The Arkansas Supreme Court has dismissed a lawsuit filed by a Eureka Springs company that argued it was improperly denied a license to operate a medical marijuana dispensary.

Carroll County Holdings Inc., doing business as Eureka Green, filed suit in June 2020 against the Arkansas Department of Finance and Administration, the Arkansas Alcoholic Beverage Control Division and the Arkansas Medical Marijuana Commission. The medical marijuana commission reviewed and scored applications for dispensaries in eight zones of the state, then awarded licenses for four dispensaries in each zone. Eureka Green was the fifth highest-scoring applicant in Zone 1 but was not awarded a license.

According to the lawsuit, Eureka Green received a refund of half its $7,500 application fee. The suit says the defendants “arbitrarily refunded money to (applicants) without a basis in law for doing so,” then disqualified them from consideration for receiving a license should one of the four licensees in a particular zone fail to fulfill the requirements.

“Eureka Green was told that they were no longer a successful and unselected applicant to be held in reserve as eligible for consideration, and instead told that their application was denied as withdrawn,” the lawsuit said, adding that “Eureka Green did not ever and has not withdrawn its application.”

The lawsuit, originally filed in Pulaski County in June 2020, was transferred to Carroll County Circuit Court less than two weeks later.

The defendants moved in July 2020 to have the case returned to Pulaski County. Carroll County Circuit Judge Scott Jackson denied that motion but later reconsidered after the defendants filed another motion citing a venue-transfer provision enacted by the state legislature in 2017.

After the case was returned to Pulaski County, a circuit judge there denied a defense motion to dismiss the case. On appeal, however, the state Supreme Court reversed that decision on June 2 and ordered the case’s dismissal.

In a majority opinion, Justice Barbara Webb writes that neither the circuit court nor the state Supreme Court had the jurisdiction to reverse the medical marijuana commission’s decision based on Eureka Green’s lawsuit because the suit didn’t challenge the “applicability” of any rule nor seek a declaration regarding whether other rules should have applied.

In a dissenting opinion, Justice Courtney Rae Hudson writes that the court’s decision is inconsistent with its ruling in a similar case in 2020 involving an application for a medical marijuana cultivation license. Hudson chided the medical marijuana commission for failing to follow the model-rules requirement of the state’s Administrative Procedure Act — the law governing procedures for state administrative agencies to propose and issue regulations.

“Undoubtedly, medical marijuana is big business in our state, and recreational marijuana may be in the offing,” Hudson writes. “Arkansas medical marijuana sales reportedly totaled almost $265 million in 2021. Those sales are subject to heavy taxation that generates substantial tax revenue. By neglecting its duty to adopt adequate rules, the MMC is abdicating its duty to properly regulate this exploding industry. The MMC must adopt clear and necessary rules to allow for a level playing field, and we should not excuse its failure to do so. In the meantime, Eureka Green deserves more than a cursory dismissal of its complaint.”

In May, the commission approved a request from Osage Creek Dispensary, owned by Berryville resident Jay Trulove, to transfer from its location in Fayetteville to 101 E. Van Buren near downtown Eureka Springs.