Westbank Pharmacy of Belle Chase, LLC v. Louisiana Board of Pharmacy

STATE OF LOUISIANA

COURT OF APPEAL

FIRST CIRCUIT

NUMBER 2023 CA 1268

WESTBANK PHARMACY OF BELLE CHASE, LLC

VERSUS

LOUISIANA BOARD OF PHARMACY

Judgment Rendered:
MAY 3 1 2024

Appealed from the
Nineteenth Judicial District Court
In and for the Parish of East Baton Rouge
State of Louisiana
Suit Number C727865

Honorable Beau Higginbotham, Presiding

Antonio M. "Tony" Clayton Counsel for Plaintiff/Appellee
D'Ann R. Penner Westbank Pharmacy of Belle Chase,
Port Allen, LA LLC

H. Minor Pipes, III
Katherine S. Roth
Jeffery A. Clayman
New Orleans, LA

Celia R. Cangelosi Counsel for Defendant/Appellant
Baton Rouge, LA Louisiana Board of Pharmacy

Shelton Dennis Blunt Counsel for Intervenor/Appellee
Monica M. Vela-Vick Crescent City Therapeutics, LLC
Baton Rouge, LA

David "Beau" D. Haynes
New Orleans, LA

BEFORE: GUIDRY, C.J., CHUTZ, AND LANIER, JJ.

GUIDRY, C.J.

The Louisiana Board of Pharmacy ( Board) appeals from a district court

judgment reversing the Board' s December 15, 2022 final order, which had awarded

the State of Louisiana's tenth therapeutic marijuana pharmacy license to Crescent

City Therapeutics, LLC ( Crescent City), and remanding the matter to the Board to

conduct a hearing to consider all fourteen pharmacies that were favorably reviewed

by the Board's Application Review Committee, taking into consideration all the

criteria set forth in La. R.S. 40: 1046, the Louisiana Administrative Code Title

46:LIII, and the Board's Region I-Solicitation 2-Evaluation Criteria. For the

reasons that follow, we reverse.

FACTS AND PROCEDURAL HISTORY

In 2015, the Louisiana Legislature enacted La. R.S. 40:1046, known as the

Alison Neustrom Act," which provides, among other things, for the prescription of

marijuana for therapeutic use and the adoption of rules and regulations by the Board

relating to the prescribing, dispensing, and producing of marijuana for therapeutic

use. 2015 La. Acts, No. 261, § §1 and 2. The Board originally awarded nine licenses,

one for each administrative region of the Louisiana Department of Health.

Thereafter, the Louisiana Legislature amended La. R.S. 40: 1046 to provide for the

award of a tenth license to the region with the highest population density as of

August 1, 2022. 2022 La. Acts, No. 491, § 1. After Region 1, consisting of Jefferson

Parish, Orleans Parish, Plaquemine Parish, and St. Bernard Parish, was identified as

the region with the highest population density, the Board solicited applications for

award of the tenth therapeutic marijuana pharmacy license.

Thirty applicants submitted applications, including Westbank Pharmacy of

Belle Chase, LLC (Westbank) and Crescent City. The Board's Application Review

Committee ( Committee) evaluated these applications and recommended seven of

these applicants to the Board, including Westbank and Crescent City. The Board

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conducted hearings on December 14 and 15, 2022, to evaluate on a competitive basis

the seven recommended applications and seven additional applications for the tenth

therapeutic marijuana pharmacy license, to consider the recommendations of the

Committee, and to award on a competitive basis the tenth therapeutic marijuana

pharmacy license. The Board ultimately awarded the tenth license to Crescent City,

whose proposed location was in Kenner, Louisiana in Jefferson Parish.

Thereafter, Westbank filed a Petition for Judicial Review, seeking reversal of

the Board' s decision to award the tenth therapeutic marijuana pharmacy license to

Crescent City and requesting that the license be awarded to Westbank. Westbank

alleged that there currently exists a therapeutic marijuana pharmacy in Orleans

Parish and that the holder of that license intended to open a statutorily permitted

satellite location in Jefferson Parish. As such, Westbank alleged that the Board:

violated statutory provisions by selecting a pharmacy that was not in an unserved

parish; exceeded its statutory authority by making a decision inconsistent with what

the Louisiana Legislature required in Act 491; rendered its decision based on

unlawful procedure by using irregular and unlawful procedures to make its decision;

and failed to adhere to the law applicable to the awarding of the tenth license.

Westbank also alleged that the Board was arbitrary and capricious and/or abused its

discretion in determining that Crescent City was the " most qualified applicant" and

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that this decision was not supported by a preponderance ofthe evidence.

