April 14, 2022

NM judge orders cannabis regulators, producer to agree on testing ‘regimen’

A New Mexico cannabis producer asked to halt a majority of its operations by the Cannabis Control Division after reports of mold is still barred from selling its cannabis flower, for at least another week.

In a hearing on Wednesday, Santa Fe state district judge Bryan Biedscheid ordered cannabis regulators and cannabis producer Sacred Garden to try and come up with an agreeable way to move forward in the ongoing case by the end of the day on Thursday. 

Biedscheid said he was not going to rule on a motion filed by Sacred Garden asking for an injunction to allow the company to continue selling dried cannabis flower. But Biedscheid did call on the state’s Regulation and Licensing Department and its Cannabis Control Division to actively work with Sacred Garden to come up with an acceptable testing “regimen” that can be completed by next week. 

“The department cannot continue to sit back. And this is the perception of this court, that it is sitting back and waiting for it to be presented, in some fashion, with results it finds satisfactory,” Biedscheid said. “It must take action to see that its concerns are addressed in a way that does not cause unnecessary delay, and other irrevocable harm to the plaintiff.”

The ongoing legal dispute stems from a cease and desist letter the Regulation and Licensing Department sent Sacred Garden just days before legal adult-use sales were to begin in New Mexico. The letter alleged that the department got a complaint from a medical cannabis patient about cannabis tainted with mold that reportedly came from Sacred Garden. That complaint appeared to spur an inspection of one of Sacred Garden’s facilities in Santa Fe, where compliance officers said they found a list of conditions that would create a threat to public health. 

Sacred Garden, in turn, filed a motion for a temporary restraining order and injunction, asking the court to order regulators to unfreeze the company’s access to BioTrack, the cannabis tracking software all New Mexico cannabis businesses are required to use.

Last week, Biedscheid ordered state regulators to allow Sacred Garden to sell any products that had been processed or manufactured in a way that would mitigate possible mold or fungus contaminations.   

But since last week, both parties filed additional responses. State regulators filed a response arguing that further tests of Sacred Garden’s cannabis flower products, done by two separate, state-approved labs, were not sufficient enough to allow Sacred Garden to resume sales of all products. Scepter Lab in Santa Fe conducted one batch of tests, but state regulators said those tests did not have BioTrack identification numbers and therefore, “there is no way of knowing from where the sample originated.” State cannabis regulators also argued that the Scepter Lab tests did not show specific results for general yeast and mold levels. While the initial tests that led to the partial shutdown of Sacred Garden showed higher than acceptable levels of CFUs or colony-forming units, Sacred Garden has continually challenged that test as the Cannabis Control Division no longer requires that test for cannabis producers.

Sacred Garden sent at least one other sample to Rio Grande Analytics, the only other state-approved cannabis testing lab. State regulators challenged those results, but out of befuddlement.   

“The discrepancy between the [colony forming units per gram] found by the State Laboratory and the [colony forming units per gram] found by Rio Grande Labs (sic) is extremely large, giving the Defendants pause,” Regulation and Licensing attorney Kevin Graham wrote last week in a response.

Rio Grande Analytics CEO Barry Dungan told NM Political Report that he is not sure why there would be such a discrepancy between tests, but said the state’s process may be different than Rio Grande Analytics’. 

“I am not sure what method was employed by the State Testing Lab, but there could be a difference in the methodology that gave significantly different results,” Dungan said. “Our microbial method has not changed for several years and has continuously been approved by the State.” 

Dungan said his lab is working on a new testing method in order to “target organisms of interest for microbial testing in an effort to rule out false-positive tests.”

Both hearings largely focused on what Sacred Garden needs to do to fully reopen. Last week, Graham seemed to imply that the Cannabis Control Division and the Regulation and Licensing Department would send a qualified inspector to revisit the Sacred Garden facility for another inspection as soon as the inspector was back from vacation. But during Wednesday’s hearing and in his written response, Graham said the state would require an industrial hygienist to do a more in-depth inspection than anyone at the Regulation and Licensing Department or the Cannabis Control Division is qualified to do. 

“Our staff were not satisfied with the testing protocols that were followed, because we couldn’t identify them,” Graham said on Wednesday, of the further tests Sacred Garden commissioned. “We didn’t know what the qualifications were, the people who conducted those tests, how the samples were drawn, or how that was performed, which is why we had requested an industrial hygienist be employed to conduct those tests, as opposed to potentially untrained, incapable individuals.”

David Foster, the attorney for Sacred Garden, argued during Wednesday’s hearing that state regulators seemed determined to never let Sacred Garden operate at full capacity. 

“What they’re requesting is completely unsubstantiated and unwarranted,” Foster said. “It’s almost like a moving goalpost and it seems likely they’ll never be able to achieve anything to the department’s satisfaction.”

In his response last week, Foster invoked a classic film to illustrate his point.

“[The Regulation and Licensing Department and the Cannabis Control Division’s] ‘standards’ are the reverse of the classic Godfather line regarding an ‘offer he can’t refuse,’” Foster wrote. “Defendants are demanding ‘standards’ that cannot be met in a practical, timely manner.”

Graham has maintained since last week’s hearing that the unspecified type of mold that was found was only one small part of the state’s decision to issue the cease and desist order, citing “visible mold” throughout the Sacred Garden facility and “general health and safety concerns of the facility, which in turn impact the safety and quality of cannabis produced there” in his response from last week. Graham’s response from last week also cited a number of things that needed to be remedied before the facility could fully reopen, including standing water “throughout the facility,” exposed insulation and employees not wearing gloves while handling cannabis products, among other issues. Graham said during Wednesday’s hearing that about 90 percent of the issues had been remedied, but that state regulators want to see the results of an air quality test before approving the reopening of the Sacred Garden facility in question. 

“We are talking about mold and spores here, Your Honor, they’re not limited to just what you can see on the wall, particularly when you have ventilation systems blowing up material throughout the facility,” Graham argued during Wednesday’s hearing. “So you could test any one inch of a pipe somewhere and have it come back perfectly clean and have the next 10 feet down that pipe be filthy.” 

Biedscheid said he understood the concern for public safety, but criticized state regulators for not articulating a clear path towards compliance. 

“Frankly, it sounds like it’s the logical equivalent of proving that Bigfoot doesn’t exist,” Biedscheid said. “I mean, they could always be behind another tree. You’re saying there could always be an invisible spore on a surface that has not been tested.”

The judge tasked both parties with coming up with an agreeable path forward. If Sacred Garden and state regulators cannot agree on an appropriate and timely way to further test the company’s products and facility, Biedscheid may schedule another hearing. Biedscheid ordered that the agreed-upon testing “regimen” must be completed by April 22, with results by April 25. If the Regulation and Licensing Department and the Cannabis Control Division do not approve Sacred Garden for reopening, Biedscheid said he would schedule another hearing to determine whether the potential denial is valid.