dismiss GHS’s petition on the ground that it failed to exhaust
administrative remedies?
2. Did the circuit court err in dismissing GHS’s petition for
administrative mandamus on the ground that there was an
administrative remedy available to GHS?
For the reasons set forth below, we shall vacate the judgment of the circuit court.
FACTUAL AND PROCEDURAL BACKGROUND1
I.
Parties and the Application Process
GHS is a limited liability company with a principal place of business in Greensboro,
Maryland. The company is led by an African-American female, Chief Executive Officer
Celine Krishack. GHS submitted an application with the Commission for a medical
cannabis processor license in 2019.
1
Because this appeal is from a motion to dismiss, the facts are taken from the
pleadings.
The Commission is an independent commission that functions within the Maryland
Department of Health, and its purpose is to “develop policies, procedures, guidelines, and
regulations to implement programs to make medical cannabis available to qualifying
patients in a safe and effective manner.” Md. Code Ann., Health-Gen. Art. (“HG”) § 13-
3302(a)–(c) (2019 Repl. Vol.). The statute authorizes the Commission, in addition to other
things, to issue licenses to growers, processors, and dispensaries of medical cannabis in
Maryland. HG §§ 13-3306, 13-3307, 13-3309.
Subject to exceptions, the statute provides for no more than 28 licensed processors.
HG § 13-3309(c)(1)(i).2 The Commission has authority to “establish an application review
process for granting processor licenses in which applications are reviewed, evaluated, and
ranked based on criteria established by the Commission.” HG § 13-3309(c)(3). In issuing
processor licenses, the Commission shall “actively seek to achieve racial, ethnic, gender,
and geographic diversity” and encourage minority or women-owned business entities to
apply for licensure as processors. HG § 13-3309(c)(4)(i)(1)–(2).
The Maryland Code of Regulations (“COMAR”) sets forth the application
requirements for a medical cannabis processor license. COMAR 10.62.19.02. It also sets
forth the weighted criteria on which the applications would be ranked for a preapproval
license. COMAR 10.62.19.04I. Consideration was given, up to five percent, for applicants
who had a certain percentage of ownership interest held by those who qualified as a
2
The Commission stated in its brief in this Court, and in its argument to the circuit
court, that some licenses were awarded prior to GHS’s 2019 application, and up to ten
medical cannabis processor licenses were available in the 2019 application round.
2
Disadvantaged Equity Applicant (“DEA”), i.e., an applicant who is a member of a minority
group or a woman and met certain requirements, including having a personal net worth that
does not exceed $1,713,333. COMAR 10.62.19.04I(6), 10.62.01.B(12); see also Maryland
Medical Cannabis Commission, Grower and Processor License Applications, Guidance for
the Diversity and Socioeconomic Equity Questions. Each processor license applicant bears
the burden of proving their qualifications. COMAR 10.62.19.04A.
GHS’s 2019 application identified Mrs. Krishack as a DEA. In July 2019, the
Commission staff conducted an initial review of the applications to determine whether they
met the minimum requirements for evaluation. The applications were then transferred to
Morgan State University (“MSU”) as an independent evaluator to analyze, score, and rank
applicants based on the qualifications represented in their applications. The MSU
evaluators were not responsible for reviewing and scoring sections of the applications
related to DEA status, which were reviewed by the Commission staff. The scores and
ranking submitted by the MSU evaluators were compiled with the sections scored by the
Commission staff, and an adjusted ranking of applicants was produced.
On September 18, 2019, the Commission voted to adopt the rankings for the purpose
of investigating the highest-ranking applicants. This next-level investigation was designed
to ascertain the veracity of the responses and information provided in the applications, i.e.,
to investigate the ownership interests of members who represented themselves as a DEA.
On September 21, 2019, the Commission notified GHS that it was among the highest-
ranking applicants for a processor license. GHS had the second-highest ranking, including
3
five points for identifying a 51 percent owner who was a minority woman that met the
personal net worth threshold.
The Commission requested that GHS provide additional information necessary for
further evaluation of its application. The top 14 ranked processor applicants were invited
to be part of the ownership investigation.
On February 10, 2020, as part of the investigatory process, the Commission
contracted with an independent firm, Verity, LLC (“Verity”), to review for validity and
truthfulness the documents submitted by high-ranking grower and processor applicants that
related to their claims regarding DEA status. On February 21, 2020, the Commission again
requested additional information from highly-ranked applicants, including GHS, who were
awarded points as a DEA. The Commission requested documents relevant to determining
whether the purported DEA member(s) satisfied the regulatory requirements and whether
their ownership interests were real, substantial, and continued as required. Among the
documents requested were “copies of any agreements pertaining to operation, management
or funding of the applicant entity, by-laws and articles of incorporation, and tax returns.”
Verity conducted a comprehensive review of the materials submitted by the applicants and
provided its analysis and recommendations concerning DEA status.
The Commission chair later appointed a subcommittee that reviewed the
“ownership claims and supporting documentation provided by the high-ranking applicants,
and the report and recommendations provided by Verity.” Thereafter, the subcommittee
developed and submitted to the entire Commission its proposed findings for each applicant.
