Missouri Court Orders Officials To Award Marijuana Business Licenses Amid Application Scoring Flaws

*“The department’s scoring criteria and the scorers’ determinations were
based on the subjective valuations of the scorers. This fundamental flaw
infected the entire scoring process.”*

*By Rebecca Rivas, Missouri Independent*

A Missouri appeals court has delivered a sweeping rebuke of the state’s
marijuana licensing process, ordering regulators to award Hippos LLC 13
facility licenses after finding the 2019 scoring was inconsistent and, in
one case, performed by a grader whose qualifications were never established.

The unanimous ruling lands just weeks after a scathing state audit found
the same flaws—erratic scoring, poor documentation and a process so opaque
it cast doubt on the integrity of the results.

The decision, issued last week by the Missouri Court of Appeals Southern
District, does more than revive Hippos’s long-running challenge over denied
cultivation, manufacturing and dispensary licenses. It also undercuts the
methodology the Missouri Administrative Hearing Commission has used to
resolve cannabis licensing disputes and raises new questions about
potentially hundreds of rulings issued in the nearly 850 appeals filed by
unsuccessful applicants.

Lisa Cox, spokeswoman for the Missouri Department of Health and Senior
Services, which oversees the cannabis program, told The Independent the
agency is “evaluating all options,” in terms of appealing the decision.

Hippos officials could not be reached for comment.

When the Missouri Department of Health and Senior Services was working in
2019 to build the framework of the state’s now multi-billion dollar
industry, it hired Nevada-based company Wise Health Solutions to score the
nearly 2,000 applications.

“In each of Hippos’s applications, there were many instances in which
identical answers to the same question received inconsistent scores,” wrote
Judge Jeffrey Bates in the ruling. “That should never have occurred if
Wise’s scorers had followed the instructions that they were given. Neither
the department nor Wise did anything to correct this situation.”

Hippos’s lawsuit challenged the department’s denial applications for two
cultivation, six manufacturing and five dispensary licenses.

Their first stop for appealing the denied applications was with the
Administrative Hearing Commission, which attempted to rescore Hippos’
applications by picking the most common score for the questions the company
was challenging.

The three appellate judges felt the commission’s approach to rescoring
“completely flawed.”

“The raw scores provide no evidence of the scorers’ intent because there
are no notes explaining why the scores were given,” the ruling states. “The
conflict in these unexplained scores cannot be reconciled by simply
assuming the more common score for a particular answer is the correct one.”

The judges agreed with Hippos that the commission’s decisions affirming the
state’s denial of the company’s applications were “arbitrary, capricious
and unreasonable, and these decisions were not supported by competent and
substantial evidence on the whole record.”

They remanded the case back to the circuit court with directions that the
lower court order the department “to grant Hippos the cultivation,
manufacturing and dispensary facility licenses for which it applied.”
*No rebuttal*

A major blow in the state’s defense, the judges ruled, was that Hippos
provided two credible witnesses who testified the applications should have
received higher scores—and the judges felt the state didn’t fight back.

The experts were cannabis consultants who had collectively prepared 83
applications in Missouri, the ruling stated, and more than half of their
clients’ applications successfully received licenses.

“The department offered no rebuttal to Hippos’s expert testimony and
presented no other testimony showing why Hippos should not be given the
higher scores about which those experts testified,” the ruling states.

In the department’s response to State Auditor Scott Fitzpatrick’s report
released last month, it argued the commission did a “thorough review” of
the scoring evidence and heard from many experts during hundreds of appeals.

Cox said the Hippos case was among the first that the commission heard in
the process of reviewing the department’s licensing decisions.

“The information the Southern District is seeking—expert testimony
supporting the department’s position—has been provided in all subsequent
cases and supports the Administrative Hearing Commission’s determination in
the Hippos case,” she said in an email to The Independent.

The department’s audit response listed several cases where the commission
ruled in the department’s favor, and in at least one of the other
cases, the commission used the same methodology that the appeals court last
week deemed “flawed.”
*No notes, no evidence*

Hippos challenged the scores given on several questions in the application.

The court found it difficult to justify the scores without seeing any notes
on why the grader made them.

“After the commission concluded that it was required to re-score Hippos’s
applications due to the noted inconsistencies, the commission stated that
it was searching for any ‘evidence’ reflecting the scorers’ subjective
evaluation,” the ruling stated. “Obviously, any notes from a scorer about
his or her reasons for giving a particular score would have been helpful to
show consistency.”

Without any notes, the commission’s decision to use the old scores was
“guesswork,” the ruling states.

The lack of notes stems from an instruction in Wise’s training manual, the
ruling stated, pointing to the lines: “Don’t write anything that you don’t
want everybody to read. Past versions [something deleted] will be
discoverable[.] Adhere to this axiom: Say it and forget it; write it and
regret it.”

The manual reminded scorers that any emails, notes or other written
materials would be discoverable if any scores were challenged in court, the
ruling stated.

In the audit, Fitzpatrick also said these phrases and the lack of
note-taking were problematic. In response to the audit, the department said
that reading the sentences on their own “fails to consider this language in
the context of the rest of the training manual,” and the scorers were
encouraged to take notes.

In the lawsuit, Hippos also successfully challenged the credentials of the
scorer, which other cases have attempted to do before the commission and
failed.

The ruling stated that Wise was required to make sure each scorer had the
requisite experience and background to perform their assigned task. In the
case of the woman who scored the grades Hippos was challenging, “there is
nothing in the record to show that this requirement was met.” The woman
didn’t list or describe any experience or background in the cannabis
industry or in business evaluation or analysis, the ruling stated.

However, the department has argued that she’s a college professor with good
research skills throughout the case. In a 2024 brief, the department
pointed out that she also graded three other questions on Hippos
applications.

“Yet, Hippos does not criticize her scoring of those questions,” the brief states.
“That is because she awarded scores of 10 for each of them.”

The appeals court was unpersuaded.

The unanimous court ruling, taken together with Fitzpatrick’s audit, amount
to a devastating assessment on how Missouri awarded licenses that launched
its legal marijuana market. It also raises broader questions about other
cases in which the Administrative Hearing Commission relied on similar
methods to review disputed application scores.

“The commission correctly concluded that the department’s scoring criteria
and the scorers’ determinations were based on the subjective valuations of
the scorers,” the ruling states. “This fundamental flaw infected the entire
scoring process.”

*This story was first published by Missouri Independent.*

*Photo elements courtesy of rawpixel and Philip Steffan.*

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