In its brief filed with the district court, Westbank specified four errors

committed by the Board that it alleged prejudiced Westbank' s substantial rights and

justified reversal of the Board' s final order and award of the license to Westbank:

1) the Board exceeded its statutory authority and abused its discretion in awarding

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On April 17, 2023, Crescent City filed a Petition For Intervention, maintaining that it was
properly awarded the tenth therapeutic marijuana pharmacy license and requesting that judgment
be rendered in favor of the Board, maintaining the award to Crescent City and denying all relief
requested by Westbank.

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the tenth license to a pharmacy location that is in an already served, not unserved,

parish and that was " strategically designed" to serve cities outside ofRegion 1, rather

than within Region 1; ( 2) the Board acted arbitrarily and capriciously in placing a

medical marijuana pharmacy just 6.3 miles from an existing medical marijuana

pharmacy in contravention of its own criteria for awarding the tenth license; ( 3) the

Board abused its discretion and acted arbitrarily and capriciously in awarding the

tenth license to a pharmacy whose pharmacist-in-charge answered " Yes" to the

criminal history question on the application but apparently did not supply the

required final disposition and personal letter of explanation; and ( 4) the Board's

finding that Crescent City was the most qualified applicant is not supported by a

preponderance ofthe evidence because Westbank's location, unlike Crescent City's,

is in an unserved parish, Westbank's pharmacist-in-charge has experience working

in an actual medical marijuana pharmacy, unlike Crescent City, and Crescent City's

pharmacist-in-charge answered " yes" to the criminal history question on the

application without providing the required supplemental information.

Thereafter, Westbank filed a motion to supplement the administrative record,

seeking issuance of an order directing the Board to supplement the administrative

record on appeal with all omitted record materials, including all documents related

to the character and fitness ofany member of Crescent City. Particularly, Westbank

noted that Crescent City's application appears to indicate that Crescent City supplied

a supplemental document that might have contained the required information

regarding the pharmacist-in-charge's criminal history but that the mentioned

document is not a part of the administrative record. The Board supplemented the

administrative record with the information that was inadvertently omitted from the

record originally filed.

Following a hearing, the district court found that the Board abused its

discretion in awarding the tenth therapeutic pharmacy license to Crescent City when

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the Board did not consider its own criteria in the Region I-Solicitation 2-Evaluation

Criteria during its hearings, as there was no evidence that the award of the tenth

license was for an underserved parish, there was minimal evidence presented

regarding the proximity to previously approved or proposed marijuana pharmacies,

and no evidence was presented as to whether the patient population justifies the need

for a pharmacy in that area. Because ofthis lack of evidence, and the district court's

determination that the record lacked evidence these specific evaluation criteria were

considered by the Board, the district court further found that the Board's decision

was not supported by a preponderance of the evidence and was therefore, arbitrary

and capricious. As such, the district court signed an order reversing the December

15, 2022 final order of the Board, awarding the tenth therapeutic marijuana

pharmacy license to Crescent City and remanding the matter to the Board with

instructions to conduct a hearing within thirty days to consider all fourteen

pharmacies that were favorably reviewed by the Application Review Committee

with all the criteria set out pursuant to La. R.S. 40:1046, the Louisiana

Administrative Code Title 46:LIII, and the Board's Region I-Solicitation 2-

Evaluation Criteria.

The Board now appeals from the district court's judgment.

STANDARD OF REVIEW

The scope of review of administrative agencies in the performance of a

discretionary duty is restricted to a determination ofwhether the agency's action can

be deemed to have been unreasonable, arbitrary or capricious, or whether it

amounted to an abuse of power. Bowers v. Firefighter's Retirement System, 08-

1268, p. 4 (La. 3/17/09), 6 So. 3d 173, 176. " Arbitrary and capricious" means the

absence of a rational basis for the action taken. Bowers, 08-1268 at p. 4, 6 So. 3d at

176. If the evidence, as reasonably interpreted, supports the agency's

determinations, then the agency's decisions are accorded great weight and will not

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be reversed or modified in the absence of a clear showing that the administrative

action was arbitrary or capricious. United Healthcare Insurance Company v. State,

Division of Administration, 11-1398, p. 7 ( La. App. 1st Cir. 9/28/12), 103 So. 3d

1095, 1099. Furthermore, under the arbitrary and capricious standard, an agency

decision is entitled to deference in its interpretation of its own rules and regulations;

however, it is not entitled to deference in its interpretation of statutes and judicial

decisions. Bowers, 08-1268, pp. 4-5, 6 So. 3d at 176.

