Nov. 28 2018 12:08 AM

City considers dropping lawsuit against state

WEDNESDAY, NOV. 28 — Ten dispensaries in Lansing are one step closer to state-level licensure after local officials reinterpreted a court order and granted them conditional approval to sell medical marijuana in the city.


The announcement arrived yesterday more than a year after the contentious application process began. City Clerk Chris Swope said the long-awaited batch of local approvals ultimately allows applicants to pursue state licensure, will enhance patient access to medicinal bud and served as “definitely a relief” for him and his office.


“It just feels good to be able to move forward with the process,” Swope added.


Included on the list are at least a few dispensaries that have been temporarily operating for months. Others are still vacant storefronts. None of them have yet been considered for a license by the state’s Medical Marihuana Licensing Board, but Swope said his recent conditional go-ahead opens the door for the upcoming opportunity.


Medical pot shops need approval from both the state and its local municipality to permanently operate. Of the 85 dispensary applications filed with the city, 15 still remain pending. Three have been withdrawn. Another 57 have been denied, but 19 of those applicants are either appealing or still have the option to do so, Swope said.


Dispensaries in Lansing — prior to yesterday — have been stuck in a sort of regulatory stalemate, as dozens of denied applicants appealed for a license. Only 20 dispensaries are initially allowed within city limits under the existing ordinance. Five more could be peppered into the mix by a second round of applications next year.


Swope repeatedly maintained that his office couldn’t grant any licenses until each of the ongoing appeals reach a conclusion. If those denials are reversed, the applicants would need to be able to fit into the limited market. Without that guaranteed availability, the appeals process would be rendered meaningless, he said previously.


But after taking “another look” at the court order that Swope previously used to defend the slow pace of the local licensing process, he felt comfortable issuing 10 licenses knowing that another 10 — and eventually five more — could be doled out in the near future. “There’s still room for those decisions to be overturned,” he said.


The ten applicants recently granted local conditional approval include:


• AEY Holdings LLC. (KIN) at 3425 S. Martin Luther King Jr. Blvd.

• Altum LLC. (Altum Provisions) at 5829 Executive Dr. (Suite A)

• Apex Ultra LLC. (Bazonzoes) at 2101 W. Willow St. (Suite A)

• Better Than Nature LLC. at 820 W. Miller St. (Suite A)

• Capital City LLC. (The Lansing Botanical Company) at 3525 Capital City Blvd.

• CSHM Services LLC. (Cornerstone Wellness) at 3316 S. Martin Luther King Jr. Blvd.

• Edgewood Wellness LLC. at 134 E. Edgewood Blvd.

• HG Lansing LLC. at 1116 E. Oakland Ave.

• HQ3 Enterprises (Pure Options) at 5815 S. Pennsylvania Ave.

• N-East Services LLC. (Old 27 Wellness) at 2905 N. East St.


The ten shops are set to hire 1,444 people and invest $51.5 million locally, Swope said. He wasn’t able to provide documentation to verify those figures, citing privacy laws that protect the release of applicants’ proprietary information. He also noted those totals include the entire scope of their business plans — not just dispensaries.


“I believe that selecting these ten applicants is the best decision for the city,” Swope said, noting applicants still need occupancy certificates before licensure. “It is a balance between the needs of patients to ensure continuity of services within the city, the requirements of the state and the appeals process set by the ordinance.”


A few local marijuana dispensaries that missed the first round of licensing, however, continue to temporarily operate within the city while they await a more permanent ruling from a state judge. And they’ll be permitted to do so until at least the end of the year following a recent deal between state officials and the city of Lansing.


Dispensaries earlier this year were mandated by the state to get fully licensed or close their doors by Halloween.


Court of Claims Judge Stephen Borrello — after a lawsuit was waged against the state over the October deadline — ultimately barred officials from enforcing any operational deadlines until he ruled otherwise. That temporary restraining order remained in place this week, as he continues to mull over arguments raised in a recent hearing.


