July 26 2018 10:31 AM

New suit causes city clerk to tap breaks on licensing


State officials earlier this month granted operational approval for four medical marijuana-related enterprises, including Lansing-based Capital Transport, a secure transporter with plans to set up shop on Rensen Street. The nod from the Michigan Marijuana Licensing Board was the first and only directed toward the state capital.

But managing partner Michael Pedrosi — stuck in a sort of legal limbo — has no plans to open his doors until the state greenlights additional licenses. And another lawsuit recently filed against city officials could continue to delay other local licenses while City Clerk Chris Swope wades through a lengthy list of outstanding applications.

“We’re waiting for the industry,” Pedrosi added. “We literally just have to start up the vans.”

State law mandates dispensaries and cultivators use a third-party transport company to legally shuffle their products from facility to facility. Pedrosi was the first of his kind to receive approval from the state, but his business represents only one of two compliance functions required for the industry to get off the ground.

Although state officials have made progress on several applications in different sectors of the market regulators have yet to issue a single operating license for a safety compliance facility. And those testing laboratories are also required to ensure entrepreneurs are peddling safe and secure strands into the hands of their ailing consumers.

Pedrosi could technically open tomorrow, but nobody is legally authorized to test the weed he wants to haul. Capital Transport is aimed at a statewide market but the absence of provisioning center and processor licenses from the city also means he’ll have no local partners regardless of how quickly the state can kick it into gear.

“It’s such a new process, you kind of just have to go with it,” Pedrosi said. “We didn’t mess around. We went full bore at this thing and really put it into overdrive. It was our goal to be the first license in the state. But you need a full supply chain to operate under the statute as its written. You need those compliance sectors.”

State officials expect at least one safety compliance facility will be approved for a license at the board’s Aug. 9 meeting, said Licensing and Regulatory Affairs spokesman David Harns. But any of the businesses recently approved for a license prior to that decision are warned to proceed with caution under the new guidelines.

Approved businesses can continue to operate under emergency rules enacted months ago by the state, but they’ll soon be required to have their products tested once they pay the $48,000 fee to activate their licenses. “Basically everyone” has chosen to operate under those emergency rules to maintain their business operations, Harns said.

“Everyone is so anxious because everyone is excited,” Pedrosi added. “It’s a brand new industry.”

But the market in Lansing has all but ground to a halt while Swope continues to pore over stacks of license applications. Fourteen cultivators, one safety compliance facility and Capital Transport are the only businesses to receive approval from Swope’s office. Dozens of dispensaries and processors have yet to receive his blessing.

State law mandates approval from both the state and a local municipality before a business can operate. But Swope said it “might not be possible” for him to approve those licenses until those who have already been denied have a chance to fight his decision through an administrative appeal. And those could take months.

“We’re steadily moving forward,” Swope said, noting he has no timeframe for when others will be approved.

Officials at Seman Consulting Services Inc. earlier this month filed a lawsuit against the city seeking more than $25,000 in damages after their dispensary — identified as Green Crush in city records — was denied a provisioning center license for a shop on Pennsylvania Avenue. They’re currently pursuing an appeal.

Swope said the lawsuit — which argues the city made an “arbitrary” and “capricious” decision based on a “whimsical” scoring methodology — could toss another wrench into an already convoluted process. The city’s ordinance allows for 25 pot shops, slots that Swope is hesitant to fill until numerous appeals have concluded.

“It puts us in a weird situation,” Swope added. “I’m trying to figure out if we can come up with some number (of licenses) that we can issue that still keeps the door open for these people who might win on an appeal.”

Multiple attempts to contact Seman President Renee Seman and the company’s attorney, Jim Kelly, were unsuccessful.

Messages left with City Attorney Jim Smiertka, much like the last time the city was sued, were not returned.

A Freedom of Information Request filed with city officials showed they spent more than $20,000 to defend against a recently dismissed lawsuit from Let Lansing Vote, but the figure didn’t account for the salaries paid to Smiertka and others within his office who defended the legality of the city’s medical marijuana ordinance.

Other early birds to the marijuana market are gearing up for business following partial approval but ongoing delays in the licensing process have thrust them into legal uncertainty while the rest of the industry catches up.

Officials at Green Peak Innovations were recently given preliminary licensing approval from the state for 12 cultivator facilities, one processor and 19 more for dispensaries. They aim to operate a growing facility and three provisioning centers in Lansing but the absence of local approval creates a temporary obstacle to those plans.

Greenpeak CEO Jeff Radway isn’t deterred as he looks to snatch up real estate around the city and construction continues at his headquarters within a 131-acre marijuana business park off Creyts Road. Radway said the facility will also handle his research and development efforts. He listed plans to hire up to 170 local residents.

“Our view of both the Lansing and the state process is that it’s rigorous,” Radway said. “And it should be. It’s more important for regulators and lawmakers to get it right than it is to do it quickly. At this point, our team is solely focused on bringing our facilities up to speed and to remain compliant.”

Others are less than hopeful. The entrepreneur behind one medical marijuana-related facility that was already approved by Swope’s office is contemplating cutting his losses as the wait continues for the state to issue its licenses. He spoke about the uncertain future to City Pulse only under the condition he remain anonymous.

The licensing board has been known to be “really judgmental” to outspoken critics of the process, he added. And he said the state — and Lansing — could be lagging behind in an industry pegged to generate millions.

“Michigan has become this sort of wildcard and we’re considering pulling out of the state altogether,” he added. “Until we have a clear picture of where everybody going, it’s tough to make good business decisions and we want to make sure the market is growing. We need a robust market to really support this operation.”

The city earlier this month filed a motion to toss out Seman’s lawsuit. Smiertka argued the company’s request for court-ordered relief flies in the face of state law and was “merely an attempt to circumvent” the city’s ordinance to remain open, court records state. Judge James Jamo could make a decision at a hearing on Sept.5.

Visit lansingcitypulse.com for previous and continued coverage of the city’s burgeoning medical marijuana market as the lawsuit proceeds in 30th Circuit Court. Industry professionals who care to share their perspectives on the topic are encouraged to contact the author of this story via email or by phone at 517-999-6715.