TRAVERSE CITY — A split ruling in a lawsuit challenging Traverse City’s nonmedical marijuana ordinance may have settled questions about its legality, at least for now.
State law allows the city to limit nonmedical marijuana retailers to four, even if it allows up to 13 medical marijuana sellers, 13th Circuit Court Judge Thomas Power said Tuesday. He also found that limit doesn’t violate the due process rights of a handful of medical marijuana sellers looking to become nonmedical cannabis retailers.
For one, Power said the plaintiffs in the case — Leoni Wellness, Green Peak Industries, SecureCann doing business as House of Dank, and 314 Munson Avenue LLC — have no vested or substantive right at issue. City ordinances for medical marijuana made clear getting a permit under those rules gave no guarantee of a nonmedical marijuana retail permit, he said.
For another, the city had a rational basis in limiting the number of licenses, whether people agree with it or not, Power said. Whether the city wanted to become a destination for marijuana was something to consider, particularly in light of its party town reputation, as some claim.
“Again, we can argue whether that’s a good idea or not, but that’s a policy issue that’s up to the city commission, and their decision to limit the number of licenses is rationally related to that concern,” he said.
Power rejected arguments from Frank DeLuca, an attorney for 314 Munson Ave LLC, that state law prohibits local ordinances that only authorize certain facilities for medical cannabis and others only for nonmedical.
DeLuca pointed to a section of the Michigan Regulation and Taxation of Marihuana Act, or MRTMA for short, that preempts any local rules that would ban the two types from co-locating. Allowing different limits for the two types would leave eight medical marijuana sellers empty-handed.
He also cited an affidavit from Heather Azzi, Cannabis Trade Federation’s general counsel and formerly with the Marijuana Policy Project. She stated that she wrote MRTMA during her time at the former, and that Traverse City’s ordinance violates the wording, intent and spirit of the law.
Peter Worden, outside counsel for Traverse City, said the law allows cities to ban or limit the number of nonmedical marijuana establishments that can operate there. Plus, it specifies local governments must award licenses competitively if they limit the number of those businesses.
DeLuca argued the section of the law allowing for a limit on the number of marijuana establishments isn’t applicable to Traverse City’s situation, and that it’s trumped by the requirement that both business types be allowed to co-locate.
But Power said the law didn’t support the claim that each medical marijuana retailer is entitled to a license, just that they can’t be prohibited from seeking and getting one. Traverse City’s law doesn’t prohibit that, he added.
“Every medical retailer has as much right to apply for and compete for a recreational retail seller’s license as anyone else who would apply,” Power said.
Plaintiffs had some success Tuesday, with Power agreeing the city’s scoring rubric it previously adopted to award nonmedical marijuana retail licenses through a competitive process wasn’t legal.
That rubric has been on hold since November 2020 when Power placed a temporary injunction on issuing licenses using the rubric.
Worden argued a phrase in that law lets the city bring in other standards beyond just compliance with MRTMA.
But Power didn’t agree, and read several of the items in the rubric from requiring a building to use at least 90 percent of allowed height and building size, to making sidewalk improvements and providing for “green infrastructure” in parking plans.
After reading off each “wish list” item, as Power called it, he repeatedly said they may be a great idea, but have nothing to do with whether the applicant is best suited to comply with the state’s nonmedical marijuana law.
The city could impose those standards through other means, like zoning, but not as part of its competitive licensing process, Power said.
There’s still a trial set for mid-September, and attorneys for the city and medical marijuana businesses are set to meet Sept. 8 to discuss if there are any issues left to try.
Worden said afterward he was disappointed Power ruled against the scoring rubric, but not surprised. The judge indicated similar concerns when he issued the preliminary injunction.
City commissioners are already well into a process to rewrite that scoring rubric, Worden said — the city’s looking for input on the proposed rules via an online survey Sept. 3-12, and an open house Sept. 8 from 3:30-6:30 p.m. at the City Opera House, according to a release from the city.
Worden was glad to hear Power agreed the city’s license limit doesn’t violate state law or due process rights, he said.
Messages for DeLuca weren’t returned as of Wednesday.
Whether that ruling will stay remains unseen. Power said he expects an appeal and for the state Court of Appeals to give a “real outcome.”
Worden said he needs to talk to city officials before he would know if Traverse City wants to appeal Power’s ruling on the scoring rubric. But doing so would make little sense, given the progress commissioners made in drafting a new one, he added.