4
II.
The Commission’s Findings and Determination
On October 1, 2020, the Commission adopted “findings regarding the accuracy and
truthfulness of ownership claims made by high-ranking applicants, including any
representations that ownership interests were held by disadvantaged minority and women
owners,” and it announced its award of stage-one preapproval for licenses to eight
processor applicants. The Commission noted that it had received more than 200
applications for grower and processor licenses.
In a letter dated October 2, 2020, the Commission advised GHS/Mrs. Krishack that
“the application for a medical cannabis processor license submitted by [GHS] [was]
denied.” The letter advised that GHS had not met its burden of demonstrating that Mrs.
Krishack met the personal net worth requirement to qualify as a DEA, noting that GHS did
not properly account for assets that Mrs. Krishack owned jointly with her husband. The
letter continued:
Further [GHS] has not met its burden of demonstrating that the
ownership interest of Mrs. Krishack is real, substantial and continuing, as
required by the [Commission’s] regulations and as described in the Guidance
for the Diversity and Socioeconomic Equity Questions. Although Mrs.
Krishack holds the majority of the Class B (voting) units, she holds only
27.11 percent of the total units and receives less than 51 percent of the total
profits of [GHS]. Additionally, the terms of the line of credit from Jacobs
Capital Management were not provided to the [Commission]. For these
reasons, [GHS] has not demonstrated that Mrs. Krishack holds control over
maintaining her ownership interest and/or that her ownership interest cannot
be diluted or extinguished in a manner that is beyond her control.
Accordingly, [GHS] has not met its burden to demonstrate that it is
entitled to the five (5) points previously awarded for [DEA] ownership.
5
Without these five (5) points added to its application score, [GHS] would
have ranked 24th in the processor applicant ranking list based on the
proposed scoring that the [Commission] reviewed and voted to adopt in
September 2019.
Additionally, the [Commission] found that the application materials
and supporting documentation submitted by [GHS] contain a misstatement,
misrepresentation, omission or untruth.
The letter advised that GHS had a right to request an administrative hearing to
contest the Commission’s decision to deny its application for a processor license, in
accordance with COMAR 10.62.34.05 and 10.01.03.3 On October 16, 2020, GHS
submitted a request to the Commission for an administrative hearing.
William Tilburg, the Commission’s Executive Director, subsequently submitted an
affidavit explaining that the Commission had delegated authority to the Office of
Administrative Hearings (“OAH”) to conduct administrative hearings on the five requests
for hearings from highly-ranked processor applicants that were not awarded preapprovals.
After the OAH gave “the Commission proposed findings of facts and conclusions of law,”
the Commission would consider them and then enter a final order regarding the
applications.
3
COMAR 10.62.34.05 provides: “A hearing held by the Commission or a designee
of the Commission will use the procedures set forth in COMAR 10.01.03.” COMAR
10.01.03 addresses procedures for hearings that the Secretary of Health is required to
conduct by statute or regulation. The parties have not cited any statute or regulation that
requires the Secretary of Health to conduct a hearing for an applicant challenging an
unsuccessful application for a processor license.
6
III.
GHS Petition for Mandamus and Declaratory Judgment
On March 5, 2021, GHS filed a Petition for Writ of Mandamus, or in the alternative,
for Declaratory Judgment in the Circuit Court for Anne Arundel County. It argued that the
Commission denied it a processor license after making erroneous assumptions and
conclusions that led to the rescission of the five points GHS previously was awarded for
its DEA ownership. It asserted that the Commission erred in concluding, among other
things, that Mrs. Krishack did not satisfy the personal net worth requirement because of
assets she jointly owned with her husband, noting that, pursuant to a prenuptial agreement,
Mrs. Krishack’s assets were separate from her husband’s assets. GHS argued that, by not
seeking clarification from GHS as it did with other applicants, the Commission deviated
from its methodology, and the award process was arbitrary and capricious.
GHS explained that it had expended a lot of resources in preparing its application
and securing a location, and because of the Commission’s delay in issuing its license, GHS
continued to incur significant expenses and was at risk to suffer irreparable harm. It
requested that the court issue a writ of mandamus ordering the Commission to “reinstate
the five (5) points removed from the award to [GHS] for its medical cannabis processor
application, reinstate [GHS]’s #2 highest ranked processor ranking, and award Stage-One
Preapproval to operate a medical cannabis processor in the State of Maryland.”
In the alternative, GHS requested that the court issue a declaratory judgment
declaring the rights of the parties, including that “the Commission erroneously removed
7
five (5) of the points awarded to GHS for its processor application, and that GHS is entitled
to reinstatement of its #2 highest ranked processor status, entitled to Stage-One Preapproval
to operate a medical cannabis processor in the State of Maryland.”
On March 16, 2021, the Commission filed a motion to dismiss GHS’s Petition, or
in the alternative, a motion for summary judgment, on two grounds. First, it argued that
the court lacked jurisdiction to review GHS’s claims because GHS had failed to exhaust
its administrative remedies. The Commission asserted that GHS first should be required
to pursue the administrative hearing offered, which proceeding may result in there being
no need to seek relief through civil litigation.
