Blue Water Cannabis Co. v. City of Westland

1

BLUE WATER CANNABIS COMPANY, LLC, doing business as PUFF CANNABIS COMPANY, H.O.D. WESTLAND, LLC, HENNDOGS HOLDINGS, LLC, doing business as GREEN VIBE, and ATTITUDE WELLNESS, LLC, Plaintiffs, and MHS WESTLAND, LLC, HARPER VENTURES, LLC, and EXCLUSIVE BRANDS, LLC, Plaintiffs-Appellants, and COMBINED CANNABIS OF MICHIGAN, LLC, Intervening Plaintiff-Appellant, and CANDID LABS, LLC, Intervening Plaintiff, v. CITY OF WESTLAND, WESTLAND CITY COUNCIL, WESTLAND MARIJUANA SELECTION COMMITTEE, JAMES HART, JAMES GODBOUT, TASHA GREEN, MICHAEL LONDEAU, PETER HERZBERG, MIKE MCDERMOTT, and ANDREA RUTKOWSKI, Defendants-Appellees, and QUALITY ROOTS, INC., MPM-R VIII, LLC, and KARVOL ENTERPRISES, LLC, Intervening Defendants-Appellees. BLUE WATER CANNABIS COMPANY, LLC, doing business as PUFF CANNABIS COMPANY, H.O.D. WESTLAND, LLC, HENNDOGS HOLDINGS, LLC, doing business as GREEN VIBE, MHS WESTLAND, LLC, HARPER VENTURES, LLC, and EXCLUSIVE BRANDS, LLC, Plaintiffs, and ATTITUDE WELLNESS, LLC, Plaintiff-Appellant, and CANDID LABS, LLC, and COMBINED CANNABIS OF MICHIGAN, LLC, Intervening Plaintiffs, v. CITY OF WESTLAND, Defendant-Appellee, and WESTLAND CITY COUNCIL, WESTLAND MARIJUANA SELECTION COMMITTEE, JAMES HART, JAMES GODBOUT, TASHA GREEN, MICHAEL LONDEAU, PETER HERZBERG, MIKE MCDERMOTT, and ANDREA RUTKOWSKI, Defendants, and QUALITY ROOTS, INC., MPM-R VIII, LLC, and KARVOL ENTERPRISES, LLC, Intervening Defendants-Appellees.

Nos. 359144, 359168

Court of Appeals of Michigan

April 13, 2023

UNPUBLISHED

Wayne Circuit Court LC No. 21-003413-CZ Before: CAVANAGH, P.J., and BOONSTRA and RIORDAN, JJ.

PER CURIAM

In these consolidated appeals, plaintiffs and intervening plaintiffs are applicants who were denied licenses to sell marijuana in the city of Westland ("the City"). Five separate actions challenging the City's licensing application process were filed in the trial court, which consolidated the cases into one action under LC No 21-003413-CZ. The City, the Westland City Council, individual council members, and the City's Marijuana Selection Committee (the "Selection Committee") were all named as defendants.^[1] Intervening defendants Quality Roots Inc., and MPM-R VIII, LLC (collectively the "intervening defendants"),^[2] are applicants who successfully obtained conditional licenses to operate a marijuana business in Westland. In Docket No. 359144, plaintiffs MHS Westland, LLC ("MHS Westland"), Harper Ventures, LLC ("Harper"), and Exclusive Brands, LLC ("Exclusive"), and intervening plaintiff Combined Cannabis of Michigan, LLC ("Combined Cannabis") (hereinafter collectively referred to as "appellants"), appeal as of right the trial court's September 20, 2021 order granting summary disposition in favor of defendants and intervening defendants pursuant to MCR 2.116(C)(7) and (8). In Docket No. 359168 plaintiff Attitude Wellness, LLC ("Attitude Wellness"), appeals the same order as of right. For the reasons set forth in this opinion, we affirm.

I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

In October 2019, the City adopted the Westland Uniform Marijuana Business Ordinance, § 27-1 et seq., to exercise its police, regulatory, and licensing powers over both medical-use and adult-recreational-use businesses selling marijuana to the extent permissible under state law, specifically the Medical Marihuana Facilities Licensing Act, MCL 333.27101 et seq., and the Michigan Regulation and Taxation of Marijuana Act (MRTMA), MCL 333.27951 et seq. Westland Code, §§ 27-1, 27-2. The City created three types of licenses and allowed licenses to be issued for up to eight business locations. Westland Code, §§ 27-5(a) and 27-6.

