July 8 2018 10:45 AM

Does Lansing City Clerk Chris Swope have a right to be wrong?

Lawsuit rattles Lansing’s marijuana market

Does Lansing City Clerk Chris Swope have a right to be wrong?

City officials argued he does in an ongoing lawsuit that threatens to upend Lansing’s medical marijuana industry, potentially forcing all of the city’s pot shops to close as early as later this month. And an important ruling expected from Ingham County Circuit Court Judge James Jamo could resolve the case next week.

Let Lansing Vote — a state-registered ballot committee representing an unnamed number of would-be marijuana dispensaries — last year filed a lawsuit that aims to strike down the city’s 2017 ordinance that many claimed to be overly restrictive in an industry pegged to generate millions of dollars for the state capital.

Swope last year threw out Let Lansing Vote petitions that challenged the ordinance, not because the signatures were invalid but because he contended the petitions’ circulator had erred in filling out the paperwork.

Jamo must now decide what (if any) mistakes were made and whether the issue can find its place on the ballot.

But some said a ruling to revoke the ordinance would ultimately eliminate the only remaining legal mechanism that allows marijuana-related businesses to set up shop within city limits. Both sides suggested compromise could be possible but agreed Lansing’s medical marijuana industry is off to a largely uncertain start.

The city essentially cobbled together an ordinance “that’s favorable to millionaire carpetbaggers who are trying to put these local residents out of business,” said attorney Bob Baldori. “These are the mom-and-pop shops that have been involved with the business since the very beginning. They’re being muscled out by big money.”

City Council members in October narrowly passed an ordinance that enacted a state-mandated licensing framework for up to 25 dispensaries within city limits. Swope was ultimately tasked with selecting which ones.

Swope and Mayor Andy Schor couldn’t be sure how the prior City Council landed on the figure, but both suggested the market needed to be capped. Local residents complained about the high concentration of provisioning centers near their neighborhoods. And many shops operated in “shoddy” conditions, Swope said.

“It’s probably the most fair way if you’re going to put a cap on it, but it’s a difficult situation,” Swope added.

Applicants were given a December deadline to enter into a point-based scoring system or face closure. An outside firm was hired to judge each business plan. Key factors like safety regulations, quality standards, business experience, job creation and capital investment allowed the best shops to float to the top of the pool, Swope said.

Baldori, however, argued the ordinance gives preferential treatment to mostly out-ofstate investors with money to blow. Lansing — with a population of about 116,000 residents and the potential to expand commerce into the surrounding region — is drastically underserved with so few provisioning centers, he suggested. As many as 80 had operated in Lansing last year.

“This is capitalism,” Baldori said. “Let these people go. Let these entrepreneurs conduct their business.”

Baldori said the city’s ordinance reflects a “reefer madness” mentality in its regulation of the medical marijuana market, at times watching weed with a closer eye than alcohol. Let Lansing Vote was formed to circulate a petition to nullify the regulation. Baldori said the lawsuit was only filed after Swope overstepped his bounds.

Thousands signed a petition to overthrow the ordinance, but Swope — using his perceived right to use his own discretion — ruled hundreds invalid and enacted the regulations regardless. A debate over the discounted signatures for months brewed into a contentious legal battle as the industry tries to maintain its heartbeat.

Baldori estimated the city has spent up to $100,000 in defense of the lawsuit. Swope said he couldn’t be sure. Multiple calls to City Attorney Jim Smiertka were not returned. A Freedom of Information Act request that sought clarification on the financials was not immediately returned to City Pulse by Monday.

“I don’t know where their interests lie when they’re spending taxpayer dollars like that,” Baldori added.

Let Lansing Vote argued Swope erred when he opted to toss out more than 40 percent of the 6,730 signatures submitted with their petition. Swope said inaccuracies filed by the circulators who collected the names ultimately invalidated the initiative, nudging it just below the threshold needed to bring the issue to a vote.

The lawsuit — after months of legal motions, court hearings and combative dispositions — now rests squarely on 226 signatures collected by Missouri circulator Vince Ivory. Court records state he listed “St. Louis City” as his county of registration when he submitted the forms. And Swope didn’t consider that a valid response.

The form clearly required Ivory to list a county — not a city — in the space provided, Swope said. St. Louis, however, is an independent city. Officials there said it holds no allegiance to a particular county. The city instead functions within its own jurisdiction. Voters there register for elections through city offices, for example.

