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Two recent cases from the Michigan Court of Appeals dramatically undercut many municipalities’ use of zoning power to require permits or fees and control the location of caregivers and qualifying patients under the 2008 Michigan Medical Marihuana Act (“MMMA”). The limitations of these powers is in the wake of a potential shift towards legalization of recreational marihuana. The outcome of a ballot proposal in November may bring more change to marihuana regulation as Michigan could become the 9th state to authorize recreational use of the drug. This E-Letter examines recent limitations of zoning ordinance enforcement against MMMA caregivers, the outdoor cultivation of medical marihuana, and the support for and impact of a ballot proposal this November to legalize recreational marihuana.

MMMA COMPLIANT GROWING ACTIVITY CANNOT BE LIMITED BY PERMITS OR ZONING DISTRICTS

Significantly, the Michigan Court of Appeals issued a decision in July 17, 2018 drastically limiting municipalities’ right to regulate patients and caregivers under the MMMA. The plaintiff, a licensed and registered caregiver operating in a commercial building, challenged a township’s ordinance. The township ordinance regulated caregivers as a home occupation and forbade them from operating in commercial properties. The plaintiff caregiver’s cultivation in the commercial district was in violation of the township ordinance, but the cultivation was consistent with the requirements imposed under the MMMA (locked, enclosed facility, correct number of plants, etc.).

The issue was whether the MMMA preempted the township’s zoning regulations. Under MMMA, medical use of marihuana is protected from “penalty in any manner” when it is conducted in accordance with the act. The township argued that its ordinance only restricted the location where medical marihuana activities could occur but did not prohibit them altogether. This scheme of locating caregiver facilities in specific zoning districts has been applied in many jurisdictions in Michigan.

The Court disagreed with this approach. The Court determined that the township could not enforce its ordinance since the MMMA allowed operation of medical marihuana activities so long as they complied with the state law. Thus, the Court concluded that the MMMA does not permit municipalities to regulate patients and caregivers through zoning permits or zoning districts.

This case dramatically undercuts township zoning power in relation to medical marihuana. In striking down the commercial district limitations, townships may not be able to enforce any location controls establishing zoning districts where MMMA activity may occur. Only those locations within the MMMA itself regarding schools, public transit, and public places are restricted. Zoning ordinances that restricted MMMA activities to specific districts, which were becoming more common, are now suspect and may be ruled unenforceable.

Further, the Court emphasized that MMMA compliant activity could not be restricted by requiring permits and fees from the township. Operational limits or penal fines in connection with permits are now also suspect and may be ruled unenforceable. Yet, some permitting processes may survive if they do not conflict with the MMMA or establish penalties. A simple registration process without fines or penalties that provides notice to the township of medical marihuana activities (justified by the efficient use of police and other governmental resources) might be upheld but enforcement is unclear as there would be no fine for noncompliance. Yet, remember that zoning and facilities permits under the newer MMFLA remain fully enforceable.

The Court’s analysis of the issue also fails to adequately address prior Michigan Supreme Court precedent, which questions whether the Court’s decision could be overruled in the future. A 2014 Supreme Court ruling had an explicit note that local zoning control may remain viable. This decision has been appealed by the township to the Supreme Court. Hopefully, the Supreme Court will take up the appeal and restore zoning control to local municipalities. We will monitor new developments closely.

This Court’s decision does not directly impact commercial facilities under the MMFLA, or those ordinances adopted by municipalities regulating such uses. This case does pose an issue for those municipalities with ordinances regulating the cultivation of marihuana by MMMA caregivers. If your township regulates the patient/caregiver arrangement established by the MMMA, we encourage you to contact an attorney for advice on how best to comply with this decision. Deruiter v Twp of Byron, Michigan Court of Appeals (July 17, 2018).

MARIHUANA MAY BE GROWN OUTDOORS BUT CONSTRUCTION PERMITS STILL APPLY

Earlier this year, the Court of Appeals ruled on the outdoor cultivation of marihuana. In that case, the defendants, qualified patients and a caregiver, challenged the zoning ordinance of the township which required that MMMA activities be conducted in compliance with building permit procedures and effectively required that marihuana be grown indoors.