Second, the Commission argued that, pursuant to Md. Rule 2-322(b)(2), dismissal
was proper because GHS failed to state a claim upon which relief could be granted. It
argued that common-law mandamus was not an appropriate remedy where the act sought
to be compelled was within the discretion of the decisionmaker, and GHS was “challenging
the Commission’s decision not to invite” a high-ranking applicant “to correct inconsistent
or incomplete documentation submitted for evaluation,” a decision within the
Commission’s discretionary authority. The Commission argued that “a writ of mandamus
is not an available remedy to challenge [that] kind of discretionary, non-ministerial
Commission action.”
The Commission further asserted that GHS’s petition for a writ of common-law
mandamus failed because such an action required “both a lack of an available procedure
for obtaining review and an allegation that the action complained of is illegal, arbitrary,
8
capricious or unreasonable.” (quoting Goodwich v. Nolan, 343 Md. 130, 146 (1996)).
Here, GHS had “an adequate remedy in the form of an administrative hearing.”
Moreover, it asserted that the Commission’s act was not arbitrary and capricious,
noting that (1) the Commission’s consideration of GHS’s application was consistent with
its statutory authority, which directed the Commission to establish a review process for
processor licenses; (2) the Commission did not treat GHS differently from other high-
ranking applicants; and (3) GHS failed to demonstrate that the review of its application
was inconsistent with the Commission’s previous decisions, noting that “this round of
licensing application was the first to include criteria related to ownership interests held by
[DEA] individuals.”4
The Commission requested that the petition “be dismissed with prejudice, as any
[f]urther [a]mendment would be [f]utile.” It asserted that there was nothing that GHS could
include in an amended pleading that would present a legally cognizable claim.
4
With respect to GHS’s allegation that the Commission treated GHS differently
from other applicants, the Commission stated that the claim was vague and unsupported by
a sworn affidavit. Assuming, however, that GHS was referring to a situation involving
another unsuccessful applicant who was represented by the same counsel that represented
GHS, the cases were distinguishable. The other applicant had submitted two versions of
its operating agreement with the same execution date, so Verity, on behalf of the
Commission, contacted the applicant to determine which operating agreement was
controlling. The Commission did not ask the applicant, or any other high-ranking
applicant, to clarify or explain substantive information submitted regarding the
investigation of ownership interests. It also noted that the other high-ranking applicant that
GHS referred to in its pleading was denied Stage-One preapproval on October 1, 2020.
9
GHS filed an opposition motion stating that the case was “a result of the
[Commission’s] wrongful revocation of five (5) points awarded to GHS for a
disadvantaged ownership and the resulting denial of GHS’s application.” With respect to
the Commission’s claims that GHS failed to exhaust its administrative remedies, GHS
stated that it was not required to submit to an administrative procedure that was not
authorized by statute or a fair and unbiased adjudication of the dispute. GHS noted that it
did not file suit until after it waited almost five months to get a hearing. It asserted that its
petition was not seeking review of the Commission’s discretionary powers, but rather, GHS
sought “judicial intervention to force the [Commission] to apply its regulations as
promulgated, correct its erroneous application of those regulations, and/or for a finding that
the [Commission] unfairly applied their regulations and procedures in the treatment of
GHS’s application for a medical cannabis processor license.” It asserted that the
Commission had “no discretion on when and with which applicants to properly apply its
regulations.” GHS stated, however, that to the extent that “there is any confusion on the
type of Mandamus sought here, GHS requests leave to amend to specifically request relief
by an Administrative Mandamus under Md. Rule 7-401 et seq.”
On May 7, 2021, the circuit court held a hearing on the Commission’s motion to
dismiss. Counsel for the Commission addressed first its jurisdictional argument relating to
GHS’s failure to exhaust its administrative remedies. Counsel acknowledged that the
Commission’s enabling statute did not explicitly provide for an administrative hearing as
a remedy for an unsuccessful licensure applicant, but he argued that the principles
10
underlying the doctrine of exhaustion should bar the petition. Counsel asserted that the
issued involved was a matter left to the expertise of the Commission, and the Commission
was acting within its statutory authority to provide an administrative process for
unsuccessful applicants to contest an adverse decision before a neutral Administrative Law
Judge (“ALJ”), who would make proposed findings, which the Commission would
consider before making another determination on that application. This procedure was “in
line with the rationale underly[ing] the doctrine of exhaustion.”
Counsel also argued that the doctrine of finality created another jurisdictional bar to
GHS’s claims. Counsel argued that, because there was still more for the Commission to
do after the administrative hearing, there was no final decision by the Commission from
which GHS could proceed to the circuit court.
Counsel then turned to his second argument, that the petition should be dismissed
for failure to state a claim upon which relief could be granted. Counsel argued that a
petition for a writ of common-law mandamus is an “extraordinary remedy that ordinarily
does not lie where the action to review is discretionary, or it depends on personal judgment
from the agency.” The Commission’s determination that GHS failed to meet “its burden
of demonstrating that the 51 percent owner met the personal net worth requirement” was a
discretionary determination based on the documents that GHS submitted, and it was not a
decision for which common-law mandamus was permitted.
