Pot grower’s claims against regulators go up in smoke

DENVER (CN) — Legal cannabis is one of Colorado’s most heavily regulated industries, with products tracked from seed to sale.

At least, that’s how it’s supposed to work. But despite strict state laws, the Colorado Marijuana Enforcement Division has failed to keep products made with illegal synthetic THC off store shelves, cultivator Mammoth Farms has argued in court.

In an order published Thursday night, a Denver judge sided with the state, dismissing a suit from Mammoth for lack of subject-matter jurisdiction.

That judge, Jill Dorancy, said that because Mammoth hadn’t formally requested rulemaking from the agency, its legal claims were barred under the Administrative Procedure Act. In a 7-page order, she said the suit “attempts to circumvent the process” for raising complaints against government agencies.

Housed under the state Department of Revenue, Colorado’s Marijuana Enforcement Division is tasked with regulating and collecting taxes from the Centennial State’s $1.4 billion cannabis industry.

Mammoth Farms, the state’s largest outdoor cannabis cultivator, sued in March, claiming the state agency was failing in its legal mandate to track marijuana plants from seed to sale.

The company criticized regulators for failing to implement a test for methylene chloride, a compound used to process legal hemp into illegal synthetic THC products that evade the state regulatory process and expose consumers to health risks. Due to what it calls lax regulation and enforcement, Mammoth argues cheap, synthetic pot is filling shelves at Colorado dispensaries, duping consumers and cutting into profits for law-abiding growers.

Based in Saguache 200 miles south of Denver, Mammoth is owned by Justin Trouard, a former intelligence agent for the U.S. Army. In 2017, he became a ganjapreneur.

Despite being the state’s biggest cultivator of marijuana, Trouard told the court last month that his sales have drastically shrunk.

When customers began asking him for stems and junk clippings, Trouard investigated. He says he personally discovered that producers were buying cheap byproducts to create a virtual product in the state’s tracking system, then using that paperwork to sell products with illegal synthetic THC.

When Trouard brought his concerns to the state, he argues regulators didn’t act quickly enough. He says they allowed some operators to keep their licenses even as they faced related criminal charges.

Although Mammoth’s attorneys cited several cases where environmental groups had been allowed to challenge government agencies for failing to act, Dorancy noted that those cases hinged on the agencies’ refusal to undergo a rulemaking process. This case was different: Mammoth had never requested one.

Despite lacking jurisdiction, Dorancy nevertheless left the door open for future review.

“While courts cannot imply limitations on powers extraneous to the required duties, they can ensure that agencies perform their statutory duties,” Dorancy wrote.

Mammoth is represented by Jean Gonnell of the Charlotte, North Carolina-based firm Troutman Pepper. Gonnell did not immediately respond to a request for comment.

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