The requirements were part of the township’s general zoning ordinance but did require that cultivation occur inside the main building and that all permits be secured for electrical, water, and other work. Most directly here, the Court noted that in 2012 the Legislature amended the MMMA to allow plants grown outdoors to be considered in compliance with enclosed facility requirements. The Court held that the amendment to the MMMA permitted growing medical marihuana outdoors by registered caregivers. The Court reasoned that the township’s ordinance prohibited something that the state act allowed (outdoor cultivation) and thus the prohibition against growing outdoors directly conflicted with the state act and that part was void.

Construction code and their permits were also considered. Unfortunately, the Court of Appeals did not give these restrictions the same detailed review as the outdoor growing requirements. They upheld the building permit requirements, reasoning only that defendants were not granted immunity and exemption from all zoning and construction regulations and that building permits fell under the township’s power to regulate the public health and safety respecting new construction.

Allowance of outdoor growing was not a surprising outcome. If this restriction is in your township’s ordinance, then it is likely unenforceable; however, the outdoor restrictions are generally not a large part of township ordinance and permitting schemes. More interesting, however, is that the construction codes were summarily upheld. The applicability of building permits, with their fines and penalties, leave open a door regarding other permits in connection with MMMA activity. This is consistent with the 2014 ruling from the Michigan Supreme Court that local governments may impose some regulation of marihuana activity. Yet, it also could be argued to be in conflict with the Byron Township case, discussed above. For now, township governments can enforce their building, electrical, and other construction codes. Whether additional medical marihuana permits, fees, fines, or penalties can be successfully imposed remains to be clarified.

The township in this case filed an application in the Michigan Supreme Court for leave to appeal. The Supreme Court has yet to act on it; we will follow developments closely. York Charter Township v Miller, Michigan Court of Appeals (January 18, 2018).

BALLOT PROPOSAL WOULD LEGALIZE RECREATIONAL MARIHUANA BUT WITH SOME LOCAL ZONING

Medical marihuana regulation does not present the only legal issues for municipalities. This November, voters will consider another voter initiative (similar to the MMMA process) that would create a state law authorizing recreational marihuana use. The ballot proposal (known as the Michigan Regulation and Taxation of Marihuana Act or “MRTMA”) would build on the MMFLA regulatory framework, but also create new independent categories. With an estimated 278,000 qualifying patient cards and 43,100 caregiver cards, medical marihuana sales under the MMFLA are expected to reach approximately $700 million. If the ballot proposal passes, sales are predicted to exceed $1 billion. In Colorado, 2017 sales relating to marihuana topped $1.5 Billion. Colorado has a population of approximately 5.6 million as opposed to the almost 10 million people that live in Michigan. Thus, approval by the voters of this ballot proposal could greatly expand the number of people in Michigan using marihuana.

At a glance, if adopted, the MRTMA would:

• Legalize the possession and sale of up to 2½ ounces of marihuana for personal, recreational use by adults 21 and older and cultivate up to 12 plants for personal use;
• Create six “marihuana establishment” licenses, consistent with the MMFLA except for the inclusion of a “marihuana microbusinesses” license;
• Restrict license ownership in favor of residents and currently licensed MMFLA operators;
• Permit municipalities to limit marihuana establishments (although there is a local petition process that may be used to propose adoption of a local ordinance authorizing such establishments);
• Restrict ability to limit transportation of marihuana or prohibit certain recreation uses from operating where commercial facilities are already operating pursuant to the MMFLA;
• Limit municipal restriction by ordinance, including colocation, separation distances, and district location;
• Impose a 10% excise tax on marihuana sold by retailers or microbusinesses (replacing the 3% excise tax of the MMFLA); and
• Distribute funds in a new manner: 15% to municipalities with retail or microbusinesses; 15% to counties with same licenses; 35% for K through 12 schools; and 35% for the repair and maintenance of roads and bridges.

There many potential questions left unanswered by the proposed regulation. Even so, current information is indicating a likelihood that it will pass. A recent Gallup survey regarding the ballot proposal gauged support at 60%. Therefore, municipalities will want to stay abreast of the potential impacts of the new legislation.

— Christopher Patterson & Matthew Kuschel

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Fahey Schultz Burzych Rhodes PLC, Your Township Attorneys, is a Michigan law firm specializing in the representation of Michigan townships. Our lawyers have more than 150 years of experience in township law and have represented more than 150 townships across the state of Michigan. This publication is intended for our clients and friends. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.