A federal judge last Wednesday temporarily halted Detroit’s unique adult-use cannabis license system favoring long-time city residents. In the coming weeks the judge will hear arguments whether or not the city’s licensing scheme creates a “special class”, a legal no-no that has stymied social equity programs from Maine to Illinois.
Cannabis industry veteran and Detroit resident Crystal Lowe is suing to overturn the city’s adult-use licensing system on the grounds that it favors so-called “legacy” Detroiters who have lived in the city a total of 15 years over a 30-year period, violating the U.S. Constitution’s equal protection clause. Lowe, 33, has lived in Detroit for ten years, and also in nearby suburbs, including River Rouge, which is next-door, south of the city.
“She lived in the Detroit area almost her entire life and worked in the cannabis industry a long time,” attorney Kevin Blair of Honigman LLP told Grown In. “The way the current system is set up it doesn’t look like anyone who is not a legacy and doesn’t have an existing medical store will even get a chance.”
Detroit’s “legacy” plan requires license applicants to have resided in the city for at least 15 years, with exceptions for low income residents or convictees of cannabis-related crimes. Additionally, the legacy applicants must own at least 50% of the business’ equity. The city ordinance also included an unusual poison pill, where if it was ruled “invalid, unconstitutional or struck down by a court of law,” it would be immediately “repealed, and future adult-use marihuana establishments will be prohibited.”
Attorney Blair thinks that city leaders put in that clause for political reasons.
“They knew this was unconstitutional, because they built in that poison pill. I’ve never seen this anywhere else in the state, I’ve never heard of it,” said Blair.
Violations of the federal constitution’s equal protection clause, or state constitutional prohibitions against creation of a “special class” have tied up cannabis license social equity plans across the country. In Maine, a state law attempted to limit cannabis licenses to residents who lived in the state at least four years. The state dropped the residency requirement, as it was unlikely to survive court scrutiny on equal protection grounds. In Illinois, 75 adult-use dispensary licenses have been tangled up in two state-level lawsuits charging that application scoring created a special, favored class, because it was impossible to obtain a perfect score unless a military veteran led application teams.
Originally filed in Wayne County Circuit Court in early March, Crystal Lowe v. The City of Detroit, was removed to the Federal Court of Eastern Michigan on March 30 by the city’s request. Federal District Judge Bernard Friedman ordered a temporary restraining order last week, with an oral argument scheduled for April 22 to determine a permanent injunction. But, Blair tells Grown In that, “The parties have agreed to a later hearing date in May,” which is still subject to Judge Friedman’s approval.
“It’s not necessarily a bad thing this lawsuit is slowing things down because many of the social equity applications who do qualify really didn’t have time to prepare and get through the prequalifications with the State of Michigan,” said Matt Abel of Cannabis Counsel. Before a would-be cannabis business owner can be approved by a municipality, they need to obtain state pre-qualification, says Abel, a process that typically takes 60 to 90 days.
Detroit’s adult-use certification process passed the City Council on November 24, 2020, and the city began accepting “legacy” applications on April 1. According to the city’s ordinance, 75 adult-use dispensaries would be approved, and Mayor Mike Duggan promised a one-to-one approval: One legacy license would be approved for each non-legacy license. Currently there are 42 non-legacy owned dispensary licenses in Detroit, meaning five would be left out in the cold.