With respect to the claim that the Commission did not abide by its regulations by
not asking GHS to explain the deficiency in the application regarding the net worth
11
requirement, counsel argued that this was a discretionary decision regarding how to
conduct the application process.5 Those decisions by the Commission were discretionary
and non-ministerial, and they were not the proper subject of a writ of common-law
mandamus.
With respect to GHS’s request for leave to amend its petition to seek administrative
mandamus, counsel argued that was not appropriate because an “[a]dministrative writ of
mandamus will only lie where there is a substantial right that has been prejudiced by an
action by” the Commission. Counsel stated that “[a] substantial right is a protected
property interest,” and GHS had “no protected property interest in the preapproval that it
applied for but did not receive.” “[A]bsent that substantial right, administrative mandamus
will not lie either.”
Finally, with respect to GHS’s alternative claim for a declaratory judgment, counsel
stated that “a declaratory judgment is not generally the proper remedy for a quasi-judicial
action such as the [C]ommission’s decision to deny [GHS] preapproval.” Even if a
declaratory judgment was an available remedy, GHS had not pled facts demonstrating that
the Commission’s actions were arbitrary or capricious. The Commission acted within its
broad statutory authority to implement the application process, and GHS was not treated
5
Counsel stated that the Commission did not ask applicants about deficiencies in
their application material because that would have amounted to “coaching an applicant on
how to successfully demonstrate its qualification.” Moreover, there were approximately
100 applicants against only 10 available licenses, and therefore, it was “reasonable and fair
for the [C]ommission to decide not to offer feedback to applicants on how to cure [the]
deficiencies in their applications.”
12
differently from any other similarly situated applicant. Finally, counsel argued that an
amendment to the petition would be futile because administrative mandamus will not lie
where the petitioner “does not have a protected property interest that was prejudiced.”
Counsel for GHS acknowledged that the doctrine of exhaustion of administrative
remedies requires that a party exhaust all available “statutorily prescribed” administrative
remedies before seeking relief in the circuit court. Here, however, the statute did not
provide for an administrative remedy to challenge the Commission’s denial of an
application for a processor license, and therefore, exhaustion of the administrative remedy
that had been offered was not required. With respect to the Commission’s finality
argument, counsel asserted that there was nothing left for the Commission to do since the
Commission had already decided that GHS was not entitled to the five points, that was a
final decision, and the only thing left to do was determine if the Commission “made a
mistake and overturn that decision.”
With respect to GHS’s request for a writ of mandamus, counsel argued that the
Commission’s actions were not discretionary because the Commission “can’t pick and
choose when to apply the regulations and their scoring rubric . . . and their application
review standards and when not to.” There was a strict grading rubric. Additionally, for
purposes of administrative mandamus and declaratory judgment, the Commission’s actions
were arbitrary and capricious. The Commission treated GHS differently from other
similarly situated applicants when it contacted another applicant to clarify a
misunderstanding, but it did not contact GHS. If the Commission had contacted GHS to
13
determine the truthfulness of Mrs. Krishack’s affidavit stating that she met the personal net
worth requirement, GHS would have presented the prenuptial agreement separating her
assets from her husband’s assets and clarified any confusion in GHS’s submitted materials.
GHS did not submit the prenuptial agreement in the first place because there was no place
to submit it.
The circuit court granted the Commission’s motion to dismiss on two alternate
grounds: (1) failure to exhaust an available administrative remedy; and (2) failure to state
a claim upon which relief can be granted. With respect to the first ground, the court noted
that, although there was no enabling statute that provided for administrative review, the
General Assembly, in enacting HG § 13-3302(c), granted the Commission broad authority
“to develop policies, procedures, guidelines, and regulations to implement programs to
make medical cannabis available to patients in a safe and effective manner.” The court
found that developing a policy, procedure, or regulation that offered an administrative
hearing appeared to be within the Commission’s purpose. It further noted that HG § 13-
3309(c)(3) granted the Commission the authority to “establish an application review
process for granting processor licenses in which applications are reviewed, evaluated and
ranked based upon criteria established by the [C]ommission,” and there was no place that
restricted the Commission’s authority to outsource some of the review process to the OAH.
Accordingly, the circuit court found that “the legislature [] granted the [C]ommission
substantial authority, . . . [a]nd that within that authority they can establish the process as
they deem it to be proper.” It concluded that, because the Commission created an
14
administrative remedy for GHS to contest the denial of its application, which GHS failed
to do, GHS failed to exhaust its administrative remedies. Accordingly, the court granted
the Commission’s motion to dismiss.
“[O]ut of an abundance of caution,” the court also addressed the Commission’s
motion to dismiss for failure to state a claim upon which relief can be granted. It noted
that the law was clear that a writ of common-law mandamus will not lie where the
challenged administrative actions were discretionary, and it found that the Commission’s
process in conducting a licensing review was discretionary. Accordingly, the court found
that “mandamus [did] not lie,” and therefore, the petition seeking mandamus failed to state
a claim upon which relief could be granted. It also noted that, when there was an
administrative process, “mandamus [did] not lie.”
