[Cite as State ex rel. CannAscend Ohio, L.L.C. v. Williams, 2020-Ohio-359.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
The State ex rel. :
CannAscend Ohio LLC, et al.,
:
Plaintiffs-Appellants,
: No. 18AP-820
v. (C.P.C. No. 18CV-1505)
:
Jacqueline T. Williams, Director, (REGULAR CALENDAR)
Ohio Department of Commerce, et al., :
Defendants-Appellees. :
D E C I S I O N
Rendered on February 4, 2020
On brief: Zeiger, Tigges & Little LLP, Marion H. Little, Jr.,
and Christopher J. Hogan, for appellant Schottenstein
Aphria, LLC. Argued: Marion H. Little.
On brief: Squires Patton Boggs (US) LLP, Heather L. Stutz,
C. Craig Woods, Christopher F. Haas, Jeffrey M. Walker, and
Andres H. King, acting as special counsel to appellee
Jacqueline T. Williams, in her capacity as Director of Ohio
Department of Commerce. Argued: Christopher F. Haas.
On brief: Vorys, Sater, Seymour and Pease LLP, Elizabeth T.
Smith, and Christopher A. LaRocco, for appellee Terradiol
Ohio LLC. Argued: Elizabeth T. Smith.
On brief: Peterson Conners LLP, Gregory S. Peterson, and
Istvan Gajary, for appellee Cresco Labs Ohio, LLC.
On brief: Mac Murray & Shuster, LLP, Helen M.
Mac Murray, Patrick W. Skilliter, and Kari R. Roush, for
appellee Harvest Grows, LLC.
On brief: Buckingham, Doolittle & Burroughs, LLC, James S.
Simon, Gregory P. Amend, and Andrew J. Pullekins; Murray
Murphy Moul + Basil, and James B. Hadden, for appellee
Parma Wellness Center, LLC.
No. 18AP-820 2
On brief: Barnes & Thornburg LLP, C. David Paragas, and
Jeanine Kerridge, for appellee Columbia Care OH LLC.
On brief: Taft Stettinius & Hollister LLP, Gregory J. O'Brien,
and Devin M. Spencer, for appellee Grow Ohio
Pharmaceuticals LLC.
APPEAL from the Franklin County Court of Common Pleas
BRUNNER, J.
{¶ 1} Plaintiff-appellant, Schottenstein Aphria, LLC (hereinafter referred to
individually as "Aphria"), appeals from a decision of the Franklin County Court of Common
Pleas entered on May 17, 2018. The trial court in its decision granted the motions filed by
the various 14 defendants-appellees1 (hereafter referred to collectively as "appellees") to
dismiss Counts 1, 2, 3, and 6 of the amended complaint for one or more of three grounds:
lack of subject-matter jurisdiction pursuant to Civ.R. 12(B)(1), failure to state a claim upon
which relief can be granted pursuant to Civ.R. 12(B)(6), and/or failure to exhaust
administrative remedies.2 For the following reasons, we affirm the decision of the trial
court.
I. FACTS AND PROCEDURAL BACKGROUND
{¶ 2} This appeal arises from Aphria's unsuccessful application for a level I
cultivator provisional license under Ohio's Medical Marijuana Control Program (the
"MMCP"). In the underlying matter, Aphria challenged the process by which the Ohio
Department of Commerce (the "department") awarded a limited number of level I
cultivator provisional licenses ("provisional licenses") and sought declaratory relief from
the trial court.
{¶ 3} Appellees argued that Aphria's claims should be dismissed for three reasons:
(1) the trial court did not have subject-matter jurisdiction over Aphria's claims as set forth
in Counts 1, 3, and 6 (the "licensure claims"), thereby requiring the dismissal of those
1 Defendants-appellees are the Ohio Department of Commerce; Crescso Labs Ohio, LLC; Buckeye Relief, LLC;
Harvest Grows, LLC; Terradiol Ohio LLC; Parma Wellness Center, LLC; Grow Ohio Pharmaceuticals, LLC;
Pure Ohio Wellness, LLC; B & B Grow Solutions; Columbia Car OH, LLC; iCann Consulting, LLC; OPC
Cultivation, LLC; Standard Wellness Company, LLC; and AT-CPC of Ohio, LLC.
2 The trial court's May 17, 2018 decision became a final, appealable order upon Aphria's filing of a notice of
dismissal as to the remaining two counts (4 and 5) of the amended complaint on September 24, 2018.
No. 18AP-820 3
counts pursuant to Civ.R. 12(B)(1); (2) Aphria had failed to state a valid claim for relief as
to monetary damages arising from its tortious interference claim under Count 2, requiring
dismissal pursuant to Civ.R. 12(B)(6); and (3) Aphria had failed to exhaust the
administrative remedies provided for in the MMCP. Appellees had challenged the trial
court's jurisdiction to consider Aphria's claims on two bases: that exclusive jurisdiction over
Aphria's claims is vested with the department and that Aphria's claim improperly sought to
bypass a specialized statutory scheme for resolving licensure disputes under the MMCP.
A. Ohio's Medical Marijuana Control Program – R.C. Chapter 3796
{¶ 4} In 2016, the General Assembly adopted House Bill No. 523 ("H.B. No. 523"),
thereby enacting new Ohio Revised Code Chapter 3796 to authorize the use of medical
marijuana and to establish the MMCP. The legislation enacting the MMCP is
comprehensive in scope, providing for the cultivation, processing, testing, and dispensing
of medical marijuana from beginning to end. R.C. 3796.18 through 3796.21.
{¶ 5} The General Assembly established the MMCP in the department and the
Ohio Board of Pharmacy (the "pharmacy board"). R.C. 3796.02 The department is
responsible for licensing medical marijuana cultivators, processors, and testing
laboratories. Id. The pharmacy board is responsible for licensing retail dispensaries and
registering patients and caregivers. Id. Additionally, the State Medical Board is responsible
for certifying physicians who are authorized to recommend medical marijuana to patients.
R.C. 3796.08. The MMCP vests the department, the pharmacy board, and the State
Medical Board with authority to establish rules and standards for licensure and/or
certification of their respective populations. R.C. 3796.03, 3796.04, and 4731.30. The
General Assembly intended for the department and the pharmacy board to have the MMCP
fully operational by September 8, 2018. 2015 Ohio HB 523; see also, e.g., R.C. 3796.03,
3796.04, 4731.30.
B. The Department of Commerce's Role in the MMCP
{¶ 6} The General Assembly mandated that the department adopt rules
establishing standards and procedures for the MMCP not later than September 8, 2017,
and adopt rules establishing standards and procedures for the licensure of cultivators not
later than May 6, 2017. R.C. 3796.03(A). The department was required to adopt its rules
in accordance with R.C. Chapter 119. R.C. 3796.03(A)(3). The department is authorized
to refuse to issue a license or to suspend, revoke, refuse to renew, or impose a penalty on a
No. 18AP-820 4
license it had issued, but any such action must be taken in accordance with R.C. Chapter
119. R.C. 3796.14(A); Ohio Adm.Code 3796:5-6-03.
{¶ 7} The department was authorized to establish (1) the number of medical
marijuana cultivator licenses permitted, and (2) the procedures and eligibility
requirements for cultivator licensure. R.C. 3796.03(B). The department established two
categories—level I and level II—of cultivator provisional licenses. Ohio Adm.Code 3796:1-
1-01(A)(23) and (24). The level I cultivator provisional licenses at issue in the underlying
matter allow licensees to operate up to 25,000 square feet of space for marijuana
cultivation. The department's administrative rules allowed it to issue up to 12 level I
cultivator provisional licenses before September 8, 2018. Ohio Adm.Code 3796:2-1-01.
Each provisional licensee must pass inspections and conform to certain statutory and
regulatory requirements to obtain a final license, a "certificate of operation," which permits
the licensee to cultivate medical marijuana. Ohio Adm.Code 3796:2-1-06(A) and (B).
{¶ 8} The department began accepting applications for level I cultivator
provisional licenses in June 2017. In November 2017, the department announced it was
issuing 12 level I cultivator provisional licenses for marijuana cultivation. Aphria applied
for, but not did not receive, a provisional license. In accordance with R.C. 3796.14(A), the
department notified Aphria and other unsuccessful applicants that they were entitled to a
hearing before the department made a final decision about their applications. (Ex. A at ¶ 5,
Aff. of Frank Tice, attached to Apr. 20, 2018 Mot. for Prelim. Inj.) Four other unsuccessful
applicants (the other plaintiffs in the underlying matter) pursued the special statutory
proceeding provided for in H.B. No. 523 and timely requested administrative hearings
under R.C. Chapter 119, in accordance with R.C. 3796.14(A).3 (Ex. A at ¶ 11, attached to
Mot. for Prelim. Inj.)
