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Michigan Medical Marihuana Licensing Board Divided on Licenses

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Michigan Medical Marihuana Licensing Board Divided on Licenses

Today marked the first day Michigan’s Medical Marihuana Licensing Board took action on licenses under Michigan’s relatively new Medical Marihuana Facilities License Act (“MMFLA”). Although industry observers were hoping for some initial signals on the standards the Board will apply in decisions, today’s meeting instead revealed confusion on the part of Board members, and failed to reach any conclusions.

Today’s Board agenda initially had five applicants up for consideration, but a revised agenda was released this morning with only two applicants. At the Board meeting itself, a second revised agenda was provided, listing two different applicants. Those applicants, Greentransport Services, Inc., and TJM Enterprises Services, LLC, were considered for “pre-qualification” decisions, the first phase of the process, focusing on the suitability of applicants.

In reviewing Greentransport’s application, Board Member Don Bailey stated that the applicant had not initially disclosed a 20-year-old misdemeanor conviction. According to Mr. Bailey, when the conviction was discovered during the State’s background review, the applicant responded by saying “I didn’t think you would find that” before filing an amended disclosure. Mr. Bailey and Board Chairman Rick Johnson voted “no” on the motion to approve Greentransport’s application, citing Emergency Rule 12(2)(d) as the basis. (This rule provides that a license may be denied if “the applicant made a material misrepresentation on the application.” The MMFLA also provides that applicants are ineligible if they knowingly submit an application with false information.)

Board Members David LaMontaine and Nichole Cover, however, voted in favor of Greentransport, with Mr. LaMontaine expressing the view that once someone has paid their penance for a crime, they should not be further penalized. With Board Member Vivian Pickard absent from the meeting, the 2-2 deadlock meant that the application would not proceed. Accordingly, the application can come up again at a future meeting.

The Board then turned to TJM Enterprises’ application. Once again, Mr. Bailey stated that the applicant had failed to disclose an offense. In this case, he explained that the non-disclosure was of a statutorily disqualifying offense, because it involved a conviction for misdemeanor marihuana possession that occurred within the last 5 years. Mr. Bailey further explained that the conviction was a “Section 7411” sentence.

For those unfamiliar with Michigan’s law on controlled substances, “Section 7411” refers to MCL 333.7411. This is a provision in Michigan’s Public Health Code that allows a court to defer proceedings for someone pleading guilty to a first drug offense, and impose probation with terms and conditions. If the defendant successfully completes probation without violation, then the court is to dismiss the proceedings. Importantly, Section 7411 provides that, “Discharge and dismissal … shall be without adjudication of guilt and, except as otherwise provided by law, is not a conviction … for purposes of disqualifications or disabilities imposed by law.” (Emphasis added.)

Contrary to Mr. Bailey’s assertions, a 7411 proceeding that results in dismissal is not an automatic disqualifier for licensure under the MMFLA. When it comes to misdemeanor controlled substance offenses within 5 years of an application, the MMFLA automatically disqualifies someone only if they have been convicted. Since MCL 333.7411 specifically provides that a dismissal under that section is not a conviction, an offense handled under this section should not trigger the MMFLA’s automatic disqualification. The Board, however, retains the discretion to deny a license for arrests for “any relevant criminal offense,” even if “the offense has been expunged, pardoned, reversed on appeal, or otherwise,” so could deny an applicant on that basis.

Apart from the Board’s ability to act with respect to criminal offenses, again, the Board may deny a license for failure to accurately complete the application, and arguably must do so if the Board believes false information was knowingly submitted. As part of the MMFLA license application, applicants are required to disclose all arrests and charges, regardless of outcome. Surprisingly, at least one Board member had to ask staff whether the offense in this case needed to be reported, demonstrating a lack of understanding of the basic application requirements.

Following some brief Board discussion, the Board took up a motion to approve TJM Enterprises’ prequalification. That motion failed, with 3 members voting “no,” apparently on the mistaken belief that the offense at issue was an automatic disqualifier. Only Mr. LaMontaine voted “yes.” The Board then attempted action on a motion to deny the application, but ultimately voted to table it after Mr. LaMontaine advocated for giving the applicant a chance to correct the deficiencies in the application. (If the members believe there is a disqualifying offense at issue, it’s not clear how this “deficiency” could be corrected, unless the offense only pertained to one of multiple stakeholders, and the stakeholder with the offense withdrew.)

Even though today’s meeting did not supply great insight into how the Board will approach critical issues such as the probity of those currently operating facilities, it did confirm that there will be some growing pains as the Board starts processing applications. The meeting also continued to highlight a significant philosophical divide, with Board Members Bailey and LaMontaine on opposite ends of the spectrum. As for how lenient the Board will be with applicants who fail to disclose information, interested observers will have to await a Board vote with Ms. Pickard in attendance to get a real sense.

As always, check back with Dykema’s Cannabis Law Blog for future updates.