With respect to GHS’s request for a declaratory judgment, the court stated that
because the challenged actions included discretionary decisions, the Maryland Uniform
Declaratory Judgments Act did not apply. Accordingly, it would dismiss GHS’s petition
on two grounds: failure to exhaust administrative remedies and failure to state a claim upon
which relief can be granted.6
The court then stated that it was going to deny GHS’s motion to amend its petition.
It explained that it “[did] not see how any amendment [was] going to cure in any way the
failure to comply with administrative remedies, [or] . . . cure the exhaustion of
6
The court stated that it found the memorandum and briefs filed by the Commission
“to be compelling and persuasive,” and it adopted the Commission’s reasoning.
15
administrative remedies. And the [c]ourt [did] not in any way see how an amended
complaint [was] going to address the discretionary issues.”
On May 21, 2021, the court issued an order granting the Commission’s motion to
dismiss the petition with prejudice on several grounds. The court dismissed all claims
because GHS “failed to exhaust its administrative remedies.” In that regard, the court
stated:
The [c]ourt finds that the Commission has broad statutory authority to
administer that State’s medical cannabis program, see Md. Code Ann.,
Health-Gen. § 13-3302(c), including designing and implementing process
for licensing medical cannabis processors, see id. § 13-3309(c). The
Commission is acting within the scope of such authority by affording
unsuccessful but highly ranked processor applicants the right to a hearing at
the [OAH]. Having failed to pursue an administrative hearing, Petitioner has
failed to exhaust its administrative remedies.
With respect to the request for mandamus, the court stated:
Pursuant to Rule 2-322, the [c]ourt dismisses the petition for a writ of
common[-]law mandamus because Petitioner challenges determinations by
the Commission that are discretionary in nature. Specifically, Petitioner
challenges the Commission’s determinations that: GHS failed to meet its
burden of demonstrating that Celine Krishack met the personal net worth . .
. requirement to qualify as [a] Disadvantaged Equity Applica[nt] as defined
under COMAR 10.62.01.01 and as set forth in COMAR 10.62.19.04; that
GHS failed to meet its burden of demonstrating that Mrs. Krishack’s
ownership interests were real, substantial and continuing, as required by [the
Commission’s] regulations and as described in the Guidance for the
Diversity and Socioeconomic Equity Questions; and that GHS presented
incomplete and/or misleading information in its application and
supplemental documentation submitted to the Commission. Because such
determinations by the Commission are discretionary in nature, administrative
16
mandamus will not lie.[7] As such, Petitioner has failed to allege a claim upon
which relief can be granted.
Pursuant to Rule 2-322, the [c]ourt dismisses the petition for a writ of
common[-]law mandamus because common[-]law mandamus will not lie
where there is an administrative procedure for obtaining review.
Finally, the court dismissed the claim for a declaratory judgment. It found that the
claim failed to state a claim for which relief can be granted because the Commission’s
determinations were discretionary.
GHS subsequently filed a motion for reconsideration. It stated that, after the court
dismissed its petition, it tried to reinstate its request for an administrative hearing, but the
Commission denied GHS’s request. The Commission’s grounds were: (1) GHS waived its
right to an administrative hearing; and (2) because GHS’s petition was denied with
prejudice for failure to state a claim upon which relief could be granted, that was a final
judgment on the merits of the Commission’s denial of GHS’s application. GHS stated that
“the [c]ourt’s dismissal of GHS’s [p]etition, requiring GHS to first seek administrative
remedy, in conjunction with the [Commission’s] [] denial of any administrative remedy,
would preclude GHS from any relief in relation to GHS’s application denial.” Therefore,
GHS requested that the court rescind its decision denying GHS’s petition for failure to
exhaust its available administrative remedy “and permit GHS’s petition for common[-]law
writ of mandamus to continue.” The circuit court denied GHS’s motion.
7
The court stated that “administrative mandamus will not lie.” The parties agree
that the court made an error saying that “administrative” mandamus will not lie to review
discretionary decisions.
17
This timely appeal followed.
STANDARD OF REVIEW
An appellate court reviews a circuit court’s grant of a motion to dismiss using the
de novo standard, with no deference to the circuit court. Lamson v. Montgomery County,
460 Md. 349, 360 (2018). We determine whether the circuit court was legally correct.
Forster v. State, Off. of Pub. Def., 426 Md. 565, 579 (2012). In doing so, “we assume the
truth of all well-pleaded facts and allegations in the complaint, as well as the reasonable
inferences drawn from them, in a light most favorable to the non-moving party.” Id.DISCUSSION
GHS contends that the circuit court erred in dismissing its Petition for a Writ of
Mandamus, or in the alternative, for a Declaratory Judgment, for two reasons. First, it
argues that the court erred in dismissing the petition on the ground that GHS failed to
exhaust its administrative remedies, asserting that the Commission’s enabling statute did
not explicitly provide for an administrative remedy for an unsuccessful licensure applicant,
and GHS could not “be required to adhere to an ad hoc remedy created at the Commission’s
leisure with neither the authority to do so conferred by the legislature nor the procedure
established by the Commission’s regulations.” Second, it contends that the court erred in
dismissing GHS’s petition for administrative mandamus on the ground that there was an
administrative remedy available when there was no statutory provision for such review.