{¶ 9} Aphria, however, did not request an R.C. Chapter 119 hearing. (Ex. A at ¶ 11,
attached to Mot. for Prelim. Inj.)
3 By letters dated January 11, 2018, the department informed plaintiffs CannAscend Ohio, Appalachia,
CannaMed, and PalliaTech Ohio that their requests for hearings had been received, and the hearings had been
scheduled for January 22, 2018, but that the MMCP had continued the hearings on its own motion and would
contact the four plaintiffs to reschedule. (Ex. A at ¶ 12, attached to Mot. for Prelim. Inj.) On February 8, 2018,
the department sent a letter to CannaMed advising that a hearing had been scheduled for May 23, 2018. Id.
at ¶ 16. The department had not contacted CannAscend Ohio, Appalachia, or PalliaTech about a rescheduled
hearing date as of the filing of the original complaint in the underlying matter. Id. at ¶ 15.
No. 18AP-820 5
{¶ 10} On February 20, 2018, Aphria and five other unsuccessful applicants4 filed
the complaint that initiated the underlying lawsuit against the department (naming
Jacqueline T. Williams, in her official capacity as director of the department), 3 of the
department's consultants,5 and 10 of the 12 successful applicants for the provisional
licenses.6
{¶ 11} On April 2, 2018, Aphria and the other plaintiffs7 filed an amended
complaint, adding one count and naming the other two successful applicants for the
provisional licenses.8 The amended complaint alleges that the department's process for
scoring cultivator applications was "unreasonable, unlawful, arbitrary, and capricious" in
nature. (Apr. 2, 2018 Am. Compl. at ¶ 20.) The amended complaint contains the following
overview of alleged problems with the department 's process:
Among other things detailed in this Complaint, the
Department: (1) failed to adhere to the mandates of Chapter
3796 of the Ohio Revised Code, its own Administrative Rules
and application instructions, and the Due Process Clause of the
Ohio Constitution; (2) awarded provisional licenses to entities
that made material fraudulent and/or misleading
representations in the cultivator applications, which were not
discovered, but could or should have been uncovered by the
Department with reasonable due diligence; (3) awarded
provisional licenses to entities that should have been
disqualified for failure to meet mandatory provisions of
Chapter 3796 of the Ohio Revised Code, but were not
disqualified due to the Department's failure to verify or
otherwise evaluate information provided in at least some of the
Defendants' cultivator applications; and (4) failed to uncover
4 In addition to Aphria, the other plaintiffs named on the amended complaint were CannAscend Ohio, LLC;
Appalachian Pharm Products, Inc.; CannaMed Therapeutics, LLC; PalliaTech Ohio, LLC; and Trillium
Holdings, Inc.
5 The consulting entities against which claims are asserted are: Meade & Wing, LLC; B & B Grow Solutions;
and iCANN Consulting, LLC (dissolved on January 27, 2018, and is now Trevor Bozeman of Dublin, Ohio).
6 The successful applicants against whom claims were asserted are: Terradiol Ohio, LLC; Cresco Labs Ohio,
LLC; Harvest Grows, LLC; Parma Wellness Center, LLC; and Grow Ohio Pharmaceuticals LLC. Named as
nominal defendants were successful applicants Buckeye Relief, LLC; OPC Cultivation, LLC; Riviera Creek
Holdings, LLC; Pure Ohio Wellness, LLC; and Columbia Care OH, LLC. Not listed in the caption of original
complaint but discussed therein were Standard Wellness Company, LLC; and AT-CPC of Ohio, LLC. The
nominal defendants were included for the purposes of obtaining declaratory relief pursuant to R.C. 2721.12,
and no claims were brought against them.
7 Trillium Holdings, Inc., a named plaintiff on the originally filed complaint, is not a named plaintiff on the
amended complaint.
8 Added as named defendants on the amended complaint are Standard Wellness Company, LLC and AT-CPC
of Ohio, LLC. They were included as nominal defendants for the purposes of obtaining declaratory relief
pursuant to R.C. 2721.12, and no claims were brought against them.
No. 18AP-820 6
blatant conflicts of interest between the Defendant-
consultants, who scored the cultivator applications, and the
Defendant-applicants who received a provisional license
despite clear conflicts of interest.
(Am. Compl. at ¶ 20.)
{¶ 12} Aphria and the other plaintiffs asserted three claims against the department
and one claim against the non-department defendants.9 Count 1 alleges the department's
actions in the licensure process were unreasonable, arbitrary, and/or unconscionable,
constituting an abuse of discretion. Count 1 seeks declaratory and injunctive relief to
remedy the alleged problems with the process used in awarding licenses.
{¶ 13} Count 2 alleges the department breached an implied contract claim with each
applicant that it would fairly consider each bid in accordance with all applicable statutes
and regulations. Count 2 also seeks declaratory and injunctive relief.
{¶ 14} Count 3 alleges tortious interference with prospective contractual and
business relationships against five successful license applicants10 and the three entities that
scored the applications for the department.11 Count 3 alleged the non-department
appellees improperly interfered with Aphria and the other plaintiffs' ability to obtain
cultivator licenses by engaging in conduct that allegedly violated the MMCP statutes and
regulations.
{¶ 15} Count 6 alleges the department's conduct in administering the licensing
process violated the due process rights of Aphria and the other plaintiffs under the Ohio
Constitution. Count 6 seeks declaratory and injunctive relief.
{¶ 16} Aphria and the other plaintiffs sought nine separation declarations, each
declaration asserting either (1) provisional licenses were improperly granted because of
specific defects in an application and/or general issues with the application and review
process, or (2) applications for provisional licenses were improperly denied or disqualified.
Aphria and the other plaintiffs also sought preliminary and permanent injunctive relief
9 Not at issue in this appeal are Counts 4 and 5, which asserted claims against the department for violation of
Ohio's Public Records Act. As previously noted, Counts 4 and 5 were voluntarily dismissed on September 24,
2018.
10 Terradiol Ohio, LLC; Cresco Labs Ohio, LLC; Harvest Grows, LLC; Parma Wellness Center, LLC; and Grow
Ohio Pharmaceuticals LLC.
11 Meade & Wing, LLC; B & B Grow Solutions; and iCANN Consulting, LLC (now Trevor Bozeman of Dublin,
Ohio).
No. 18AP-820 7
ordering the department to refrain from issuing a certificate of operation to any of the
provisional licensees and to revoke all provisional licenses.
{¶ 17} Each of the 14 appellees filed a separate motion to dismiss Counts 1 through
3 and/or 6.12 On May 3, 2018, Aphria and the other plaintiffs filed a single memorandum
contra responding to all the motions to dismiss. Appellees subsequently filed their reply
memoranda.
{¶ 18} Finding the motions had been fully briefed, the trial court issued a 20-page
decision and entry on May 17, 2018 (the "decision"), granting appellees' motions dismissing
Counts 1, 2, 3, and 6 of the amended complaint. The trial court dismissed the counts on
four grounds: (1) lack of subject-matter jurisdiction because the General Assembly had
enacted a comprehensive statutory scheme that vested the department with exclusive
jurisdiction over the licensing of medical marijuana cultivators; (2) lack of subject-matter
jurisdiction because the licensure claims were an attempt to bypass the special statutory
proceeding that the General Assembly had prescribed for licensing disputes under the
MMCP; (3) failure of plaintiffs to exhaust administrative remedies before commencing suit
on their licensure claims, and those administrative remedies were not futile; and (4) to the
extent the tortious inference claim sought money damages against non-State defendants, it
failed to state a valid claim for relief because the amended complaint did not allege any
valid contract or business relationship.