DISCUSSION

Louisiana Revised Statutes 40:1046(G)(l)(a) provides:

The Louisiana Board of Pharmacy shall develop an annual license for
a pharmacy to dispense recommended marijuana for therapeutic use
and, except as provided in Paragraph (3) of this Subsection, shall limit
the number oflicenses granted in the state to no more than ten licenses.
Except as provided in Subparagraph ( b) of this Paragraph, the board
shall award one license per region as delineated in Paragraph (2) of this
Subsection and one additional license to the region with the highest
population density as of August 1, 2022, and shall award each license
through a competitive process. The board shall consider the status of an
applicant as a minority-, woman-, or veteran- owned business as a
primary factor in awarding a license. [ Emphasis added.]

Additionally, La. R.S. 40:1046(C)(l) and ( 2)0) provide that the Board shall

adopt rules relating to therapeutic marijuana, which shall include rules related to the

licensure of dispensers of recommended therapeutic marijuana. The Board adopted

rules in conformity with its legislative mandate, which are found in LAC 46:LIII,

2440-2459. Louisiana Administrative Code 46: LIII, §2445 provides for the

marijuana pharmacy permit, which once issued, authorizes the operation of a

marijuana pharmacy. Section 2445 further provides for the issuance by the Board

of notice that it is accepting applications, the requirements for notice, and that an

award of a marijuana pharmacy permit shall be based on the criteria set out in the

notice of open applications.

Louisiana Administrative Code 46:LIII, §2447 sets forth procedures for

issuance of the pharmacy permit. According to Section 2447(13), a complete

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application shall be referred to the Committee, who will then conduct a hearing and

evaluate the application for the marijuana pharmacy permit by considering a myriad

of criteria listed therein, including but not limited to the character and fitness ofthe

owner's managing officer and pharmacist-in-charge and the location ofthe proposed

marijuana pharmacy, including its proximity to previously approved marijuana

pharmacies and whether the patient population in the area supports the proposed

pharmacy. Following the evaluation, the Committee shall compile a

recommendation for presentation to the Board at the Board's next meeting, and the

Board may accept the Committee's recommendation, select an alternative applicant,

reject all of the applicants, or return all the applicants to the Committee for its

reconsideration. LAC 46:LIII, §2447(14). The decision of the Board to award or

not award a marijuana pharmacy permit to an applicant shall be final. LAC 46:LIII,

2447(16).

In the instant case, the Board published " Therapeutic Marijuana Pharmacy

Solicitation 2" on August 4, 2022. The solicitation invited applications for a tenth

therapeutic marijuana pharmacy permit to be awarded to Region 1 and specified that

t] he Board shall consider the status of the applicant as a minority, woman, or

veteran-owned business as a primary factor in awarding a permit in accordance

with La. R.S. 40: 1046[( G)(J)}." The solicitation did not specify a preferred location

but noted that "[ t] he Board shall consider any unserved parishes within the region

when approving a satellite location or additional marijuana pharmacyfor licensure

in accordance with La. R.S. 40:1046[( G)(3)]( d)." Additionally, the solicitation

included some ofthe criteria set forth in LAC 46:LIII, §2447(13).

In the instant case, thirty applicants responded to the solicitation, and their

applications were evaluated by the Committee. Seven applicants, including

Westbank and Crescent City, were recommended by the Committee as being the

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most qualified for the Board's consideration. After considering the application

materials and exhibits, in addition to any testimony offered, the Board accepted the

recommendation of the Committee and awarded the tenth marijuana pharmacy

license to Crescent City.

From our review ofthe administrative record, we do not find that the Board's

decision to award the tenth marijuana pharmacy license to Crescent City was

arbitrary or capricious or otherwise amounted to an abuse of power. Crescent City

was recommended to the Board by the Committee as being one of seven applicants

most qualified for the Board's consideration. Furthermore, La. R.S.

40:1046( G)(l)(a) provides that the Board " shall consider the status of an applicant

as a minority-, woman-, or veteran- owned business as a primary factor in awarding

a license." ( Emphasis added.) Crescent City meets all three of these criteria. As

such, because the Board exercised its discretion to accept an applicant recommended

by the Committee as being qualified, and the applicant meets the primary statutory

criteria to be considered by the Board in awarding a license, we cannot say that the

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Board's decision was arbitrary and capricious.

Furthermore, we fail to find that La. R.S. 40: 1046(G)(3) applies to the instant

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Fourteen applications were considered by the Board, but only seven applicants were
recommended by the Committee.

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Westbank alleged that the Board was also arbitrary and capricious in awarding a license to an
applicant whose proposed location was 6.3 miles from an existing therapeutic marijuana pharmacy
in contravention of its own criteria and in awarding a license to an applicant whose pharmacist- in-
charge had answered " Yes" to the criminal history question on the application but who did not
submit the required supporting documentation. From our review of the administrative record, we
find both of these arguments to be without merit.