The Commission contends that the circuit court properly dismissed GHS’s petition
on the ground that GHS failed to exhaust its available administrative remedy. It argues
18
that the Commission’s enabling statute granted the Commission broad authority relating to
the state’s medical cannabis program, including the authority to establish an administrative
remedy for unsuccessful processor applicants. It asserts that the Commission’s authority
to create an administrative remedy for licensure applicants was presumptively intended to
be primary because the remedy addresses matters within the Commission’s expertise.
Accordingly, “the court correctly held that GHS must exhaust its administrative remedy
before pursuing a judicial action.” The Commission also argues that, even if the
administrative remedy offered by the Commission was not primary, but concurrent with a
judicial remedy, GHS suffered no prejudice because it was able to litigate the merits of its
petition in the circuit court, “albeit unsuccessfully.”
With respect to the court’s order dismissing GHS’s petition for a writ of mandamus
for failure to state a claim upon which relief can be granted, the Commission notes that
GHS’s petition requested a writ of common-law mandamus, which it asserts the court
properly dismissed because there was an administrative remedy available. Although GHS
did seek leave to amend its pleadings to include a petition for a writ of administrative
mandamus, the Commission notes that the court denied leave to amend and dismissed its
claims with prejudice. It asserts that such an amendment would be futile because a court
can issue a writ of administrative mandamus only if a substantial right of the plaintiff may
have been prejudiced by the agency’s decision, and GHS did “not possess a substantial
right to the processor license that it applied for but did not receive.”
19
I.
Exhaustion of Remedies
The doctrine of exhaustion of administrative remedies generally requires “that,
under circumstances where a party’s claim ‘is enforceable initially by administrative
action,’ the party must ‘fully pursue administrative procedures before obtaining limited
judicial review.’” Md. Reclamation Assocs., Inc. v. Harford County, 468 Md. 339, 394,
(quoting Md.-Nat’l Capital Park & Planning Comm’n v. Wash. Nat’l Arena, 282 Md. 588,
602 (1978)), cert. denied, 141 S. Ct. 560 (2020). Accord Arroyo v. Bd. of Educ. of Howard
Cnty., 381 Md. 646, 661 (2004). The Court of Appeals has explained the rationale for this
requirement, as follows:
“The decisions of an administrative agency are often of a discretionary
nature, and frequently require an expertise which the agency can bring to
bear in sifting the information presented to it. The agency should be afforded
the initial opportunity to exercise that discretion and to apply that
expertise. Furthermore, to permit interruption for purposes of judicial
intervention at various stages of the administrative process might well
undermine the very efficiency which the Legislature intended to achieve in
the first instance. Lastly, the courts might be called upon to decide issues
which perhaps would never arise if the prescribed administrative remedies
were followed.”
Arroyo, 381 Md. at 661–62 (quoting Soley v. State Comm’n on Hum. Rels., 277 Md. 521,
526 (1976)).
Where the legislature provides an administrative review remedy for a particular
matter and there is a possible alternative judicial remedy, the court must determine the
relationship between those remedies, which ordinarily will fall into one of the following
categories:
20
[T]he administrative remedy may be exclusive, thus precluding any resort to
an alternative remedy. Under this scenario, there simply is no alternative
cause of action for matters covered by the statutory administrative remedy.
[T]he administrative remedy may be primary but not exclusive. In this
situation, a claimant must invoke and exhaust the administrative remedy, and
seek judicial review of an adverse administrative decision, before a court can
properly adjudicate the merits of the alternative judicial remedy.
[T]he administrative remedy and the alternative judicial remedy may be
fully concurrent, with neither remedy being primary, and the plaintiff at his
or her option may pursue the judicial remedy without the necessity of
invoking and exhausting the administrative remedy.
United Ins. Co. of Am. v. Md. Ins. Admin., 450 Md. 1, 14–15 (2016) (quoting Prince
George’s County v. Ray’s Used Cars, 398 Md. 682, 644–45 (2007)). Accord Zappone v.
Liberty Life Ins. Co., 349 Md. 45, 60–61 (1998). This determination ordinarily is a question
of legislative intent. Zappone, 349 Md. at 61.
The General Assembly sometimes makes its intent clear regarding whether an
administrative remedy is to be exclusive, primary, or a concurrent option. Ray’s Used
Cars, 398 Md. at 645; see, e.g., Md. Code Ann., Educ. Art. § 6-904(a) (2022 Repl. Vol.)
(“A public school employee shall exhaust any administrative remedies before instituting a
civil action under this section.”); Md. Code Ann., Real Prop. Art. § 7-507(a)(2) (2022 Repl.
