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NOT FOR PUBLICATION WITHOUT THE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.,

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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).

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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

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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.

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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

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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:

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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."

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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

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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

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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.

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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

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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

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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

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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

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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.

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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

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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%.

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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.

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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

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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

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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.

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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

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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

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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

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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.

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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).]

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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

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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

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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

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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

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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

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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

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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.

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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

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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.

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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

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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

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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

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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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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.

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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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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.

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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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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

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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

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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.

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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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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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