{¶ 19} Counts 4 and 5 of the amended complaint were not subject to any motion to
dismiss. On September 21, 2018, a little more than four months after the trial court issued
12 Cresco Labs filed a renewed motion to dismiss the amended complaint pursuant to Civ.R. 12(B)(1) and (6)
on April 18, 2018. Buckeye Relief filed a motion to dismiss the complaint pursuant to Civ.R. 12(B)(6) on
April 16, 2018. Harvest Grows filed a motion to dismiss the amended complaint on April 19, 2018. Terradiol
Ohio filed a motion to dismiss pursuant to Civ.R. 12(B)(1) and (6) on April 19, 2018. Parma Wellness filed a
motion to dismiss the amended complaint pursuant to Civ.R. 12(B)(1) and (6) on April 23, 2018. Grow Ohio
Pharmaceuticals filed a motion to dismiss the amended complaint pursuant to Civ.R. 12(B)(1) and (6) and for
failure to exhaust administrative remedies on April 23, 2018. Pure Ohio Wellness filed a motion to dismiss
the amended complaint pursuant to Civ.R. 12(B)(6) on April 23, 2018. B & B Grow Solutions filed a motion
to dismiss the amended complaint pursuant to Civ.R. 12(B)(1) and (6) on April 23, 2018. Columbia Care OH
filed a motion to dismiss pursuant to Civ.R. 12(B)(6) on April 23, 2018. The department filed a motion to
dismiss Counts 1 through 3 and 6 of the amended complaint pursuant to Civ.R. 12(B)(1) and (6) and for failure
to exhaust administrative remedies on April 24, 2018. iCann Consulting filed a renewed motion to dismiss
the amended complaint pursuant to Civ.R. 12(B)(6) on April 24, 2018. OPC Cultivation filed a motion to
dismiss pursuant to Civ.R. 12(B)(1) and for judgment on the pleadings as to Counts 1 through 3 and 6 of the
amended complaint on April 25, 2018. Standard Wellness Company filed a motion to dismiss the amended
complaint pursuant to Civ.R. 12(B)(6) on April 25, 2018. Not listed in the trial court's decision is AT-CPC of
Ohio's motion to dismiss the amended complaint pursuant to Civ.R. 12(B)(6), on April 19, 2018.
No. 18AP-820 8
its May 17, 2018 decision and entry, Aphria and the other plaintiffs filed with the Franklin
County Clerk of Courts a certified copy of the Auditor of State's September 13, 2018 Report
and Examination of the Department of Commerce Medical Marijuana Control Program,
which found fault with the department's licensure actions. On September 24, 2018, Aphria
and the other plaintiffs voluntarily dismissed the remaining two counts, Counts 4 and 5, of
the amended complaint without prejudice.
{¶ 20} On October 24, 2018, Aphria filed notice of this appeal.13
II. ASSIGNMENT OF ERRORS
{¶ 21} Aphria presents for our review one assignment of error:
The trial court erred in granting motions to dismiss and
dismissing Counts One, Two, Three, and Six of the Amended
Complaint in this matter.
III. LAW AND DISCUSSION
C. Standard of Review
{¶ 22} The trial court's four grounds for dismissing Counts 1 through 3 and 6 are not
governed by a single standard of review. This Court reviews the trial court's decision to
dismiss for lack of subject-matter jurisdiction under Civ.R. 12(B)(1) de novo, to determine
"whether any cause of action recognizable by the forum has been raised in the complaint."
Sudberry v. Ohio Dept. of Rehab. & Corr., 10th Dist. No. 18AP-155, 2018-Ohio-5104, ¶ 6,
7.
{¶ 23} We likewise review de novo the trial court's decision to dismiss the money
damages component of Aphria's tortious interference claim for failure to state a claim for
which relief can be granted under Civ.R. 12(B)(6). Rooney v. Ohio State Hwy. Patrol, 10th
Dist. 16AP-204, 2017-Ohio-1123, ¶ 13, citing Ferron v. Dish Network, LLC, 195 Ohio
App.3d 686, 2011-Ohio-5235, ¶ 16 (10th Dist.), quoting Perrysburg Twp. v. Rossford, 103
Ohio St.3d 79, 2004-Ohio-4362, ¶ 5. A Civ.R. 12(B)(6) motion to dismiss for failure to state
a claim is procedural and tests the sufficiency of a complaint. State ex rel. Hanson v.
Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548 (1992); Ferron at ¶ 16; Powell v.
Vorys, Sater, Seymour and Pease, 131 Ohio App.3d 681, 684 (10th Dist.1998). In
considering a Civ.R. 12(B)(6) motion to dismiss, a trial court may not rely on allegations or
13 The other four plaintiffs from the underlying matter did not join in this appeal.
No. 18AP-820 9
evidence outside the complaint. State ex rel. Fuqua v. Alexander, 79 Ohio St.3d 206, 207
(1997). Rather, the trial court must limit its consideration to the four corners of the
complaint and may dismiss the case only if it appears beyond a doubt that the plaintiff can
prove no set of facts entitling the plaintiff to recover. O'Brien v. Univ. Community Tenants
Union, Inc., 42 Ohio St.2d 242 (1975), syllabus; Ritchie v. Ohio Adult Parole Auth., 10th
Dist. No. 05AP-1019, 2006-Ohio-1210, ¶ 16, citing Singleton v. Adjutant Gen. of Ohio, 10th
Dist. No. 02AP-971, 2003-Ohio-1838, ¶ 18. In such cases, a trial court must presume that
all factual allegations in the complaint are true and draw all reasonable inferences in favor
of the nonmoving party. Mitchell v. Lawson Milk Co., 40 Ohio St.3d 190, 192 (1998). The
appellate court need not, however, accept as true any unsupported or conclusory legal
propositions advanced in the complaint. Rudd v. Ohio State Hwy. Patrol, 10th Dist. No.
15AP-869, 2016-Ohio-8263, ¶ 12, citing Morrow v. Reminger & Reminger Co., LPA, 183
Ohio App.3d 40, 2009-Ohio-2665, ¶ 7 (10th Dist.).
{¶ 24} The standard of review for the third ground for dismissal—failure to exhaust
its administrative remedies—is different. While this Court reviews question of law de novo,
the dismissal of claims seeking declaratory judgments for failure to exhaust administrative
remedies is reviewed for an abuse of discretion. OMB MST LSCO, LLC v. Ohio Dept. of
Medicaid, 10th Dist. No. 18AP-223, 2018-Ohio-4843, ¶ 10, 19 ("We see no abuse of
discretion on the part of the trial court in concluding that * * * the declaratory judgment
action must be dismissed due to appellants' failure to exhaust their administrative
remedies."); SP9 Ent. Trust v. Brauen, 3d Dist. No. 1-14-03, 2014-Ohio-4870, ¶ 13-14 ("SP9
and S&K's assignments of error challenge the trial court's dismissal of their declaratory-
judgment action based on the conclusion that proceeding with the action would have been
improper because they failed to exhaust their administrative remedies. We review that
decision * * * under an abuse-of-discretion standard.").
{¶ 25} Counts 1, 2, and 6 of the underlying matter are explicitly brought under the
Declaratory Judgment Act. While Count 3 does not specifically cite the Declaratory
Judgment Act, it is based on the same underlying allegations and seeks the same injunctive
relief against eight specific, non-State appellees as Counts 1, 2, and 6 seek against the
department. Accordingly, this Court reviews the common pleas court's dismissal for failure
to exhaust administrative remedies for an abuse of discretion. "An abuse of discretion
No. 18AP-820 10
consists of more than an error of judgment; rather, it connotes an attitude on the part of
the trial court that is unreasonable, unconscionable, or arbitrary." SP9 Ent. at ¶ 14. As
Justice O'Donnell of the modern Supreme Court of Ohio has opined, " '[a] court abuses its
discretion when its ruling is founded on an error of law or a misapplication of law to the
facts.' " Independence v. Office of the Cuyahoga Cty. Executive, 142 Ohio St.3d 125, 2014-
Ohio-4650, ¶ 49 (O'Donnell, J., dissenting), quoting Doe v. Natl. Bd. of Med. Examiners,
199 F.3d 146, 154 (3d Cir.1999). Absent an abuse of discretion on the part of the common
pleas court, this Court may not substitute its judgment for that of the common pleas court.
Pons v. Ohio State Med. Bd., 66 Ohio St.3d 619, 621 (1993), citing Lorain City School Dist.
Bd. of Edn. v. State Emp. Relations Bd., 40 Ohio St.3d 257, 260-61 (1988).
D. Assignment of Error
{¶ 26} In the underlying action, Aphria sought to challenge the validity of the
process the department used to award level I cultivator provisional licenses under the
MMCP through a declaratory judgment action. Aphria contends, essentially, that it would
have been awarded 1 of the 12 level I cultivator provisional licenses awarded in November
2017 but for problems with the department's licensing process that were inconsistent with,
or in violation of, the department's statutory mandate under the MMCP. Aphria argues
that "[t]he Declaratory Judgment Act is the proper vehicle for asserting that an agency acted
arbitrarily and capriciously and abused its discretion in making decisions in a licensing
process." (Aphria Brief at 12.)
