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Local Approval Process Of Marijuana Businesses A ‘Nightmare’ That Could Get Worse

October 8, 2019

How local governments decide who can operate medical pot shops in their jurisdictions has been described as a “nightmare” that has spurred litigation, and some believe it’s only going to get worse once the state’s recreational marijuana market comes online.

While the medical marijuana law is silent on how locals should go about evaluating applicants, the recreational marijuana initiative approved by voters last year requires a competitive process to select applicants.

“That’s just going to continue to lead to litigation on these positions, I have absolutely no doubt about that because the . . . competition for provisioning center locations in particular is just incredibly fierce right now,” said R. Lance Boldrey, the cannabis law practice leader for Dykema in Lansing, who called locals setting and scoring the criteria for marijuana business applicants a “nightmare.”

Under the state’s medical marijuana facility law, local governments must actively opt in to allowing facilities, and once they do they can determine what types of facilities they want and set caps on those facilities.

In the recreational law, municipalities must actively opt out. But in both cases, while the state issues the license, that’s still predicated on the local government giving the all-clear. 

And for local governments that have adopted the practice of scoring applicants and making determinations that way, it’s led some to some objections from the marijuana business applicants. 

For instance, if five applicants apply for three available licenses, the applicant who missed it by one point could object to the fairness of the process, said Kalamazoo city attorney Clyde Robinson.

“How does one put in an objective system that somebody is not going to challenge?” Robinson asked.

In Lansing, the Lansing State Journal (LSJ) reported in September 2018 that City Clerk Chris Swope hadn’t been able to issue licenses to dispensaries because the appeals for the rejected applicants wasn’t complete yet.

The newspaper reported the city’s ordinance only allowed 20 licenses at first, based on the 20 highest scores under the “city’s detailed evaluation system.” At the time, Swope said he couldn’t determine the 20 highest scores because 25 applicants hadn’t exhausted their appeals. 

And Lansing had been holding off on granting licenses while appeals were ongoing because of a civil case filed by a prospective dispensary objecting to the “capricious” denial of its license, according to the LSJ in November 2018.

Over in Warren, the city is facing at least three lawsuits in Macomb County Circuit Court over its handling of medical marijuana facility licenses, according to a September 19 article from C&G Newspapers’ Warren Weekly. 

The publication reported Sept. 24 the city had been blocked by a judge from issuing medical marijuana licenses “pending further examination of the methodology used to score applications.” 

An attorney representing one of the applicants accused a city council member of applying a “subjective” pass/fail system rather than going with the “objective” 17 factors in Warren’s ordinance, according to the Warren Weekly.

And even Iron Mountain, which Boldrey said he thinks has a “very clear scoring rubric,” is facing litigation over its criteria. 

Boldrey said locals lack the expertise to design and implement scoring systems. Sometimes it comes down to someone in the clerk’s office trying to weigh all the factors, which include job creation, proximity to schools and churches and investment level, among others.

“We’ve seen . . . continuing problems with municipalities applying selection criteria because they just don’t have the in-house expertise to . . . really judge the merits of applications,” he said.

Robinson sees potential trouble ahead because of the recreational law’s requirement of a “competitive” process, which he said “eschewed” the blind draw option that’s worked well for his municipality. He said using a blind draw – with Lottery-style ping-pong balls – has put applicants on a level playing field and has helped the city avoid litigation.

Robin Schneider, executive director of the Michigan Cannabis Industry Association (MCIA), said the recreational law doesn’t “prohibit a lottery” and that the competitive process was included to encourage locals to do that instead of “the exclusionary zoning practices we’ve seen in the past.”

Schneider continued, “In the past we’ve seen an attempt to use zoning as a way to limit the number of facilities and many of the drafters felt that was not in good practice. I’m not sure if the competitive process will create more litigation but I’ve also seen a lot of litigation over zoning issues.”

As for how to fix the issue, Boldrey urged locals to adopt as objective of criteria as possible. Robinson suggested a softening of the competitive process language, but any amendment to the voter-approved initiative would take a three-fourths vote in both legislative chambers.

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