Swope said he didn’t know that information at the time but still questioned the legal validity of the maneuver. St. Louis residents — and those who live in one of 38 independent cities scattered across Virginia — could be simply ineligible to submit these types of petitions, he suggested. He doesn’t know.

He’s not a lawyer, he added.

“There’s no clear answer,” Swope maintained. “I don’t think it’s ever been litigated.”

“This case may clear it up,” he said. City officials — even if they did fumble Ivory’s petition — said they are unable (or perhaps unwilling) to correct the mistake. Schor said the lawsuit is about the ability of Swope to use his own discretion to determine which citizen-driven petitions are valid. Attorneys have argued Swope has an unequivocal “right to be wrong.”

“Frankly it’s not relevant because, again, discretion implies the right to be wrong,” said Deputy City Attorney Heather Sumner, according to courtroom transcripts. “The clerk used his discretion to make a determination. Regardless of the answer, discretion implies the right to be wrong.”

Schor also maintained a successful lawsuit from Let Lansing Vote could fundamentally reshape the way the city enforces medical marijuana. State law requires local municipalities — like Lansing — to enact their own regulations both for state revenue sharing and for dispensaries to fully complete the licensing process.

The entire industry — at least temporarily — would need to be shut down until another ordinance can be put in place to legally allow for its operation, Schor said. The City Council could eventually be ordered to revisit the ordinance if the lawsuit succeeds, but no market is better than a broken one, Baldori contended.

“It’s up to them,” Baldori added. “They made a mistake here. They’ve got a lot of choices on how to go about fixing it. If they want to be spiteful, they could get to the point to where there is no ordinance. That wouldn’t make any sense to me.”

“They could fix this in one day, but they could insist on shutting down the business,” Baldori added.

The potential interruption would also inevitably divert funding that could have otherwise landed in city coffers, officials said. The regulatory structure alone — with nearly 130 businesses vying for a limited number of licenses — has already collected at least $650,000 in application fees that could soon need to be refunded.

Schor said medical marijuana businesses that applied for a dispensary license and paid the $5,000 application fee were allowed to continue operations until a final determination could be made. Many have since been denied and received only a 50 percent refund for their time, he said. None have been formally approved.

Swope said most of the provisioning center applications arrived during the week of the deadline and funneled some $400,000 to the Clerk’s Office in a single day. Additional revenue was generated from tickets issued to those who continued to operate shops without an application or after they were formally denied.

But the added cashflow was matched by an overwhelming amount of busywork, officials said.

Swope’s office was forced to hire a full-time employee to help oversee the application process, he said. Weekly meetings with attorneys and other departmental leaders have kept the office on overload. The city has also paid nearly $80,000 to a consulting firm tasked with processing business plans for would-be dispensaries.

“This is a bigger task,” Swope added. “We had no idea.”

Many dispensary applicants — like Mike Barron and his wife, Chelsey, of GotMeds — argued the licensing process is far too restrictive. He said most local shops that opened before the ordinance took effect were forced to make “educated guesses” on the city’s unfamiliar scoring system. Barron just wants the market to grow.

“We feel like they’re spending our own money against us,” Mike Barron said. “When this is all said and done and the pennies are all added up, I think the public is going to be blown away. The city is going to have to negotiate and listen to us. If we have to run this petition back again and again and again, we will.”

Jamo is scheduled to hear a motion for summary disposition from Let Lansing Vote on Wednesday. Barron and other local entrepreneurs said his ruling will help chart the course for the uncertain future of Lansing’s burgeoning medical marijuana business.

Both sides, however, appeared willing to resolve the issue before it lands in Jamo’s courtroom. Baldori said Let Lansing Vote is “ready to talk” about a settlement. Schor said he’s open to the conversation but is unsure what sort of deal could be struck beforehand.

“We’re always open to sit and have that conversation,” Schor added.

Swope is cautiously optimistic but recognizes recreationally legalized marijuana could again change the game. An initiative

to legalize the possession of and sale of certain amounts of marijuana is slated to make its way onto the statewide ballot on Nov. 6. The state would then be required to institute yet another licensing system for its regulation.

“Lansing should have a well-regulated medical marijuana industry,” Swope said. “It’s not unexpected to have these different elements moving in and out of this industry. It’s possible they could all be forced to shut down. Then we have this vote on the state ballot for recreational use. … That could change the whole thing.”

Visit lansingcitypulse.com for continued coverage of Let Lansing Vote’s lawsuit as the case proceeds.

kyle@lansingcitypulse.com