{¶ 27} Appellees contend that Aphria is attempting to circumvent the General
Assembly's intent as expressed in H.B. No. 523, the well-established process for resolving
administrative disputes contained in R.C. Chapter 119, and the department's jurisdiction
over the licensing of medical marijuana cultivators. See, e.g., Ohio Department of
Commerce Brief at 1-2. Appellees stress that Aphria declined to challenge the department's
decision denying its application through the process prescribed in H.B. No. 523 for
licensing disputes, did not request an administrative hearing pursuant to R.C. Chapter 119,
and did not appeal the department's final order denying its application. Instead, Aphria
commenced the underlying action with plaintiffs who had requested, but had not yet
received, R.C. Chapter 119 hearings in compliance with H.B. No. 523. Appellees contend
the trial court properly identified Aphria's licensure claims, determined it did not have
jurisdiction over those claims and, accordingly, dismissed them.
No. 18AP-820 11
{¶ 28} Having independently reviewed the record of the underlying matter, studied
the briefs, and listened to oral arguments, we recognize Aphria's concerns about alleged
flaws in the department's licensing process. However, we conclude the trial court correctly
granted appellee's motions to dismiss Counts 1 through 3 and 6 of the amended complaint.
1. Subject-Matter Jurisdiction
{¶ 29} A declaratory judgment action is a civil action and provides a remedy in
addition to other legal and equitable remedies available. One Energy Ents., LLC v. Ohio
Dept. of Transp., 10th Dist. No. 17AP-829, 2019-Ohio-359, ¶ 30, citing Victory Academy
of Toledo v. Zelman, 10th Dist. No. 07AP-1067, 2008-Ohio-3561, ¶ 8, citing Aust v. Ohio
State Dental Bd., 136 Ohio App.3d 677, 681 (10th Dist.2000). "R.C. Chapter 2721,
the Declaratory Judgments Act, is remedial in nature; its purpose is to settle and afford
relief from uncertainty and insecurity with respect to rights, status and other legal relations
and it is to be liberally construed and administered." One Energy Ents. at ¶ 30, citing
Swander Ditch Landowners' Assn. v. Joint Bd. of Huron & Seneca Cty. Commrs., 51 Ohio
St.3d 131, 134 (1990), citing Radaszewski v. Keating, 141 Ohio St. 489, 496 (1943).
{¶ 30} Nonetheless, it is well-established that declaratory judgment actions are
inappropriate where special statutory proceedings would be bypassed. In State ex rel.
Albright v. Court of Common Pleas of Delaware Cty., 60 Ohio St.3d 40, 42 (1991), the
Supreme Court stated:
Courts of appeals have uniformly held that actions for
declaratory judgment and injunction are inappropriate where
special statutory proceedings would be bypassed. Dayton
Street Transit Co. v. Dayton Power & Light Co. (1937), 57 Ohio
App. 299, 10 O.O. 500, 13 N.E. 2d 923; State, ex rel. Iris Sales
Co., v. Voinovich (1975), 43 Ohio App. 2d 18, 72 O.O. 2d 162,
332 N.E. 2d 79; Wagner v. Krouse (1983), 7 Ohio App. 3d 378,
7 OBR 479, 455 N.E. 2d 717; Beasley v. East Cleveland (1984),
20 Ohio App. 3d 370, 20 OBR 475, 486 N.E. 2d 859; and Arbor
Health Care Co. v. Jackson (1987), 39 Ohio App. 3d 183, 530
N.E. 2d 928. Each of these actions was decided on direct
appeal, not by issuance of a writ of prohibition. However, since
it is always inappropriate for courts to grant declaratory
judgments and injunctions that attempt to resolve matters
committed to special statutory proceedings, their decisions
should always be reversed on appeal, except when they dismiss
the actions. We find this tantamount to a holding that courts
have no jurisdiction to hear the actions in the first place, and
now so hold.
No. 18AP-820 12
{¶ 31} Therefore, "while a declaratory judgment action may provide an additional
remedy which may be granted by a court, [it] cannot be used to extend the jurisdiction as
to the subject matter upon which a court may act." Huntsman v. Ohio Dept. of Agriculture,
5th Dist. No. 2016CA00206, 2017-Ohio-2622, ¶ 30, citing State ex rel. Ford v. Ruehlman,
149 Ohio St.3d 34, 2016-Ohio-3529, ¶ 74, citing State ex rel. Foreman v. Bellefontaine
Municipal Court, 12 Ohio St.2d 26 (1967). "For this reason, a common pleas court cannot
use the declaratory judgment statute to decide matters over which it otherwise has no
jurisdiction." Huntsman at ¶ 30.
2. Subject-Matter Jurisdiction – Exclusive Jurisdiction
{¶ 32} Aphria argues that nothing in the MMCP confers exclusive jurisdiction to the
department to adjudicate Aphria's claims. Moreover, Aphria relies on the holding of State
ex rel. Banc One Corp. v. Walker, 86 Ohio St.3d 169 (1999), for the proposition that a
government agency has exclusive jurisdiction only when the General Assembly provides
such jurisdiction "by appropriate statutory language." Id. at 172.
{¶ 33} We disagree. Ohio cases that find exclusive jurisdiction exists do not require
language in any particular form but look at the entire statutory scheme of regulation. Ohio
courts have consistently held that "where the General Assembly has enacted a complete and
comprehensive statutory scheme governing review by an administrative agency, exclusive
jurisdiction is vested within such agency." Kazmaier Supermarket v. Toledo Edison Co.,
61 Ohio St.3d 147, 153 (1991). The Kazmaier Court upheld the trial court's dismissal of a
corporate utility customer's complaint alleging that a utility had charged an improper rate
because the Public Utilities Commission of Ohio has complete jurisdiction over the
regulation of utility rates. The Court found that the General Assembly had "created a broad
and comprehensive statutory scheme for regulating the business activities of public
utilities," explaining as follows:
R.C. Title 49 sets forth a detailed statutory framework for the
regulation of utility service and the fixation of rates charged by
public utilities to their customers. As part of that scheme, the
legislature created the Public Utilities Commission and
empowered it with broad authority to administer and enforce
the provisions of Title 49. The commission may fix, amend,
alter or suspend rates charged by public utilities to their
customers. R.C. 4909.15 and 4909.16. Every public utility in
Ohio is required to file, for commission review and approval,
tariff schedules that detail rates, charges and classifications for
No. 18AP-820 13
every service offered. R.C. 4905.30. And a utility must charge
rates that are in accordance with tariffs approved by, and on file
with, the commission. R.C. 4905.22.
The General Assembly has by statute pronounced the public
policy of the state that the broad and complete control of public
utilities shall be within the administrative agency, the Public
Utilities Commission. This court has recognized this legislative
mandate.
Kazmaier at 150-51.
{¶ 34} The Kazmaier Court continued:
In regard to administrative agency exclusivity, generally, this
court has recognized that where the General Assembly has
enacted a complete and comprehensive statutory scheme
governing review by an administrative agency, exclusive
jurisdiction is vested within such agency. State, ex rel. Geauga
Cty. Budget Comm., v. Geauga Cty. Court of Appeals (1982), 1
Ohio St.3d 110, 113, 1 OBR 143, 146, 438 N.E.2d 428, 431; see,
also, State, ex rel. Northern Ohio Tel. Co., v. Winter, supra, 23
Ohio St.2d at 9-10, 52 O.O.2d at 31, 260 N.E.2d at 829-830;
State, ex rel. Ohio Bell Tel. Co., v. Cuyahoga Cty. Court of
Common Pleas (1934), 128 Ohio St. 553, 1 O.O. 99, 192 N.E.
787.
Kazmaier at 153. With respect to the matter before it, the Court concluded "that in this
type of matter involving a dispute inherently arising from charges based upon tariffs filed
with and approved by the commission, the General Assembly has granted the commission
exclusive jurisdiction to determine the mutual rights and responsibilities of the parties."
Id. at 154.