Vol.) (“A person may bring an action for damages under this section: (i) Without having
to exhaust administrative remedies under this subtitle.”). Other times, the statute does not
specify “the category in which an administrative remedy falls.” Ray’s Used Cars, 398 Md.
at 645. In that circumstance, there is a rebuttable presumption that the legislature intended
the administrative remedy to be primary. Zappone, 349 Md. at 64.
21
Here, the parties acknowledge, as they must, that there is no explicit statutory
language providing an administrative remedy for an unsuccessful applicant for a grower or
processor license. The circuit court found, however, and the Commission argues on appeal,
that the Commission had the implied authority to establish an administrative remedy for
highly-ranked, unsuccessful grower and processor applicants.
The circuit court found that the legislature granted broad authority to the
Commission, noting that HG § 13-3302(c) provides that “[t]he purpose of the Commission
is to develop policies, procedures, guidelines, and regulations to implement programs to
make medical cannabis available to qualifying patients in a safe and effective manner.” It
found that a policy, procedure or regulation providing for an administrative hearing
appeared to be within the Commission’s purpose, noting that the Commission had “great
power to develop their procedures.” Moreover, HG § 13-3309(c)(3) provides: “The
Commission shall establish an application review process for granting processor licenses
in which applications are reviewed, evaluated, and ranked based on criteria established by
the Commission.” The circuit court determined that, given the Commission’s substantial
authority to establish the review process, the Commission had the authority to establish an
administrative remedy for unsuccessful applicants for a processor license, which remedy
GHS was required to exhaust before bringing a petition for mandamus. We disagree.
The Maryland appellate courts have held that an administrative agency has “not only
the powers expressly conferred by its enabling statute, but also ‘those powers which are
necessarily, or fairly or reasonably, implied as an incident to the powers expressly
22
granted.’” Md. Port Admin. v. C. J. Langenfelder & Son, Inc., 50 Md. App. 525, 545 (1982)
(citations omitted). Accord Town of La Plata v. Faison-Rosewick LLC, 434 Md. 496, 523
(2013) (“Generally, [] a government official or agency has reasonable discretion to carry
out ‘fairly implied’ powers incident to those duties or authority expressly granted”); see
also 2 Am. Jur. 2d, Administrative Law § 128 (2022) (“When a statute expressly authorizes
an agency to regulate an industry, it implies the authority to promulgate rules and
regulations necessary to accomplish that purpose.”).
We agree that, based on the broad authority that the General Assembly gave to the
Commission to regulate the medical cannabis industry, it had implied authority to set up
an administrative process for high-ranking applicants to challenge the denial of a grower
or processor license. Thus, the Commission could have adopted regulations to provide for
such a remedy. See HG § 13-3316 (“The Commission shall adopt regulations to implement
the provisions of this subtitle.”). If the Commission had adopted such an administrative
remedy by regulation, it could have created an exhaustion requirement for that
administrative remedy. See Kobleur v. Grp. Hospitalization & Med. Servs. Inc., 954 F.2d
705, 709 (11th Cir. 1992) (“[A]gency regulations promulgated under the authority of a
statute may create an exhaustion requirement despite the absence of such a requirement
within the text of the statute.”). Accord Kennedy v. Empire Blue Cross & Blue Shield, 989
F.2d 588, 592 (2d Cir. 1993) (“The exhaustion requirement may arise from explicit
statutory language or from an administrative scheme providing for agency relief.”);
Weimer v. Sanders, 752 S.E.2d 398, 407 n.5 (W. Va. 2013) (“‘[W]here an administrative
23
remedy is provided by statute or by rules and regulations having the force and effect of
law, relief must be sought from the administrative body, and such remedy must be
exhausted before the courts will act.’”) (quoting Daurelle v. Traders Fed. Sav. & Loan
Ass’n of Parkersburg, 104 S.E.2d 320, 326 (W. Va. 1958)); Godbout v. Attanasio, 234
A.3d 1031, 1041 (Conn. App. Ct. 2020) (“‘[R]equirement of exhaustion may arise from
explicit statutory language or from an administrative scheme providing for agency
relief.’”) (quoting Stepney, LLC v. Town of Fairfield, 821 A.2d 725, 729 (Conn. 2003)).
At oral argument, counsel for the Commission conceded, appropriately, that the
Commission did not enact a regulation providing for an administrative remedy for
unsuccessful applicants for a processor license. It merely advised, in a letter, that GHS
could seek an administrative hearing to contest the Commission’s decision, citing two
regulations that did not apply to the Commission’s denial of a processor license
application.8 Because there was no administrative review remedy authorized by statute or
an administrative scheme providing for such relief, there was no exhaustion requirement,
and the circuit court erred in finding that GHS’s petition should be dismissed for failure to
exhaust administrative remedies.9
8
As indicated, COMAR 10.62.34.05 states that a hearing by the Commission or its
designee will follow the procedures set forth COMAR 10.01.03. COMAR 10.01.03
however, applies to hearings that the Secretary of Health is required to conduct by statute
or regulation; it does not involve medical cannabis licenses.
