A three-judge appellate court panel heard arguments Tuesday in a case that has stalled the expansion of the New Jersey’s burdened medical marijuana program.

But the court must still issue a decision before the state can reopen its review of licenses that a lawsuit put on hold in late 2019.

The case involves eight rejected medical marijuana applicants from a round of licensing the Department of Health opened in 2019. The applicants in question lost out due to technical issues with their applications or because they had insufficient documents to show the town they wished to operate in approved of the business.

But they argue the department incorrectly rejected their applications during its first round of cuts and should reconsider them along with 146 others still in the running.

“The entire purpose of this undertaking is to ensure a merit-based review so that the best and most qualified applicants are awarded licenses to serve the patient population,” Joshua Bauchner, one of the attorneys representing the appellants, said during the hearing, which was held remotely.

“There is no reason to disavow that undertaking. These applications should be scored along with the rest so that the best candidates are awarded licenses and we can proceed.”

More than 190 groups applied for 24 licenses in the summer of 2019. The licenses ranged from large operations to grow, process and dispense marijuana down to smaller businesses that would only grow or dispense marijuana to patients.

The licenses are vital not only to the 100,000 medical marijuana patients in the state who have long complained of product shortages and long lines, but to increase the amount of marijuana in New Jersey and launch a legal marijuana industry once Gov. Phil Murphy signs a bill into law.

The state eliminated 51 applicants during its first round of reviews for licenses in 2019. But several of those took issue with the decision, claiming they were denied simply because the department could not open PDFs attached to their applications.

They have called on the department to reopen their applications, but the state has declined to do so. Instead, an appellate court put the entire process on hold and stranded some 146 other applicants in limbo as those who were rejected awaited their day in court.

Fifteen groups submitted applications with corrupt files, and attorneys Tuesday argued that was a large enough proportion to indicate the technical issue lies with the department, not the filers.

But the health department disagreed. Assistant Attorney General Jacqueline D’Alessandro, who represented the department Tuesday, said an investigation revealed the state was not at fault, and noted that the vast majority of applicants had no problems with their submissions.

“Once this issue was discovered, the department took steps,” she said.

“After investigation, it reasonably concluded the issues did not lie with the department,” she said. “If there was some common compression or corruption problem, most, if not all, applicants would have had this issue.”

But Bauchner argued there was no proof the corruption had occurred on the applicants’ part, as they had taken PDFs from the state and submitted them to the health department.

It’s not the first time the health department has faced legal challenges to its licensing process. Another group of rejected applicants sued over a 2018 licensing round, arguing the scoring methods for selecting six license winners lacked a clear methodology.

A court ruled in November that the health department must change its “unreasonable” system for awarding licenses and offer more transparency going forward.

The appellants argued that point Tuesday, calling the second case “deja vu.”

Throughout the delays, Bauchner has said the applicants would resubmit their materials in a different format if given the chance by the health department. He has said the department could have asked for that at any point, avoiding the year-long delay.

“No one knew there were any problems during the submission process,” he said. “We only learned there were problems three months later.”