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Michigan House Bill Would “Grandfather” Existing MMJ Businesses—And Override Local Approval Requirements

Cannabis Law Blog

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Michigan House Bill Would “Grandfather” Existing MMJ Businesses—And Override Local Approval Requirements

by Hilary Vigil

Yesterday, State Representative Yousef Rabhi (D-Ann Arbor), with 21 House Democrat and 3 Republican co-sponsors, introduced a bill that would allow medical marihuana facilities operating on or before August 15, 2017, to remain open until the State can process and approve license applications under the Medical Marihuana Facilities Licensing Act (MMFLA). Lost in media reports about House Bill 5014, however, are two other critical changes the bill would make to the MMFLA, including eliminating requirements for local government approvals.

As we previously reported, the Michigan Department of Licensing and Regulatory Affairs (LARA) has announced its intent to require in emergency rules that any existing facilities close by December 15, 2017—the day LARA will begin accepting facility license applications—and remain closed until a license is obtained. If a facility remains open after December 15, LARA will consider its continued operation to be “a potential impediment to licensure.” LARA’s position is based on a 2013 Michigan Supreme Court ruling that held that the 2008 Michigan Medical Marihuana Act (MMMA) does not allow sales of marihuana other than from a caregiver to that caregiver’s maximum of five connected patients. Unless an existing dispensary is following this model, that dispensary’s activity is illegal (as are sales of “overages” from caregivers to dispensaries).

In a statement in support of HB 5014, Rep. Rabhi argued that existing facilities should not need to close during the time it takes LARA to process applications because those facilities have invested in both the care of their patients and in their communities. The bill is touted as a solution to a so-called transition period for existing facilities because it would allow them to become licensed without a gap in service to patients, many of whom claim that they cannot obtain necessary marijuana products through the caregiver framework of the MMMA.

Besides protecting existing facilities during the transition period, however, HB 5014 would also make two other significant changes to the MMMA.

First, for all applicants for licensure who file complete applications before February 15, 2018, the Medical Marihuana Licensing Board would need to make a licensing decision within six months. (LARA has previously stated that licenses should begin to be issued around April 1, 2018, although on a rolling basis as the State works through what could be hundreds of applications.)

Second, and much more consequentially, HB 5014 would change the regulatory structure of the MMFLA in a way that is not readily apparent. The MMFLA establishes a dual regulatory system: both municipalities and the state have authority to license and regulate medical marijuana facilities. Under section 205(1) of the MMFLA, a municipality must adopt an ordinance authorizing each type of medical marihuana facility before a facility can receive a State license. HB 5014 would completely exempt existing facilities from the municipal authorization requirement. Therefore, an existing facility could remain open while it waited for state approval in a municipality that does not authorize—or perhaps even prohibits—the existing facility type.

Thus, while HB 5014 is being widely touted as simply allowing existing dispensaries seeking state licensure to remain open in the interim (a controversial enough topic), the bill actually works a truly fundamental change to the MMFLA. Notably, Rep. Rabhi’s statement describing the legislation says that the provision concerning local approval only “clarifies” that existing dispensaries would not be barred from licensure just by virtue of operating before authorization under a local ordinance became a requirement. But this is not what the language of HB 5014 would do. Instead, it explicitly provides that the local approval requirement does not apply to any applicant that operated before August 15, 2017, and applies for licensure before February 15, 2018.

Whether these issues with HB 5014 will see amendments during the legislative process—or whether HB 5014 has any legs whatsoever—remains to be seen.

Check back with Dykema’s Cannabis Law Blog for updates on HB 5014’s progress.