Lawsuit challenges Detroit recreational marijuana shop licensing rules

Detroit’s new ordinance regulating licensing for recreational marijuana shops, which gives preferences to longtime Detroiters, has sparked a lawsuit claiming the rule is unfair and could unravel the city's plans to license stores.

In the suit filed Tuesday in Wayne County Circuit Court, Crystal Lowe, who has lived in Detroit for 11 of the past 30 years, indicates she plans to apply for an adult-use retail establishment license. 

However, the city “has almost certainly denied" Lowe's chances to obtain a license because the city's "licensing scheme favors certain Detroit residents over other Michiganders based on the duration of their residency” there, the filing said.

After two years of debate, the City Council in November unanimously approved the ordinance that gives special preference to residents under a certification the city calls "Detroit Legacy."

Applicants can qualify if they've lived in Detroit for 15 of the last 30 years; 13 of the last 30 years and are low-income; or 10 of the last 30 years and have a past marijuana-related criminal conviction; or have parents who have a prior controlled substance record and still live in the city.

Lowe, who has lived in the city for the past 11 years, fails to meet the legacy requirements, although she briefly lived in nearby River Rouge and spent several years in Georgia. The city ordinance, she contends, violates a commerce clause in the U.S. Constitution because it “discriminates against out-of-state residents and punishes people for moving between states.”

City officials have said only a fraction of the city's 46 medical marijuana dispensaries, permitted under an ordinance the council approved in 2018, are owned by Detroit residents.

But Lowe, who has worked in the state’s marijuana industry since 2012, argues in the suit that the policy is unconstitutional and discriminates against all non-residents and other longtime residents.

“Because Defendant has decided to cap the number of licenses available for adult-use retail establishments, it has set up a competitive licensing scheme … unlike any other in the state,” Lowe's Lansing-based attorney Kevin Blair of Honigman law firm wrote.

The ordinance allows a maximum of 75 licenses and no less than 50% have to be granted to Detroit legacy applicants, without a cap on those awarded to that group, the filing said. 

“It further provides that City shall not issue a license for an adult-use legal establishment if such issuance would cause the number of licenses held by Detroit legacy licensees to be less than 50% of the total licenses for this category,” according to the suit. “Thus, Detroit legacy applicants can compete for 75 licenses, whereas applicants without Detroit legacy status can only compete for a potential maximum of 37 licenses, a number that will shrink depending on how many Detroit legacy applicants succeed in obtaining licenses.”

Detroit Deputy Mayor Conrad Mallett told The Detroit News Wednesday the state law gives local municipalities the ability to approve or prohibit adult use of recreational marijuana within its boundaries. Through legislation sponsored by Detroit Councilman James Tate, the city acted on that authority, he said.

"The ordinance was crafted to make sure longtime Detroit residents benefit significantly from this new industry and can build generational wealth," Mallett said. "The ordinance states that if any part of the Legacy Detroiter provision is struck down, no recreational marijuana licenses will be issued in Detroit.

"That's how strongly we feel about making sure Detroiters are the ones benefitting from this new industry.  If they don't have a share of this industry, then it's not an industry we want in our city."

The city's Office of Civil Rights, Inclusion, and Opportunity is certifying legacy Detroiters, overseeing the licensing process and reviewing the neighborhood plans, as it pertains to community benefits, Director Charity Dean said in January.

In January, the city opened a six-week application window reserved for legacy residents seeking to operate recreational marijuana shops.

Legacy Detroiters have until March 12 to submit their applications and 180 certifications have been issued by the city so far.

After the exclusive six-week licensing period for legacy residents, individuals who already operate medical marijuana facilities in Detroit will get their own reserved six-week application process before other applications will be reviewed.

The city will license up to 75 medical marijuana provisioning centers, officials have said.

Qualifying residents get a 99% discount on licensing fees this year and a 75% discount in 2022. They also receive a 75% discount on city-owned land.

Lowe’s suit highlights the window for applicants and claims “it seems almost certain that (the city) will award all 75 adult-use establishment licenses to Detroit legacy applicants before it even considers any non-legacy applicants.

Meanwhile, the lawsuit notes, a legacy applicant-owned business “cannot be transferred, sold, or conveyed to anyone other than another Detroit legacy applicant for a period of five years from the date the initial license is granted or else the business will lose its Detroit legacy status and must re-apply…”

Detroit Legacy applicants will be reviewed starting May 1. General applicants with existing marijuana licenses will be reviewed starting June 16 and applicants without an existing medical marijuana license will be reviewed starting Aug. 1, the city said.

Mitzi Ruddock, a 40-year-old single mother with a past marijuana conviction, grew up in Detroit and helped the city craft the ordinance, although she currently doesn't live in the city.

"These are taxpayer dollars supporting this program and should go to those currently in the city of Detroit. That’s just how the cookie crumbles," said Ruddock, who runs Black Cannabis Access, which she said helps urban communities "break the cycle of wealth and economic disparities." Ruddock helps educate communities, consults potential business owners, aids in the licensing process and provides legal representation in the Black cannabis business community.

She said the ordinance requirements are intentional to show the applicant's "foothold in the city" and that’s what is important. 

"It's to ensure that they get the benefits and in most social equity programs, the target markets are often missed," Ruddock said. "I know a lot of people complaining, but like councilman Tate has said 'there are people who lived here and stuck it out through the good and the bad.' We can’t argue with that."

srahal@detroitnews.com

Twitter: @SarahRahal_