Lawsuit challenges Detroit's recreational marijuana ordinance

A Michigan marijuana company filed a lawsuit against the City of Detroit Wednesday to allow existing medical dispensaries to also receive recreational licenses, yet another potential setback in getting the recreational cannabis industry up and running in the city.

If the city follows the current ordinance, medical facilities would not be given a shot at getting a recreational license until 2027, when the medical businesses would have likely already closed their doors from lack of sales, the plaintiffs say. They're asking the court to intervene and stop Detroit from prohibiting dispensaries that sell both medical and recreational cannabis.

More: At Mumma Maria's House in Detroit, every dish honors mom

More: Detroit man sold $2,000 a day in marijuana from vending machine at home, feds say

The plaintiffs say state law specifies that once municipalities opt into allowing cannabis businesses within city limits, they cannot prevent medical marijuana licensees from obtaining recreational licenses.

The city's current ordinance does the opposite of what state law intends by "intentionally singling out and punishing the existing provisioning center licensees, who will all certainly be strangled to death and go out of business long before they are even eligible to apply for (recreational) retailer licenses in 2027," the plaintiffs said in a lawsuit filed Wednesday in Wayne County Circuit Court.

Medical marijuana product is photographed at West Coast Meds, a medical marijuana dispensary in Detroit Monday, March 14, 2022.
Medical marijuana product is photographed at West Coast Meds, a medical marijuana dispensary in Detroit Monday, March 14, 2022.

The plaintiffs are represented by Kevin Blair, Douglas Mains, Keith Underkoffler and Essence Patterson with the Detroit law firm Honigman.

John Roach, a spokesperson for the City of Detroit, said the law department has not had a chance to review the complaint and didn't have a comment.

After taking years to craft, Detroit's first attempt at a recreational marijuana ordinance was held up in court after a federal judge called the ordinance "likely unconstitutional" in June 2021 after it was challenged in a lawsuit by Crystal Lowe, a longtime Detroit resident who didn't qualify as a Detroit legacy applicant. The previous ordinance set aside at least half of the limited licenses for "legacy Detroiters." Lowe was also represented by Honigman.

The city spent the next several months crafting a revised ordinance that stays "true to the spirit" of the original ordinance, Council President Pro-tempore James Tate said when it was introduced in February, and sets aside half of the 100 coveted retail licenses for so-called equity applicants, which include longtime Detroiters and people from communities that have been disproportionately impacted by marijuana prohibition and enforcement.

The plaintiffs — House of Dank, Herbal Wellness, TJM Enterprises Services and Detroit Natural Selections Enterprises, all medical marijuana dispensaries in Detroit, say another issue with this ordinance is that it prohibits ownership interest in more than one such retail license, meaning even if a medical marijuana business owner gets a recreational license, they could only have it for one store location.

The best-case scenario for the plaintiffs, the lawsuit said, is that Detroit will not have awarded all 100 of its available marijuana retailer licenses by 2027, and the plaintiffs will be able to obtain a recreational license for one of their locations.

"Under the worst case, and most likely, scenario, the city will have awarded all 100

of its allowable retailer licenses by 2027, leaving plaintiffs unable to obtain even one such license, which will ensure the financial ruin of their businesses, as well as the termination of dozens of employees, many of whom are residents of the city," the lawsuit said.

They're worried they won't survive because the number of Michigan residents with medical marijuana cards is declining. Medical marijuana sales were down 44% in April compared with the same month a year ago, from $48 million to $27 million, according to Michigan's Cannabis Regulatory Agency. Meanwhile, recreational sales were up 60% in that same time frame, from $105 million a year ago to $168 million in April.

More: Plummeting Michigan cannabis prices are good news for consumers but not for small sellers

More: As Detroit opens applications for unlimited pot licenses, some fear there will be lawsuits

Scott Roberts, founder and managing member of Scott Roberts Law in Detroit, has several clients who have medical marijuana dispensaries in the city.

"Many of the medical operators spent millions and in some cases tens of millions of dollars to buy or build dispensaries in Detroit and now may not get recreational licenses for years to come," he said. "All of the existing medical operators are simply looking to get a recreational license like their suburban competitors."

Contact Adrienne Roberts:

This article originally appeared on Detroit Free Press: Lawsuit challenges Detroit's recreational marijuana ordinance