{¶ 35} The Supreme Court continues to apply the Kazmaier exclusive jurisdiction
analysis; see, e.g., State ex rel. Taft-O'Connor '98 v. Court of Common Pleas of Franklin
Cty., 83 Ohio St.3d 487 (1998) (granting writ of prohibition to prevent common pleas court
from ruling on a complaint about campaign materials because the Ohio Elections
Commission has exclusive jurisdiction over claims of fraudulent and false statements in
elections communications); State ex rel. Dir. Ohio Dept. of Agriculture v. Forchione, 148
Ohio St.3d 105, 2015-Ohio-3049 (granting a writ of prohibition because the Department of
Agriculture has exclusive jurisdiction over the regulation of dangerous animals);
Huntsman, 2017-Ohio-2622 (dismissing an action attacking a decision of the Department
No. 18AP-820 14
of Agriculture to transfer dangerous wild animals, relying on Forchione); Rocky Ridge
Develop., LLC v. Winters, 151 Ohio St.3d 39, 2017-Ohio-7678 (issuing a writ of prohibition
because the permitting matters at issue fell under the Environmental Review Appeals
Commission's exclusive jurisdiction).
{¶ 36} State ex rel. Banc One does not address the law as stated in Kazmaier, where
the Supreme Court directs courts to consider the entire statutory scheme of regulation to
determine whether the General Assembly has vested exclusive jurisdiction in the agency.
More recently, the Supreme Court rejected the argument in Forchione that the use of the
word "may" in the statute to confer authority upon the agency evidences lack of exclusive
jurisdiction:
The "may" language in R.C. 935.20(A) gives the director
discretion to issue quarantine or transfer orders. It does not
vest authority to do so in the common pleas courts or in any
other entity. No other agency of government, including the
courts, has been given authority by the General Assembly to
order the quarantine or transfer of dangerous wild animals.
R.C. Chapter 935 is a comprehensive statutory scheme
regarding the regulation of dangerous wild animals, which
vests exclusive authority over such matters to the director of
the [Ohio Department of Agriculture].
Forchione at 110.
{¶ 37} Aphria also asserts that the trial court is vested with subject-matter
jurisdiction over Aphria's claims because Counts 1, 2, and 6 all seek declaratory and/or
injunctive relief, notwithstanding the fact that Count 2 is couched as a legal claim for breach
of an implied contract. Aphria offers in support of its position the Supreme Court's holding
in BCL Ents., Inc. v. Ohio Dept. of Liquor Control, 77 Ohio St.3d 467 (1997), that the
Franklin County Court of Common Pleas had the power to adjudicate claims brought by a
rejected liquor license applicant that the Department of Liquor Control had acted
arbitrarily and capriciously in denying the license, even though a statute authorized
administrative appeals of department actions to the Liquor Control Commission. (Aphria
Reply Brief at 11.) Aphria also cites as support this Court's holding in Buckeye Quality Care
Centers, Inc., v. Fletcher, 48 Ohio App.3d 150 (10th Dist.1988).
{¶ 38} We find Aphria's reliance on those two cases misplaced. The BCL Court
observed that "[h]istorically, declaratory judgment actions were permitted against state
No. 18AP-820 15
agencies, and courts have been deemed to possess jurisdiction to issue injunctive relief."
BCL at 470; see, e.g., Racing Guild of Ohio, Local 304 v. State Racing Comm., 28 Ohio
St.3d 317, 320 (1986), citing Am. Life & Acc. Ins. Co. v. Jones, 152 Ohio St. 287 (1949). The
BCL Court noted, however, that a common pleas court's jurisdiction over declaratory
judgment actions is not unlimited, stating:
We acknowledge that, where the General Assembly has
established a complete and comprehensive statutory scheme
both creating new rights and prescribing a means to enforce
them, review of administrative actions as to those rights may
be deemed to be exclusively within the jurisdiction of a
statutorily created administrative, rather than judicial, body.
Kazmaier Supermarket, Inc. v. Toledo Edison Co. (1991), 61
Ohio St. 3d 147, 153, 573 N.E.2d 655, 659 (Public Utilities
Commission); Franklin Cty. Law Enforcement Assn.
v. Fraternal Order of Police, Capital City Lodge No. 9 (1991),
59 Ohio St. 3d 167, 572 N.E.2d 87 (State Employment
Relations Board).
BCL at 471.
{¶ 39} Thus, the BCL Court recognized that courts must consider the analysis set
forth in Kazmaier in determining whether exclusive jurisdiction exists. The BCL Court held
that the Department of Liquor Control did not have exclusive jurisdiction in that matter
only after it had concluded that applying the Kazmaier doctrine was inappropriate because
it would have been "inconsistent with the statutory acknowledgement in R.C. 4301.31 of
jurisdiction in the Franklin County Court of Common Pleas to 'restrain [the department
from exercising] any power or to compel the performance of any duty under Chapters 4301.
and 4303. of the Revised Code." BCL at 471.
{¶ 40} Nor are we persuaded by Aphria's reliance on Buckeye Quality, which we
have previously distinguished, stating that we had merely found that the trial court's
dismissal under Civ.R. 12(B)(6) was improper because some allegations in the complaint,
though sketchy, met the plaintiff's "initial burden" under that rule. The plaintiff in Buckeye
Quality alleged that it was continuing to comply with defective rules for fear of losing its
Medicaid certification and that it could not disobey the invalid rules without suffering
overwhelming, irremediable harm. We acknowledged that, in certain cases, a party need
not exhaust administrative remedies to seek declaratory relief, and we found that the
situation in Buckeye Quality involved circumstances where "if plaintiffs continue
No. 18AP-820 16
indefinitely to comply with the rules, then they may be forever foreclosed from challenging
the rules' adoption." Id. at 154. In contrast, in the present appeal, Aphria was not faced
with a situation where it might be foreclosed forever from challenging the laws at issue, nor
was the trial court addressing a question of sufficiency of allegations under Civ.R. 12(B)(6).
{¶ 41} We find that the General Assembly has enacted a complete and
comprehensive statutory scheme governing licensure actions under the MMCP, including
medical marijuana cultivator licenses. The law is codified in R.C. Chapter 3796 and vests
the department with the responsibility for licensing cultivators and the authority to
establish rules and standards for licensure. R.C. 3796.02 and 3796.03. Applications for
licenses must be submitted to, and acted upon by, the department in accordance with its
promulgated rules. R.C. 3796.09 through 3769.14. Review and challenge of licensure is
pursuant to R.C. Chapter 119. R.C. 3796.14. The department is authorized to "[s]uspend,
* * * revoke, or refuse to renew a license," to "[r]efuse to issue a license," and to
"[i]mpose * * * civil penalty" on a licensee. R.C. 3796.14(B)(1)(a) through (c). Consistent
with the holding of Forchione, 148 Ohio St.3d. 105, no other government agency, including
the courts, has been given authority by the General Assembly to issue, suspend, refuse, or
revoke a medical marijuana cultivators license. Based upon this statutory scheme, we find
that the General Assembly vested the department with the exclusive jurisdiction for all
aspects of the licensure of cultivators of medical marijuana, including disputes relating to
those licensing decisions.
{¶ 42} Aphria also asserts that its claims for abuse of discretion, breach of contract,
tortious interference, and due process are not within the department's exclusive
jurisdiction. In deciding whether claims fall within an agency's exclusive jurisdiction, this
Court must determine whether the claims raised in the complaint are within the exclusive
initial jurisdiction of the department, or are pure tort or contract claims that do not require
a consideration of statutes and regulations administered and enforced by the department.
Consistent with the holding of Kazmaier, our de novo review must examine the substance
of Aphria's claims rather than the mere allegations that the claims sound in tort or contract.
Kazmaier, 61 Ohio St.3d 147.
{¶ 43} Based on our independent review of the record and the relevant statutes,
administrative rules, and caselaw, we conclude that the General Assembly has granted the
No. 18AP-820 17
department exclusive jurisdiction over the licensing of cultivators under the MMCP and has
enacted special statutory remedies for disputes involving those licenses. Each of Aphria's
claims at issue challenge how the department or the non-department appellees violated or
failed to comply with the MMCP statutes and regulations. Accordingly, we find that
Aphria's claims fall under the department's exclusive jurisdiction.
3. Subject-Matter Jurisdiction – Bypass of Special Statutory Process
{¶ 44} Despite the alleged defects in the department's licensing process, we are not
persuaded that Aphria was entitled to pursue its concerns via the underlying matter in lieu
of the statutory process mandated by the General Assembly. Aphria could have, and should
have, availed itself of the R.C. Chapter 119 process to challenge the department's decision,
rather than bypassing it altogether and proceeding directly to the trial court.