9
In addition to the typical administrative exhaustion requirements, there is a
separate exhaustion requirement for contractual remedies under collective bargaining
agreements. Gazunis v. Foster, 400 Md. 541 (2007). Under the contractual exhaustion
24
II.
Failure to State a Claim
GHS next contends that the “circuit court erred when it dismissed GHS’s petition
for administrative mandamus” on the ground that it failed to state a claim for which relief
could be granted.10 GHS does not challenge the court’s dismissal of the petition for
common-law mandamus or the request for a declaratory judgment. Accordingly, we limit
our discussion to the issue whether the request for administrative mandamus failed to state
a claim on which relief could be granted.
We begin our analysis by looking to the standard for dismissing a complaint on this
ground. A complaint fails to state a claim upon which relief can be granted if, after
assuming the truth of “all well-pleaded facts and allegations contained in the complaint, as
well as all inferences that may reasonably be drawn from them,” and viewing them in the
light most favorable to the non-moving party, the allegations and reasonable inferences
“would not afford relief to the plaintiff, i.e., the allegations do not state a cause of action
for which relief may be granted.” Chavis v. Blibaum & Assocs., P.A., 476 Md. 534, 551
requirement, an employee subject to a collective bargaining agreement is generally
required to exhaust all contractual remedies under that agreement before proceeding with
administrative remedies. Id. at 563–65.
10
We note that GHS did not file a petition for administrative mandamus. Its initial
petition sought a writ of common-law mandamus. GHS did, however, subsequently
request leave to amend its petition to request administrative mandamus. The court denied
that request on the ground that GHS failed to state a claim for administrative mandamus.
GHS did not explicitly challenge the denial of the motion to amend the petition, but because
the issue presented on appeal essentially challenges the ruling that a petition for
administrative mandamus failed to state a claim, we will address that issue.
25
(2021) (quoting RRC Northeast, LLC v. BAA Md., Inc., 413 Md. 638, 643 (2010)).
In this case, there has been some confusion regarding the elements of common-law
mandamus and administrative mandamus. Accordingly, we begin by explaining the
difference between these two remedies.
Common-law mandamus is
“an extraordinary remedy” that “is generally used to compel inferior
tribunals, public officials or administrative agencies to perform their
function, or perform some particular duty imposed upon them which in its
nature is imperative and to the performance of which the party applying for
the writ has a clear legal right. The writ ordinarily does not lie where the
action to be reviewed is discretionary or depends on personal judgment.”
Falls Rd. Cmty. Ass’n, Inc. v. Baltimore County, 437 Md. 115, 139 (2014) (quoting
Goodwich v. Nolan, 343 Md. 130, 145 (1996)). Accord Mayor & City Council of Balt. v.
ProVen Mgmt., Inc., 472 Md. 642, 669–70 (2021).11
An administrative mandamus action, by contrast, provides “‘for judicial review of
a quasi-judicial order or action of an administrative agency where review is not expressly
authorized by law.’” Gray v. Fenton, 245 Md. App. 207, 212 (2020) (quoting Md. Rule 7-
401(a)). Accord Dugan v. Prince George’s County, 216 Md. App. 650, 659 n.13 (2014)
(“[A]n administrative mandamus action is appropriate when there is no judicial review
provided by the statute and the action was quasi-judicial in nature.”); City of Annapolis v.
Bowen, 173 Md. App. 522, 534 (“Administrative mandamus is used to secure a circuit
11
The actions of the Commission here, in determining the methods used to issue
processor licenses, clearly were discretionary, which likely explains why GHS did not
appeal the court’s ruling dismissing the petition for a writ of common-law mandamus.
26
court’s review of an administrative agency’s adjudicatory decision where no agency code
or other law provides for such review.”), aff’d in part, rev’d in part on other grounds, 402
Md. 587 (2007). In such a circumstance, a court may issue a writ of mandamus, if a
“substantial right of the plaintiff may have been prejudiced because a finding, conclusion,
or decision of the agency” was, among other things, arbitrary or capricious. Md. Rule 7-
403(f).
The circuit court here found that administrative mandamus did not lie because there
was an available administrative process. As explained, however, the critical issue in
determining whether administrative mandamus was an available remedy was not whether
there was some type of administrative review offered, but rather, whether judicial review
of the Commission’s action was expressly authorized by law. Because the circuit court
misapplied the law in this regard, we vacate the court’s ruling and remand for further
proceedings to determine whether the requirements for administrative mandamus have
been satisfied.12
JUDGMENT OF THE CIRCUIT COURT
FOR ANNE ARUNDEL COUNTY
VACATED AND REMANDED FOR
FURTHER PROCEEDINGS CONSISTENT
WITH THIS OPINION. COSTS TO BE
PAID BY APPELLEE.
In addition to determining if the Commission’s decision was quasi-judicial, and
12
whether judicial review was expressly authorized by law, the circuit court may want to
consider if a petition for writ of administrative mandamus was timely filed. See O’Brien
v. Bd. of License Comm’rs for Washington Cnty., 199 Md. App. 563, 579 (2011) (action
for administrative mandamus generally required to be filed within 30 days of the agency
action); Md. Rules 7-203(a) and 7-402.
27