In the meantime, Officials with Michigan’s Department of Licensing and Regulatory Affairs agreed not to enforce any potential dispensary closures until at least Dec. 31. Lansing officials, in turn, agreed to consider dismissing its lawsuit against the state given the new, extended timeframe to sort through applications.


“While December 31 is not a new deadline, it does offer some degree of certainty to those 98 facilities who are temporarily operating with local approval and are still pursuing licensure under the Medical Marihuana Facilities Licensing Act,” explained LARA spokesman David Harns in an email sent on Tuesday morning.


Harns recognized his office ultimately cannot enforce any shutdown regardless of the recent deal because of that court order, but noted that LARA wanted to provide some added assurance to local dispensaries that might be concerned about their eventual closure. It also quelled some concerns from city officials involved in the lawsuit.


“We want to see rules that provide structure, but we also want to make sure that our city ordinance has time to be completed,” Mayor Andy Schor noted in a statement issued yesterday. “These provisioning centers are small businesses that would have to close and then re-open, taking away jobs from our residents.”


But the case is set to continue — even if Lansing decides not to stay on board.


First Class, Inc. — a company with medical marijuana interests in Jackson County — filed a lawsuit against LARA days before the deadline to push back against the shutdown plans. Attorneys for the company argued the arbitrary deadline was unfair to entrepreneurs that were still awaiting a decision on their licensing applications.


That company still hasn’t been afforded an opportunity to have their license considered by the Medical Marihuana Licensing Board. And First Class Inc. attorney Joslin Monahan said their arguments are likely to continue should LARA again decide to impose another “arbitrary and capricious” shutdown deadline.


“The other concern has to do with patient access and the industry at large,” Monahan added.

Although Medical Marihuana Bureau Director Andrew Brisbo — in a sworn affidavit — indicated there were enough licensed businesses to ensure adequate medicinal access to patients, estimates from within the industry strongly suggest otherwise. Monahan said the number of licensed growing facilities is simply inadequate.


First Class Inc. President Eric Kanaia testified that about 300,000 medical marijuana cardholders statewide will each blow through, on average, about one pound of marijuana every year. That equates to about 1.25 grams — or about two moderately sized joints — for each cardholder every single day of the year.


The 12 licensed marijuana growing facilities throughout the state are only capable of collectively producing about 12,000 pounds each year, he said. That means the statewide market, if every growing facility can keep up with estimates, is only capable of providing an adequate supply for less than five percent of patients.


“There’s an expressed legislative intent — that LARA is bound to execute — that ensures patients receive access to medical marijuana,” Monahan said. “The other concern is that any arbitrary and capricious deadline for a cutoff is going to destroy patient access. I would frame our concerns as two-fold. This case isn’t over.”


But in Lansing, concerns over patient access appear to have reached a gentle simmer. The absence of an operational deadline has allowed the city to charge forward with its licensing process. Officials indicated a few more shops could receive approval in the near future. The ball is now in the state’s court, Swope maintained.


The Medical Marihuana Commission is set to consider its next batch of licensing applications on Dec. 7.


Borrello’s temporary restraining order also suggested LARA was likely to lose the lawsuit. The burden of explaining otherwise falls entirely on the officials that imposed the deadline. State attorneys suggested the date was designed to transition the industry into a regulated system and ensure the integrity of the licensing process.


The case remained ongoing this week, as Borrello continues to ponder a ruling one way or the other. It’s likely that LARA will eventually impose a similar deadline in the future but the recent, informal agreement ensures it won’t arrive before Dec. 31 — regardless of whether Borrello decides to eventually lift his temporary order.


Visit lansingcitypulse.com for previous and continued coverage on statewide marijuana regulation.


Editor's Note: This story was updated to correct the name of the Medical Marihuana Licensing Board, which was inaccurately described as the Medical Marihuana Commission.