{¶ 45} This Court has long recognized that "[w]here * * * a specialized statutory
remedy is available in the form of an adjudicatory hearing, a suit seeking declaration of
rights which would bypass, rather than supplement, the legislative scheme ordinarily
should not be allowed." Arbor Health Care Co. v. Jackson, 39 Ohio App.3d 183, 186 (10th
Dist.1987) (finding claims for violations of due process and abuse of discretion and seeking
declaratory relief were an improper attempt to bypass a special statutory procedure). This
Court has consistently held that an adjudicatory hearing under R.C. Chapter 119 is a special
statutory proceeding. Arbor Health at 185-86 (finding certificates of need are to be filed
with the agency, and that any claims related to the grant or denial of a certificate of need
are to proceed under the R.C. Chapter 119 special statutory proceeding and ultimate
appeal); State ex rel. Gelesh v. State Med. Bd., 172 Ohio App.3d 365. 2017-Ohio-3328 (10th
Dist.) (finding R.C. Chapter 119 hearing procedure is a special statutory proceeding
warranting dismissal of physician's request for declaratory judgment and injunctive relief);
Aust, 136 Ohio App.3d 677 (finding R.C. Chapter 119 hearing procedure a special
proceeding warranting dismissal of dentist's request for declaratory and injunctive relief).
This Court also has opined that "merely because the administrative remedy takes more time
than plaintiff desires, is not a sufficient reason to bypass the statutory procedures for
review." Champaign Cty. Nursing Home v. Tomkins, 10th Dist. No. 98AP-255, 2003-
Ohio-1706, ¶ 19-20, 39. Even where one of a plaintiff's claims or arguments could
potentially be considered outside the administrative proceeding, the procedure may not be
bypassed. Id.
No. 18AP-820 18
{¶ 46} This Court's position deferring to the General Assembly's provision for
special statutory proceedings is consistent with the view of the Supreme Court that, because
"it is always inappropriate for courts to grant declaratory judgments and injunctions that
attempt to resolve matters committed to special statutory proceedings, their decisions
should always be reversed on appeal, except when they dismiss the actions. * * * [T]his [is]
tantamount to a holding that courts have no jurisdiction to hear the actions in the first
place." State ex rel. Albright, 60 Ohio St.3d at 43.
{¶ 47} Having independently reviewed the record of the underlying matter, studied
the briefs, and listened to oral arguments, and consistent with this Court's prior decisions
involving similar matters, we find that Aphria's claims are subject to special statutory
proceedings. The MMCP requires that applications for licenses to cultivate medical
marijuana must be filed with the department. R.C. 3796.09; Ohio Adm.Code 3796:2-1-02.
Any challenges to such decisions "shall be taken in accordance with Chapter 119." R.C.
3796.14(A)(1)(c).
{¶ 48} Aphria's claims contained in Counts 1 through 3 and 6 concern the licensing
of medical marijuana cultivators and rest on alleged violations of the MMCP statutes and
regulations that allegedly deprived Aphria of the ability to obtain a cultivator provisional
license. All nine declarations sought by Aphria assert that either (1) level I cultivator
provisional licenses were improperly granted because of specific defects in an application
and/or general issues with the application and review process, or (2) applications for level
I cultivator provisional licenses were improperly denied or disqualified. Moreover, the
preliminary and permanent injunctive relief sought would order the department to refrain
from issuing a certificate of operation to any of the level I cultivator provisional licensees
and to revoke all level I cultivator provisional licenses.
{¶ 49} Based on our interpretation of the MMCP provisions, Aphria is able to
present all its arguments in an R.C. Chapter 119 hearing and receive injunctive relief as may
be deemed appropriate. If the appropriate remedy is for Aphria to receive a cultivator
provisional license, the department has the power to award it. If the appropriate remedy is
to revoke all licenses and start the licensing process over, the department has the power to
do so. If Aphria is successful in obtaining a cultivator provisional license through that new
No. 18AP-820 19
process, then its claims for declaratory and injunctive relief against the department would
be rendered moot.
{¶ 50} Aphria's claims and requested relief challenge the department's grants and
denials of level I cultivator provisional licenses under the MMCP. These matters are subject
to the special statutory proceedings of R.C. Chapter 119. Aphria's claims as contained in
Counts 1 through 3 and 6 attempt to bypass these special statutory proceedings.
4. Exhaustion of Administrative Remedies
{¶ 51} The department argues the trial court did not err in dismissing Counts 1
through 3 and 6 of the amended complaint because Aphria had failed to exhaust its
administrative remedies. Aphria in turn argues that going forward under the R.C. Chapter
119 administrative process would have been futile because the department already had
issued the 12 available provisional licenses and lacked authority to issue any additional
provisional licenses to applicants who had been wrongly denied a license.14
{¶ 52} Aphria's assertions notwithstanding, failure to exhaust administrative
remedies is an affirmative defense that may be resolved by a motion to dismiss where the
affirmative defense is established on the face of the pleadings. This Court has consistently
held that a plaintiff's failure to allege exhaustion of administrative remedies is sufficient for
dismissal. See, e.g., Rocky Fork Hunt & Country Club v. Testa, 120 Ohio App.3d 442, 448
(10th Dist.1997) (granting motion to dismiss based on failure to exhaust administrative
remedies); Oglesby v. Columbus, 10th Dist. No. 00AP-544 (Feb. 8, 2001) (finding dismissal
of breach of contract and interference with contract claims appropriate where plaintiff did
not allege in complaint exhaustion of administrative remedies).
{¶ 53} Absent a challenge to the validity or constitutionality of the statute or
regulation at issue, declaratory judgment is unnecessary to preserve a plaintiff's statutory
rights when the legislature has provided an administrative remedy. Shoemaker v. First
Natl. Bank, 66 Ohio St.2d 304 (1981).
14 As previously noted, Aphria filed with the clerk of courts' office of the trial court a copy of the Auditor of
State's report that was critical of the department's licensing process more than four months after the trial court
had dismissed Counts 1 through 3 and 6. We conclude, therefore, that the trial court did not have the
opportunity to review the auditor's report before entering judgment in favor of appellees. We also conclude
that appellees did not have an opportunity during the pendency of the underlying matter to respond to the
findings and conclusions contained in the auditor's report.
No. 18AP-820 20
{¶ 54} Moreover, "[t]he Ohio Supreme Court has also held that an action for
declaratory relief is inappropriate when a plaintiff seeks a determination of statutory rights
when she failed to exhaust her administrative remedies." Huntsman, 2017-Ohio-2622, at
¶ 41, citing Fairview Gen. Hosp. v. Fletcher, 63 Ohio St.3d 146 (1992). The Huntsman
Court stated further:
Generally, courts will not entertain proceedings for declaratory
relief when "another equally serviceable remedy has been
provided for the character of the case at hand." Swander Ditch
Landowners' Assn v. Joint Board of Huron & Seneca County
Commissioners, 51 Ohio St.3d 131, 554 N.E.2d 1324 (1990).
The "equally serviceable remedy" in this case is the
administrative process contained in R.C. 935.20(D) and
further review pursuant to R.C. Chapter 119.
Huntsman at ¶ 41.
{¶ 55} This Court has held that an equally serviceable remedy exists if the party's
rights may be fully protected through other remedies. Friends of Ferguson v. Ohio
Elections Comm., 117 Ohio App.3d 332, 335-36 (10th Dist.1997); Mack v. Ohio State Dental
Bd., 10th Dist. No. 00AP-578 (Mar. 31, 2001). We have also held that, for an administrative
remedy to be found to be unnecessarily onerous, the plaintiff must demonstrate the
administrative remedy "would have necessarily entailed a lengthy or more onerous burden
than declaratory judgment proceedings * * * or would force him to incur substantially more
expense than the declaratory judgment action." Aust, 136 Ohio App.3d at 682. We
concluded that the declaratory judgment sought in Aust was "merely a substitute for the
administrative process provided by the legislature in R.C. 4715.03(D) to determine such
questions. Because such administrative process is an equally serviceable remedy,
declaratory judgment is not available." Aust at 682-83, citing Haig v. Ohio State Bd. of
Edn., 62 Ohio St.3d 507, 510-11 (1992); Friends of Ferguson at 332.