First, with regard to proximity, Westbank acknowledges that Crescent City's proposed
pharmacy location is further than the five-mile radius specified in the criteria. Additionally, with
regard to the criminal history information, Westbank acknowledged in its request for
supplementation of the record in the administrative review proceeding that this information
appeared to have been provided to the Board with the application, and the subsequent
supplementation of the record demonstrates that this information was provided with Crescent
City's application but was inadvertently omitted from the administrative record. As such, we find
both ofthese arguments to be without merit.

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case. Louisiana Revised Statutes 40: 1046(G )(3) provides:

3)(a) After three thousand five hundred active, qualified patients are
identified in the prescription monitoring program in a region, the
Louisiana Board of Pharmacy shall notify and allow the marijuana
pharmacy licensee in that region to open one additional marijuana
pharmacy location as a satellite location in that region. For the purposes
of this Paragraph, " satellite location" shall mean an additional
marijuana pharmacy location operated by a marijuana pharmacy
licensee within the licensee's geographic region but physically separate
from the location of the originally licensed therapeutic marijuana
pharmacy.

b) After seven thousand active, qualified patients are identified in the
prescription monitoring program in a region, the Louisiana Board of
Pharmacy shall notify and allow the marijuana pharmacy licensee in
that region to open one additional marijuana pharmacy location as a
second satellite location in that region.

c) The licensee shall submit an application to open a satellite location
provided for in this Paragraph no later than ninety days after receipt of
the notification sent by the Louisiana Board of Pharmacy pursuant to
Subparagraph ( b) of this Paragraph to inform the licensee of his
eligibility to open a satellite location. The satellite location shall be
operational within three hundred ten days of the approval of the
application by the Louisiana Board ofPharmacy. The Louisiana Board
of Pharmacy may grant additional time for the satellite location to
become operational due to a circumstance beyond the control of the
licensee. If a marijuana pharmacy licensee declines to open a satellite
location pursuant to Subparagraph (a) or (b) ofthis Paragraph, then the
Louisiana Board of Pharmacy may issue, pursuant to the provisions of
Paragraph ( 1) of this Subsection, an additional marijuana pharmacy
license in that region to open one marijuana pharmacy location in lieu
ofthe original licensee's satellite location in that region.

d) The board shall consider any unserved parishes within the region
when approving a satellite location or additional marijuana pharmacy
for licensure pursuant to this Paragraph.

e) For the purposes ofthis Paragraph, the active, qualified patient count
shall be conducted and reviewed on a quarterly basis using the
preceding three-month period.

In filing its petition for judicial review, Westbank alleged that the Board failed

to consider unserved parishes within Region 1 when approving the tenth marijuana

pharmacy permit as statutorily required by La. R.S. 40:1046(G)(3)(d) and as

referenced in the solicitation published by the Board. However, a plain reading of

Paragraph 3 indicates that it only applies when a marijuana pharmacy licensee in a

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region opens an additional marijuana pharmacy location as a satellite location, or in

the instance when the licensee declines to open a satellite location, the Board issues

an additional license in lieu ofthe original licensee's satellite location. Furthermore,

subparagraph ( d), providing for consideration of unserved parishes within a region,

specifically states such criteria shall be considered when approving a satellite

location or additional pharmacy for licensure pursuant to this Paragraph. The

issuance of the tenth marijuana pharmacy permit was pursuant La. R.S.

40:1046(0)(1) and not (G)(3).

Additionally, we do not find that the inclusion of the language of

subparagraph ( d) in the solicitation supports the conclusion that the consideration of

unserved parishes is statutorily required. As we have found, the plain language of

the statute is clear that the requirement that the Board consider any unserved parishes

within the region only applies to licenses issued pursuant to paragraph (G)(3), and

we owe no deference to the Board's interpretation of statutory law. See Bowers, 08-

1268, pp. 4-5, 6 So. 3d at 176.

Accordingly, after our review of the administrative record and applicable

statutory law, we find that the district court erred in finding that the Board acted

arbitrarily and capriciously in awarding the tenth therapeutic pharmacy license to

Crescent City.

CONCLUSION

For the foregoing reasons, we reverse the judgment of the district court and

reinstate the Louisiana Board ofPharmacy's December 15, 2022 order. All costs of

this appeal are assessed to Westbank Pharmacy ofBelle Chase, LLC.

DISTRICT COURT JUDGMENT REVERSED; LOUISIANA BOARD

OF PHARMACY' S DECEMBER 15, 2022 ORDER REINSTATED.

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