Mederi, Inc. v. City of Salem

488 Mass. 60

171 N.E.3d 158

MEDERI, INC.

v.CITY OF SALEM & another.¹

SJC-13010

Supreme Judicial Court of Massachusetts, Essex.

Argued February 3, 2021.

Decided July 30, 2021.

William H. Sheehan, III, Peabody, for the plaintiff.

Victoria B. Caldwell, Assistant City Solicitor, for the defendants.

Christine A. Baily, Special Assistant Attorney General, for Cannabis Control Commission, amicus curiae, submitted a brief.

Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, & Georges, JJ.

BUDD, C.J.

Since the sale and recreational use of marijuana became legal in the Commonwealth in 2016 pursuant to St. 2016, c. 334, entities seeking to open retail marijuana establishments and their prospective host communities have grappled with that statute as subsequently amended, along with the accompanying regulations promulgated by the Cannabis Control Commission (commission). In this case, the parties are at odds over (1) a municipality's role in deciding who is granted a license to sell marijuana; and (2) the restrictions, if any, that apply when a municipality is choosing between applicants for a retail marijuana license.

Mederi, Inc. (Mederi), sued the city of Salem (city), contending that by rejecting Mederi as a host community agreement (HCA) partner, the city effectively precluded Mederi from being considered for a license to sell marijuana because securing an HCA is necessary prior to applying to the commission for a license. Mederi also claims that the city's process was arbitrary or capricious and contrary to law. Mederi's suit did not survive the combination of orders allowing the city's motion to dismiss and motion for judgment on the pleadings filed ad seriatim. Before us is Mederi's appeal, which we transferred to this court on our own motion. Although we observe that the interplay between the statute and the regulations may have led to consequences perhaps not contemplated by the Legislature or the commission, we nevertheless conclude that Mederi's claims properly were denied, and thus affirm the decision.²

Background. 1. Statutory and regulatory framework. In 2016, Massachusetts voters approved the Regulation and Taxation of Marijuana Act, St. 2016, c. 334, codified at G. L. c. 94G, §§ 1 et seq., and amended the following year by St. 2017, c. 55, entitled "An Act to ensure safe access to marijuana" (recreational marijuana act). Chapter 94G provides for, among other things, the sale of marijuana to adults for recreational use and empowers the commission to oversee and regulate the use and distribution of recreational marijuana. See G. L. c. 94G, § 4. The Legislature tasked the commission with regulating the Commonwealth's new marijuana industry by, among other responsibilities, issuing licenses to prospective marijuana establishments.³ Id.

The commission reviews licensing applications "on a rolling basis." 935 Code Mass. Regs. § 500.102(1)(a) (2021). In doing so, it prioritizes the review of applications from licensed marijuana treatment centers that seek to convert to retail marijuana establishments as well as economic empowerment priority applicants. 935 Code Mass. Regs. §§ 500.101(4), 500.102(2)(a) (2021). Economic empowerment priority applicants are, broadly speaking, those applicants from communities that have been disproportionately harmed by marijuana law enforcement (particularly Black, Hispanic, and Latino communities). 935 Code Mass. Regs. § 500.002 (2021). The commission statutorily is required to prioritize such applicants. See St. 2017, c. 55, § 56 (a ) (ii); G. L. c. 94G, § 4 (a 1/2) (iv) (commission must adopt "procedures and policies to promote and encourage full participation in the regulated marijuana industry by people from communities that have previously been disproportionately harmed by marijuana prohibition and enforcement and to positively impact those communities").⁴ Likewise, qualifying applicants or licensees are eligible to receive training in, among other things, management, industry best practices, accounting and sales forecasting, and tax compliance. 935 Code Mass. Regs. § 500.105(17) (2021).⁵

Chapter 94G gives municipalities the power to regulate the operation of recreational marijuana establishments within their borders, including the ability to adopt ordinances governing the total number of such establishments, as well as the time, place, and manner of marijuana sales (with certain exceptions) as long as the ordinances do not conflict with the provisions of c. 94G. See G. L. c. 94G, § 3 (a).

Chapter 94G also allows municipalities to determine the conditions under which they are willing to "host" retail marijuana establishments. G. L. c. 94G, § 3 (d ). The relevant section provides, in pertinent part:

"A marijuana establishment ... shall execute an agreement with the host community setting forth the conditions to have a marijuana establishment ... located within the host community which shall include ... all stipulations of responsibilities between the host community and the marijuana establishment ...."

