Natural Medical, Inc. v. New Jersey Dep’t of Health & Human Services, 428 N.J. Super. 259 (App. Div. 2012). This decision, written by Judge Parrillo, involved plaintiff’s interest in opening an alternative treatment center to cultivate and distribute marijuana pursuant to the New Jersey Compassionate Use Medical Marijuana Act, N.J.S.A. 24:6I-1 to -16 (“the Act”). Plaintiff, a for-profit entity, did not apply for a permit to operate a center because defendant, the Department of Health & Human Services (“Department”) had declared that, at least initially, when plaintiff would have applied, only non-profit facilities would receive permits. Moreover, the Department determined that only six centers would be permitted statewide. That was the minimum number that the Legislature required in the Act.
The Act expressly provides that denial of a permit application is a final decision that is appealable to the Appellate Division as of right. But plaintiff did not file an application so, therefore, there was no denial of an application. Despite that, Judge Parrillo held that the circumstances here were “the virtual equivalent of a definitive, final agency decision of denial and therefore reviewable by us.” This was because the Department had made clear that applications from for-profit entities would not be accepted at that point. This is the sort of “agency inaction” that is immediately appealable. That decision was buttressed by the fact that the issue necessarily implicated the public interest, involving as it did the implementation of the Act, and was a pure question of law that could be decided promptly. As a result, the panel reached the merits.
Plaintiff’s argument was based on language of the Act stating that the Department “shall” issue a permit to applicants. But Judge Parrillo noted that “shall” is not always mandatory. “[I]t has been construed on occasion as directory, suggestive or instructive, rather than imperative, where it relates to the form and manner in which the law is to be carried out and more clearly implements legislative intent.” Here, the Act’s language, “considered in full, does not allow for automatic licensure.” That same provision qualified the “shall issue” language by saying that the Department must find that issuance of a permit “would be consistent with the purposes of this Act.” Another section expressed the Legislature’s intent that to ensure a sufficient number of centers “pursuant to need.”
As a result, the Department did not have to approve every applicant. Instead, under the deferential standard of review attendant to judicial review of agency actions, Judge Parrillo found that plaintiff had not shown anything arbitrary or unreasonable in the Department’s decision to limit the number of centers to the statutory minimum, especially since no one yet knew how many registered qualifying patients there would be within New Jersey as the Act became effective. The Act itself required the Department to evaluate, as time passed, whether the number of centers should be changed. This need to be “flexible and responsive to changing conditions” was precisely the type of discretionary agency decision to which courts will strongly defer.