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Matt Stern

Matt Stern, co-owner of Milan-based Stern Beverage Inc. and Nature's Treatment of Illinois, a medical marijuana dispensary in Milan, applied for one of Iowa's five cannabidiol dispensary licenses.

A Seattle-based company is preparing to operate a medical cannabidiol dispensary in Davenport while a Quad-City businessman continues to battle the state for a stake in the market.

Matt Stern of Nature’s Treatment of Iowa, or NTI, believes the Iowa Department of Public Health last month wrongfully rejected his firm’s application to run one of the state's five dispensaries. Health department officials say NTI failed to show in its application evidence it had begun the registration process with the Iowa Secretary of State's office by March 8, the deadline for dispensary applications. The health department tossed out NTI's application — before scoring it and the other 20 dispensary applications — during the technical review stage.

Both parties and their attorneys presented their cases last Thursday during a 3½-hour telephone hearing with Administrative Law Judge Kathleen O'Neill of the Iowa Department of Inspections and Appeals. If she rules that NTI's application was improperly rejected, the health department's team of reviewers will need to score the application.

Checking for evidence

Stern, of Rock Island, testified he delivered his application materials shortly before 1 p.m. Thursday, March 8, and remained in Des Moines most of the afternoon in case any issues arose. 

Sarah Reisetter, the deputy health director, testified she completed the technical review of NTI's application between 4-5 p.m. that day. NTI did not include in its application a file-stamped copy of its certificate of organization, which would have served as sufficient evidence it had begun the registration process. "They failed to follow the basic instructions of the RFP (request for proposal)," she said. 

When Reisetter noticed a lack of evidence that verified NTI's registration, she contacted a former colleague in the Secretary of State's office to "determine whether those documents had been filed," she said. "He called me back and indicated that he was unable to find any evidence that they had paperwork sitting in a queue to be processed."

Moline attorney James Zmuda, who is representing Stern and NTI, contended Reisetter could have contacted his client March 8. "He (Stern) would've immediately gone to the Iowa Secretary of State's office and expedited the filing process," Zmuda continued. "He was deprived of that opportunity because he was told he was 'good to go.'"

Assistant Attorney General Heather Adams, who is representing the health department, said, "Clearly the drop off did not constitute technical review." 

'This is not fair'

Stern previously secured three acres of vacant land off U.S. 61 in Eldridge for a 2,500-square-foot dispensary.

His team submitted its certificate of organization to the Secretary of State’s office on March 7, according to court documents. However, it was not filed until March 14, when NTI became a limited liability company in Iowa, according to the Secretary of State's website. Stern received the state's rejection letter March 14, and he immediately appealed the state agency's decision.

Following the health department's March 27 announcement of the five dispensary license recipients, Stern's attorneys filed an injunction request in Polk County District Court, which sought to stop the state from issuing the Davenport license. A Polk County District Court judge on March 28 denied the request, and two days later, the Iowa Supreme Court denied NTI's request to hear its appeal.

Stern, who owns a medical cannabis dispensary in Milan called Nature's Treatment of Illinois, partnered with an investment group that applied last year for a medical marijuana dispensary license in Arkansas. 

During his testimony last week, Stern pleaded with Administrative Law Judge O'Neill for his application to be scored, calling NTI "the most qualified candidate here to help the people that need help in Iowa."

"I don't want to go to court," he later said. "I don't want to spend the money, but we've got to be real here, this is not fair."

Meanwhile, Have a Heart Compassion Care, a cannabis retailer with six locations in Washington, now has the Davenport license in hand, a company representative confirmed. The business plans to renovate the former Kelly’s Irish Pub & Eatery on the west end of a retail strip center at 2222 E. 53rd St., Davenport. Have a Heart, which is expanding to California, Hawaii and Oregon, also was selected to open a dispensary in Council Bluffs.

"Clearly patients in this region will be well served by that applicant," Assistant Attorney General Adams said, "And we are not looking at a situation where the public interest required the department to consider NTI's application." 

What's next?

Administrative Law Judge O'Neill has 30 days to issue her decision. 

"It won't be a quick one-page ruling," she said at the end of the hearing. "I will certainly strive to get this out quickly. I just don’t have any guarantees at this point when that will be."

Other dispensaries will be located in the Des Moines suburb of Windsor Heights, Sioux City and Waterloo.

MedPharm Iowa, chosen Dec. 1, 2017, as the state’s only medical cannabidiol manufacturer, must begin supplying dispensaries no later than Dec. 1, 2018, the same date dispensaries must begin selling product. The health department announced last week it is seeking a second manufacturer, which will be licensed this summer and will be required to have products available no later than July 1, 2019.

Iowa law allows license holders to sell cannabidiol, or CBD, that has a tetrahydrocannabinol, or THC, content of up to 3 percent. THC is the plant’s main psychoactive component that produces a “high.” The state expanded its medical cannabidiol law in 2017 to allow for use beyond chronic epilepsy to illnesses including cancer, multiple sclerosis, AIDs or HIV and others.

As of April 12, a total of 358 patients and caregivers had been issued cards to purchase product, according to the health department.

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Jack Cullen covers health and the outdoors for the Quad-City Times.