Authored By: Matthew Smith and Jennifer Grieco
The advent of medical and recreational marihuana licensure in Michigan has proven to be a boon for litigation throughout the state. Many municipalities that have chosen to enact ordinances permitting medical and recreational licenses have been met with litigation arising from the selection of winners and losers in the licensing process. A common theme to many of these cases is an unsuccessful applicant’s claim that the licensing process deprived them of due process. But what, if any, due process rights do marihuana license applicants possess under Michigan law? The Michigan Court of Appeals answered this question in its July 14, 2022 for publication opinion in Cary Investments, LLC v City of Mount Pleasant, Docket Nos. 356707 and 357862 (Yates, J.).
Cary Investments involved the City of Mount Pleasant’s recreational marihuana licensing process. By ordinance, Mount Pleasant authorized the issuance of 3 recreational licenses through “a competitive process intended to select applicants who are best suited to operate in compliance with” Michigan marihuana laws. Among the 10 recreational applicants was Cary Investments, LLC, an existing medical marihuana license holder in Mount Pleasant. Following a series of public meetings, the selection committee ranked Cary seventh in scoring and it was not awarded one of the 3 recreational licenses. Cary responded by threatening the City Commission with litigation, contending that Mount Pleasant’s ordinance was “unconstitutional and inconsistent with Michigan law.” Thereafter, Cary filed a single-count complaint requesting injunctive and declaratory relief based on allegations of “due-process violations, undue influence, arbitrary scoring, [and] antitrust violations.” The trial court dismissed the action, granting summary disposition concluding, in part, that Cary had failed to state a claim.
In an opinion authored by Judge Christopher Yates, the Michigan Court of Appeals affirmed the grant of summary disposition on the merits of Cary’s claims under both substantive and procedural due process principles. Looking to Cary’s substantive due process claims, the standard was whether there was “governmental conduct … so arbitrary and capricious as to shock the conscience.” Given prior precedent that “[r]efusal to issue a permit is not the sort of municipal action that constitutes a violation of substantive due process,” the Court regarded Cary’s substantive due process claims “a nonstarter.”
The Court similarly rejected Cary’s claim for violation of procedural due process. While noting generally that “due process requires notice and an opportunity to be heard” by “an impartial decision-maker,” the Court reasoned that “no process at all is required if the aggrieved party lacks an enforceable property interest.” Unlike an application for the renewal of a license, prior Michigan precedent establishes that “a first-time applicant for a license is not even entitled to minimal due process.” Under those circumstances, review “is limited only to whether or not the city has acted arbitrarily and capriciously.” Moreover, that Cary held an existing medical marihuana license did not matter, as “the City’s decision to authorize plaintiff to operate a medical-marihuana facility did not obligate the City to subsequently approve plaintiff for a license to operate as a marihuana retailer for purchasers who wish to obtain marihuana for recreational purposes.” In light of the absence of proof or allegations in the record of arbitrary or capricious conduct by the City of Mount Pleasant, the Court held that dismissal was required.
For municipalities that have, or are considering, marihuana licensing processes, Cary Investments should provide cover from actions by unsuccessful applicants provided their processes comport with local ordinance and Michigan law – including the OMA, MMFLA and/or MRTMA. But whether Cary Investments will actually stymie the wave of due process claims filed by unsuccessful marihuana license applicants remains to be seen.