Unlicensed Michigan medical marijuana shops to stay open under court ruling

About 50 unlicensed medical marijuana dispensaries temporarily operating in Michigan will not have to close their doors anytime soon, ending a months-long regulatory saga over the state’s transitional weed market.

Dispensaries which applied for a license by February 2018 and haven’t yet received a decision on their licenses deserve an approval or denial from the state before being forced to close, according to one in a series of rulings issued Tuesday by a state Court of Claims judge.

Judge Stephen Borello’s ruling offered a scathing review of the state’s shifting deadlines for businesses to obtain a license or close, writing that the deadlines have been “apt to sudden change, freakish, or whimsical.” He also took aim at lengthy delays as businesses’ applications for licensing have been considered.

In issuing an injunction preventing the state from imposing new deadlines, Borello wrote that the state’s tactics amounted to a denial of due process for dispensaries operating under provisional licenses. The state’s erratic decision making on medical marijuana licensing, he wrote, has led to “looming shut-down dates and concocted threats of forfeiture actions and/or criminal prosecution.”

“The shut-down date has been ever-changing, with the only constant being that the shut-down date moves without regard for whether all of the applications have received a substantive and final decision on the merits,” Borello wrote. “These bait-and-switch announcements effectuated by LARA were entirely arbitrary and capricious.”

The decision means those unlicensed dispensaries can continue to sell to medical marijuana patients until the state determines whether or not their applications are approved — a process that’s expected to be sped up by the new Marijuana Regulatory Agency that takes over licensing Tuesday. Even if they’re denied, dispensaries can stay open 60 more days to pursue appeal.

The Marijuana Regulatory Agency will release a statement after “thoroughly review(ing)” the court orders, said spokesman David Harns. It is unclear whether the state plans to appeal.

"These court cases are part of the growing pains that happen when starting an industry from scratch,” said Josh Hovey, spokesman for the Michigan Cannabis Industry Association. “We respect the judge's ruling and will now be watching closely to see how inventory across the state is impacted.”

In a separate opinion, the judge also ruled the state can decide whether to bar caregivers from selling untested marijuana to dispensaries. Caregivers — who were originally only authorized to sell to a handful of patients — have in the past been allowed to sell their overages to dispensaries in order to meet demand, though some batches have been recalled for contaminants such as pesticides and salmonella. A state resolution would have required that to end April 1.

Tuesday’s series of rulings come after Borello issued a temporary restraining order at the end of March, right before what would have been the last state-issued deadline for all unlicensed dispensaries to close their doors.

The decisions Tuesday “may allow more lax regulation for some short time but in the long run it doesn’t loosen any regulations,” said Matthew Abel, executive director of the Michigan chapter of the National Organization for the Reform of Marijuana Laws (NORML) and a cannabis lawyer.

“It’s really just tying up loose ends from before. And the places that are open temporarily are soon to be licensed or closed, and we’ve long awaited that finality.”

Amber McCann, spokeswoman for Senate Majority Leader Mike Shirkey, said the Senate plans to vote Thursday on a bill that would require all unlicensed dispensaries to close by June 1. The bill has already passed the House with nearly unanimous approval. It’s unclear how Tuesday’s rulings might impact that measure if it were to become law.

Douglas Mains, an attorney with the Honigman law firm who said he wrote the bill, said he believes it would not be considered unconstitutional if it became law because it has been amended to create a carve out for dispensaries waiting for the state to approve or deny their application. The only conflict between the legislation and the ruling, Mains said, is that the bill does not allow for the 60-day window to stay open for dispensaries that wish to appeal a license denial.

“We want to get everybody to the point that they’re licensed,” Mains said. “While that’s pending you’ve just got to follow the rules.”