Id. Municipalities may charge marijuana establishments a "community impact fee" that, among other requirements, does not exceed three percent of the marijuana establishment's gross sales. Id.

Although the commission's regulations are silent on the process of negotiating an HCA, in a nonbinding guidance document, the commission states that it "encourages municipalities to carefully consider the impact of the particular marijuana establishment proposed for a community, as well as benefits it may bring in local revenue and employment, when negotiating [an HCA]."

An applicant must provide the commission with proof of an HCA as part of its application for a license. 935 Code Mass. Regs. § 500.101(1)(a)(8) (2021).

2. The city's HCA application process. Pursuant to G. L. c. 94G, § 3 (a ) (2), the city passed an ordinance limiting the maximum number of marijuana retail establishments within the city to five. The city published guidelines explaining the HCA application process, including the minimum requirements necessary to apply. Among other things, applicants were required to submit business plans and to describe any prior experience managing a marijuana business. They also were required to provide documentation of their financial solvency; detailed information regarding the proposed location of the retail establishment, including traffic and security plans; and a copy of a special permit issued by the city's zoning board of appeals or evidence of site control of the proposed location for the establishment.⁶

The guidelines also listed the following favorable criteria that would be considered:

"(a) Demonstrated direct experience in the cannabis industry or a similar industry. (b) Managers, directors, officers, investors, and others related to the establishment are free of any disqualifying criminal convictions. (c) Minimal traffic impacts and appropriate mitigation for impacts is offered. (d) Approval of security plan by Chief of Police. (e) Financial records, business plan, and other documentation demonstrates strong capitalization or access to financing to ensure success of business. (f) Geographic diversity of the establishment in relation to other established or permitted marijuana retail establishments."

A review committee was established to evaluate the applications and provide recommendations to the mayor, who would make the final determination whether to enter into an HCA with a particular applicant.

3. Facts and procedural posture. We summarize the relevant facts taken from the record, reserving certain details for later discussion. In September 2018, Mederi applied for an HCA with the city to open a retail marijuana establishment on Highland Avenue in Salem. At the time Mederi applied, there were a total of eight applicants vying for four then-available slots.⁷ In addition to meeting all of the city's stated requirements, Mederi made extra property tax payments at the city's request.

In December 2018, after the city informed Mederi that it had "not been chosen to advance to the next round of consideration," Mederi filed a two-count complaint in the Superior Court seeking relief in the nature of mandamus, i.e., an order requiring the city to enter into an HCA with Mederi, as well as certiorari review of the city's rejection of Mederi's application.⁸ A Superior Court judge (first motion judge) dismissed the mandamus claim in an order allowing the city's motion to dismiss the complaint. Thereafter, both parties moved for judgment on the pleadings on the remaining certiorari claim. After a hearing, a different Superior Court judge (second motion judge) allowed the city's motion. We transferred Mederi's timely appeal to this court on our own motion.

Discussion. 1. Mederi's claims for relief. Mederi contends that the first motion judge erred in dismissing the first count of his complaint (mandamus) and, in the alternative, that the second motion judge erred in allowing the city's motion for judgment on the pleadings on his remaining certiorari claim. We are not convinced.

a. Mandamus. Mederi argues that it was error to reject its claim for mandamus relief. We disagree. A request for relief in the nature of mandamus is "a call to a government official to perform a clear cut duty" (citation omitted). Simmons v. Clerk-Magistrate of the Boston Div. of the Hous. Court Dep't, 448 Mass. 57, 59-60, 858 N.E.2d 727 (2006). See Johnson v. District Attorney for the N. Dist., 342 Mass. 212, 214-215, 172 N.E.2d 703 (1961) (mandamus proper where district attorney refused to comply with personnel board's decision to reinstate petitioner as special messenger, because statute at issue "impose[d] a clear duty upon the [district attorney] to comply with the board's decision"); Strong, petitioner, 20 Pick. 484, 497-498 (1838) (mandamus proper remedy where board of examiners refused to give petitioner -- duly elected as county commissioner -- certificate of his election, because "counting the votes, and...