Applicants were required to submit an application with the City and pay a fee of $5,000, up to $2,500 of which was refundable if an application was denied. Applicants were required to provide proof that they had secured rights to any property intended to be used for their business locations. Applicants were also required to submit proof of prequalification through the Michigan Marijuana Regulatory Agency. Applicants were required to sign and attest that the application, under penalty of perjury, was true to each applicant's information, knowledge, and belief. Westland Code, §§ 27-4 and 27-9.

Completed applications were evaluated on the basis of a written policy approved by the City Council. That policy was required to contain rules for evaluation and selection of the competing applications, and the ordinance also provided that a selection committee would carry out the policy. Westland Code, § 27-12(a). The ordinance provides that "[t]he selection committee shall score and rank applications for each category of business location based on the rules in the application consideration policy." Westland Code, § 27-12(b).

On May 18, 2020, the City adopted the Marijuana Business Application Consideration Policy (the "Policy") after it was approved by the City Council, which set forth the rules for evaluating license applications. Section 1.11 of the Policy established a Selection Committee as an administrative subcommittee, comprised of three city administrative employees appointed by the mayor, to sort, review, and score the applications, among other duties outlined in the Policy. The Policy specifically provided that the Selection Committee shall not make a final decision regarding the awarding of licenses. Policy, § 1.11.

The Selection Committee was required to conduct a prereview of all applications, and all properly filed applications were to be separated into different licensing categories. Policy, §§ 3.13.6. The Selection Committee was then required to review and score the applications according to the Policy's guidelines. Policy, § 3.7. The Selection Committee was required to score the applications using the scoring rubric adopted by the City, which defined certain categories to consider for each planned business and the points to award in order to arrive at a ranking of the applications in each license category. Policy, § 4.1. The Policy also adopted procedures to follow in the event of ties among applicants. This included first giving greater weight to certain scores under the scoring rubric. Policy, §§ 4.8-4.10. If there was still a tie after those adjustments, the Policy required that a blind lottery drawing be held to determine the ranking of applications. Policy, §§ 4.11, 4.12, and 4.13. The Selection Committee was required to compile a list of the applicants and their scores, ranking them from highest to lowest, and to send that list to the City Council and to each applicant. Policy, §§ 5.1 and 5.2.

Each applicant had a 10-day period from notice of its right to appeal to file an appeal with the Marijuana Business Review Board (the "Review Board") to challenge its score. Policy, §§ 5.3 and 5.4. The Review Board was to consider each written appeal at a public hearing and applicants appealing also had a right to orally address the Review Board for 10 minutes. Policy, §§ 5.5 and 5.6. After hearing all appeals, the Review Board was required to issue its recommendation to either uphold the list or make modifications. Any ties were to be resolved in the same manner that the Selection Committee used to resolve ties. After the Review Board's recommendations were forwarded to the City Council, the City Council was to consider and certify the list with any adjustments. The City Council's decision regarding the list was final. Policy, §§ 5.7 and 5.8. Only the highest ranked applicants in each license category would be considered for and offered a conditional license. The City would not maintain a waiting list for unsuccessful applicants. Policy, §§ 6.1-6.3.

Plaintiffs and intervening plaintiffs are unsuccessful applicants for marijuana licenses in Westland. MHS Westland, Harper, and Exclusive asserted multiple claims against the City, the City Council, the Selection Committee, and individual council members for (1) violation of their rights to due process, (2) violation of the Open Meetings Act (OMA), MCL 15.261 et seq., (3) violation of the MRTMA, (4) violation of the City's own marijuana business ordinance, (5) gross negligence, and (6) breach of contract.^[3]

Briefly the substance of the factual allegations made by MHS Westland, Harper, and Exclusive in their amended complaints was primarily that the criteria adopted by the City in its ordinance did not comply with the MRTMA requirement that applicants who are best suited to operate a facility within a city be selected, because points were awarded on the basis of property characteristics and development plans, which are not factors contemplated by the MRTMA, thereby allowing the City to award licenses on the basis of its subjective belief of what was best for the City, given its aesthetic and economic development aspirations. They further alleged that defendants failed to properly follow or apply the selection criteria when scoring the individual applications. For instance, plaintiffs alleged that defendants fabricated or gave their own meaning to the term "property" as not including buildings and structures, but rather just land or vacant land. According to the amended complaints, this difference resulted in MHS Westland and Harper both receiving scores that eliminated them from qualifying for a license in the area north of Ford Road. MHS Westland and Harper alleged that they would have received scores of 100 points, not 92 out of a possible 100 points, if the criteria had been properly applied. Further, the applicants who were awarded licenses were selected after the applicants with the highest scores participated in a lottery. MHS Westland and Harper alleged that if not for the scoring errors, they would have been placed in the top tier and allowed to advance to the lottery to determine the licensees....