{¶ 56} The exhaustion of administrative remedies does not apply if the process
would be futile or a vain act. An administrative process is futile or a vain act where the
agency lacks the authority or power to grant the relief requested. Nemazee v. Mt. Sinai
Ctr., 56 Ohio St.3d 109, 115 (1990) (finding issue is agency's power and authority to grant
relief, not the claimant's likelihood of success).
No. 18AP-820 21
{¶ 57} The trial court concluded that the R.C. Chapter 119 process available to
Aphria was not futile or a vain act. The trial court's decision sets forth in detail the
reasoning that supports that conclusion:
Under the MMCP, an unsuccessful applicant has access to the
Chapter 119 process, and is entitled to a hearing before the
[department] issues a final decision on its application. RC
3796.14(A); OAC 3796:5-6-03(C). [Aphria does] not allege that
[it has] exhausted this administrative remedy process.
[Aphria's] claims all rest on issues that would be addressed in
the Chapter 119 process, specifically whether the [department]
and/or [appellees] complied with the MMCP statutes and
regulations. Moreover, as discussed more fully below, the relief
sought by [Aphria] is available during that process, specifically
the [department] can refuse, revoke, or grant a license. [Fn. 6
omitted] Finally, for the reasons that follow, the [trial court]
finds the R.C. Chapter 119 process is not futile or a vain act.
First, [Aphria's] argument that the [department] has
supposedly issued a pre-judgment of the outcome of the
hearings is without merit. Pursuant to the Chapter 119 process,
a hearing will be held and the [department] will make a
decision. If that decision is adverse to [Aphria], [Aphria] may
appeal that decision to the [common pleas court].
Next, the [trial court] finds that the [department] has the
authority to provide the remedies [Aphria] seek[s], which
include the non-issuance of certificates of operation and
revocation of all provisional cultivator licenses and review of
alleged errors in the licensing process. The [department] is
required to provide [Aphria] an Chapter 119 hearing with
respect to [its] license application.[] Based upon the results of
the R.C. Chapter 119 hearing[], the [department] is expressly
authorized to issue a license refuse to issue a license, or to
revoke a license that was already issued. RC 3796.14(A)(1);
OAC 3796:5-6-01(A)(5) and (6). The [department] further has
the authority to institute a new round of applications if
additional licenses are deemed necessary. OAC 3796:2-1-01(C).
The General Assembly has delegated broad authority to the
[department] to determine the appropriate process for
licensing cultivators and to adopt rules necessary for the
MMCP's administration, implementation, and enforcement
and to review whether such process was appropriately
followed. RC 3796.02, 3796.03(B)(1) and (C), 3796.14(A).
Finally, the [trial court] finds the Chapter 119 process is not
untimely. [Aphria] argue[s] the provisional licensees are
No. 18AP-820 22
proceeding to take steps necessary to obtain their certificates of
operation and build their facilities before [Aphria] can exhaust
their administrative remedies. However, the issuance of
certificates of operation to other applicants does not preclude
the [department]'s authority to grant relief to [Aphria] in [its]
Chapter 119 hearings.
[Aphria] focuses on OAC 3796:2-1-01(A), which provides that,
until September 8, 2018, the [department] may issue up to
twelve level I cultivator provisional licenses. However, this
regulation must be considered along with the [department]'s
duty to issue licenses based on score and the authority granted
to the [department] to administer and implement the MMCP.
Specifically, the [department] has a mandatory duty to issue
provisional licenses according to the applicants' ranked score
(OAC 3796:2-1-04(A)) and the authority to exercise any other
power it has been granted pursuant to Chapter 3796 or the
rules promulgated thereunder when necessary for the
administration, implementation or enforcement of the MMCP
(OAC 3796:5-5-01(A)). The [department]'s powers include the
authority to suspend or revoke provisional licenses or
certificates of operation, or take any other appropriate action,
including a new round of scoring or applications. RC
3796.14(A); OAC 3796:5-6-01(A). Pursuant to this authority,
the [department] has the power to issue a provisional license to
an unsuccessful applicant that establishes through its Chapter
119 hearing that is entitled to receive such a license. The
department also has the power to revoke a license improperly
granted. The [trial court] finds the [department]'s
interpretation of the MMCP statutes and rules in this regard to
be reasonable, whereas the [Aphria's] interpretation would be
inconsistent with the General Assembly's intent to grant the
[department] the authority to have the MMCP up and running
by September 8, 2018. See e.g. Nw. Ohio Bldg. & Constr.
Trades Council v. Conrad, 92 Ohio St.3d 282, 750 N.E.2d 130
(2001) (finding courts are required to give due deference to an
administrative interpretation by an agency).
(May 17, 2018 Decision at 14-16.)
{¶ 58} The trial court in its decision discusses a recent decision of the
Commonwealth Court of Pennsylvania that addressed similar challenges to Pennsylvania's
medical marijuana program. In relating the Pennsylvania case to the underlying matter,
the trial court stated:
Keystone ReLeaf LLC v. Pa. Dept. of Health, 2018 Pa. Commw.
LEXIS 140 (April 20, 2018), involved challenges to the
No. 18AP-820 23
Pennsylvania Department of Health's dispensary permit
application process pursuant to the Pennsylvania Medical
Marijuana Act. Petitioners, unsuccessful applicants, filed, in
addition to their request for administrative appeals, a petition
challenging the application process. Like this case, petitioners
asserted that the Department scored the applications
inconsistently and arbitrarily; the Department acted ultra vires
in waiving certain statutory and regulatory requirements; the
Department's process may be infected by favoritism or bias;
and the Department's permitting process should be invalidated
in its entirety and previously awarded permits rescinded,
because they were awarded pursuant to an unlawful process.
Id. at *5. The issue before the Court was exhaustion of
administrative remedies. Id. at *2-3.
Like [Aphria] in this case, petitioners asserted that their claims
were exempt from the exhaustion doctrine. Id. at *10-12. * * *
The Court held petitioners failed to exhaust their
administrative remedies. The Court found that as petitioners
did not challenge the constitutionality or validity of the statutes
and regulations themselves, but rather challenged the
constitutionality and validity of the way the Department
interpreted and applied the statutes, the constitutional
exception to the exhaustion of administrative remedies did not
apply. Id. at *18-19. The Court further found that the
administrative remedy was adequate. Id. at *24-26. The Court
reasoned that there was no aspect of petitioners' claims that is
not suitable for disposition by the administrative tribunal. Id.
In fact, since the issues involved the Department's
interpretation and application of the medical marijuana
program statutes and regulations, and the Department has
expertise in the issuance of dispensary permits, the Court
found challenges regarding the criteria applied to scoring
applications in the permitting process fall squarely within the
Department's expertise. Id. The Court further reasoned that as
there are material factual dynamics involved in evaluating the
criteria for scoring permit applications that must be developed
in an administrative forum for the Court to determine whether
the permitting process violates the medical marijuana statutes
and regulations, judicial review without a proper record would
constitute a premature interruption of the administrative
process. Id. Finally, the Court reasoned if Petitioners'
administrative appeals succeed, or if a permitee is deemed
unqualified, the Department was authorized to grant and
revoke permits. Id. at *27.
No. 18AP-820 24
Like the Court in Keystone, this Court finds that [Aphria's]
claims are subject to the exhaustion of administrative
remedies. [Aphria's] claims do not challenge the
constitutionality of the MMCP statutes or regulations
themselves, but instead challenge the constitutionality and
validity of the way the [department] interpreted and applied
the statutes in administering and implementing the license
application process. The Court further finds that the
administrative remedy is adequate. There is no aspect of
[Aphria's] claims that are not suitable for disposition by the
Chapter 119 process. In fact, since the issues involve the
[department]'s interpretation and application of the MMCP
statutes and regulations, and the [department] has expertise in
the issuance of cultivator licenses, challenges regarding the
criteria applied to scoring applications in that process fall
squarely within the [department]'s expertise. [Fn. 7 omitted.]
Further, as there are material factual dynamics involved in
evaluating the process and criteria for scoring these
applications that must be developed in an administrative
forum for the Court to determine whether the licensing process
violates the MMCP, judicial review without a proper record
would constitute a premature interruption of the
administrative process. Finally, if [Aphria's] administrative
appeal succeeds, or if a licensee is deemed unqualified, the
[department] is authorized to grant and revoke [licenses].
(Decision at 16-19.)
{¶ 59} We find the trial court's decision to be well-reasoned and supported by law.
Accordingly, we conclude that the trial court did not abuse its discretion when it relied in
part on Aphria's failure to exhaust its administrative remedies to grant appellees' motions
to dismiss.
5. Tortious Interference Claims (Count 3)
{¶ 60} Tortious interference with a business relationship occurs when a person,
without a privilege to do so, induces or otherwise purposely causes a third person not to
enter into or continue a business relationship with another. A & B-Abell Elevator Co. v.
Columbus/Cent. Ohio Bldg. & Constr. Trades Council, 73 Ohio St.3d 1, 14 (1995). The
elements are: (1) a business relationship or prospective business relationship; (2) the
wrongdoer's knowledge thereof; (3) an intentional interference causing a breach or
termination of the relationship; and (4) damages resulting therefrom. Chandler & Assoc.,
Inc. v. America's Healthcare Alliance, Inc., 125 Ohio App.3d 572, 583 (8th Dist.1997); see
No. 18AP-820 25
also Bansal v. Mt. Carmel Health Sys., 10th Dist. No. 10AP-1207, 2011-Ohio-3827, ¶ 29.
These same elements are necessary to a claim of interference with a "prospective" business
relationship. See, e.g., Bindra v. Fuenning, 9th Dist. No. 26489, 2013-Ohio-5722, ¶ 14-16.
{¶ 61} To the extent that the tortious interference claims against the non-State
appellees in Count 3 seek compensatory damages, the trial court considered whether such
claims state a claim upon which relief can be granted. The trial court stated that Aphria
was unable to cite to "a single case, in jurisdiction, which has held that a governmental
licensing scheme is a business relationship sufficient to support a tortious interference
claim." (Decision at 19.) The trial court found that Ohio caselaw establishes that a license
is not a contract or property right but a condition precedent to conducting business.
Stouffer Corp. v. Bd. of Liquor Control, 165 Ohio St. 96, 99 (1956); State ex rel. Zugravu v.
O'Brien, 130 Ohio St. 23 (1935). The trial court found that Aphria had failed to allege a
business relationship sufficient to state a claim for tortious interference.
{¶ 62} Aphria asserts that the trial court's finding was in error because the claim for
tortious interference was not subject to a heightened pleading requirement. Consequently,
Aphria was not required "to plead specific facts establishing existence of prospective
contractual or business relationship." (Aphria Brief at 20.) Next, Aphria asserts that the
trial court completely ignored "the implied contract between the [department] and [Aphria]
to consider license applications fairly." Id. at 21. Aphria contends that the non-State
appellees improperly interfered with the ability of applicants to obtain a cultivator
provisional license by engaging in conduct that allegedly violated the MMCP statutes and
regulations. Id. Aphria submits that the trial court also failed to apply the Restatement
Section 766B standard appropriately to this claim, stating:
By the Restatement yardstick, a lucrative licensing relationship
with the State – especially, as here, a license awarded to a
limited number of applicants in a highly competitive bidding
process that permits the winners to enter into contracts to grow
and sell medical marijuana to other entities in the supply chain
– certainly qualifies as "other relations leading to potentially
profitable contracts" or "other customary relationship[s] not
amounting to a formal contract."
(Aphria Brief at 22.) Finally, Aphria relies on the holding in S. Christian Leadership
Conference v. Combined Health Dist., 191 Ohio App.3d 405, 2010-Ohio-6550 (2d Dist.)
No. 18AP-820 26
("SCLC") to assert that a tortious interference claim may stand against a successful bidder
in competitive bidding for a business expectancy with a government entity. (Aphria Brief
at 22-24; Aphria Reply Brief at 26-27.)
{¶ 63} The non-State appellees against which Aphria levied its tortious interference
claim argue the trial court properly held that Aphria failed to allege a "business
relationship" sufficient to state a claim for tortious interference. They assert that this
missing element was sufficient for the trial court to dismiss this tort claim without analyzing
every element of tortious interference. See, e.g., Terradiol Ohio Brief at 9-10. They argue
further that, if a business relationship were possible, Aphria's claim still fails on other
elements. For example, Aphria did not suffer any injury attributable to the non-State
appellees, and the non-State appellees could not have known about Aphria's confidential
application, both requirements for a tortious interference claim. Id. at 10.
{¶ 64} We are not persuaded by Aphria's arguments and find its reliance on SCLC
insufficient to properly support its argument. SCLC dealt with a monetary grant, not a
license. Id. at 415. The Second District Court of Appeals considered only whether SCLC, a
disappointed bidder on a public grant-contract who alleged that the awarding agency
abused its discretion in awarding the grant, had standing to bring suit against the awarding
agency. The Second District focused on whether SCLC had pled an injury, not whether a
potential contract existed between SCLC and the awarding agency. SCLC never discusses
any of the elements of a tortious interference claim.
{¶ 65} Government agencies throughout Ohio issue licenses to individuals and
entities; the issuance of those licenses does not create a contract between the issuing
agencies and the licensees. See, e.g., Bungard v. Dept. of Job & Family Servs., 10th Dist.
No. 07AP-447, 2007-Ohio-6280, ¶ 24 ("statute are laws and regulations; they are not
contracts"); Duncan v. Cuyahoga Community College, 8th Dist. No. 101644, 2015-Ohio-
687, ¶ 29 ("statutes and regulations do not create 'contracts' between the state and its
citizens"); Quinn v. State Bd. of Real Estate Examiners, 104 Ohio App. 316, 317 (1956) (a
license, much less a prospective and speculative award of a provisional license, does not
create an economic or contractual relationship with the state).
{¶ 66} Additionally, we note that courts reviewing this issue in other jurisdictions
have uniformly held that the prospect of receiving a license is not a business or contractual
No. 18AP-820 27
relationship which can sustain an action for tortious interference. See Bakri v. Daytona
Beach, M.D.Fla. No. 6:08-cv-1572-orl-28GJK (June 5, 2009) ("Plaintiff avers that
Defendants interfered with his 'licensing relationship' with the State of Florida. * * *
However this is not a 'business relationship' that has been recognized as supporting the
interference tort."); Asia Invest. Co. v. Borowski, 133 Cal.App.3d 832, 840-41 (1982)
("[Plaintiff] is unable to assert any business relationship with which there has been tortious
interference. * * * The relationship between [plaintiff] and the City cannot be characterized
as an economic relationship"); Itasca v. Lisle, 817 N.E.2d 160, 352 Ill.App.3d 847, 858
(2004) (allegations of interference with a "government relationship" cannot survive a
motion to dismiss because there is no "valid business expectancy"); Wagner v. Nottingham
Assocs., 464 So.2d 166, 169, fn. 4, 5 (Fla.App.1985) (stating that it could not find a single
case sustaining a tortious interference action where a governmental relationship was
alleged to be the advantageous relationship); Blank v. Kirwan, 703 P.2d 58, 39 Cal.3d 311,
316-17 (1985) (plaintiff's pleading failed to satisfy the economic relationship element of a
claim for tortious interference).
{¶ 67} Aphria also cites procurement cases such as such as Cementech, Inc. v.
Fairlawn, 109 Ohio St.3d 475, 2006-Ohio-2991, where unsuccessful bidders on publicly
bid contracts were permitted to bring a claim for declaratory and injunctive relief to
challenge the award of the contract to another bidder. However, in Ohio disappointed-
bidder cases, bidders do not recover on the basis of implied contracts but on promissory
estoppel. Cardi v. State, 10th Dist. No. 12AP-5, 2012-Ohio-6157, ¶ 11, citing Mechanical
Contrs. Assn. of Cincinnati, Inc. v. Univ. of Cincinnati, 152 Ohio App.3d 466, 2003-Ohio-
1837, ¶ 23 (10th Dist.). Aphria's reliance on cases involving the public bidding of contracts
or awarding of public grant funding are inapposite because those processes result in a
contractual relationship between the successful bidder/applicant and the government
entity.
{¶ 68} Based on our review the facts of the underlying matter and the relevant law,
we find that no implied contract existed between Aphria and the department.
IV. CONCLUSION
{¶ 69} Having independently reviewed the record of the underlying matter, studied
the briefs, and listened to oral arguments, we find that the trial court did not err in granting
appellees' motion to dismiss Counts 1, 2, 3, and 6 of the amended complaint. Accordingly,
No. 18AP-820 28
we overrule Aphria's sole assignment of error. The judgment of the Franklin County Court
of Common Pleas is affirmed.
Judgment affirmed.
KLATT and BEATTY BLUNT, JJ., concur.