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Pot shops face closure under new state deadline

Jonathan Oosting
The Detroit News
Medical marijuana shops that are not fully licensed by the state by the end of October must close under new emergency rules that could put dozens of facilities out of business.

Lansing — Medical marijuana shops that are not fully licensed by the state by the end of October must close under new emergency rules that could put dozens of facilities out of business.

The Michigan Department of Licensing and Regulatory Affairs plans to enforce the Oct. 31 deadline despite a continued backlog in unprocessed applications and a court order that had temporarily allowed many existing businesses to operate until Dec. 15.

The new rules, announced Monday afternoon, could hurt businesses that applied for licenses but have not yet been approved, said attorney Denise A. Pollicella, who represents two companies in Detroit and Portage that had been appealing initial denials.

“They’re closing,” she said.

It’s not clear how many marijuana dispensaries and other businesses could be forced to close, at least temporarily. A total of 216 medical marijuana shops that had operated in a legal gray area applied to stay open while they sought licenses under a law approved by the Michigan Legislature two years ago, according to LARA spokesman David Harns.

“Many have been denied or pre-qualification or licensure,” he said. “Many were approved. Some are still in the process.”

To date, the Michigan Medical Marijuana Licensing Board has approved 73 of the 740 pre-qualification applications it received from owners interested in continuing or starting a business. The state has approved 37 of the 426 facilities that took the secondary step of applying for a state operating license. The board has denied eight other secondary applications, leaving 381 new and existing businesses with unresolved applications.

The five-member board is set to meet Oct. 18 and will “hopefully have another robust agenda,” Harns said.

Pollicella sued the state earlier this year on behalf of Montrowe LLC, a Jackson area dispensary, that had faced closure in September. Michigan Court of Claims Judge Stephen Borrello last month stopped the state from closing up to 98 businesses because they did not apply for a secondary application by June 15.

The new rules supersede that order, according to the state.

Montrowe's secondary application is set to go before the board for potential approval this month, but other facilities will be forced to close, said Pollicella, whose Cannabis Attorneys of Michigan firm represents a total of roughly 60 companies. She does not anticipate further legal action will be able to stop the process.  

By forcing medical marijuana shops in late October, the state will give a “huge shot in the arm” to a recreational marijuana initiative set to appear on the Nov. 6 statewide ballot, she predicted.

“When a whole bunch of facilities close, you’re going to watch people go to the polls and vote for recreational marijuana because the state made it so incredibly difficult to become a licensed, regulated medical facility," Pollicella said. "They’ve given voters no choice.”

LARA bureaucrats, who processes applications for the politically appointed licensing board to consider, do not have the authority to shut down facilities that continue to operate past Oct. 31 without permission.

Instead, the department can prevent the owners of those facilities from obtaining licenses in the future and refer any illegal operations to law enforcement agencies, Harns said.

Rick Thompson, a medical marijuana activist and founder of the Michigan Cannabis Development Group, said he expects some sort of legal challenge to a deadline that would “put the brakes on an industry that is cruising along quite nicely right now.”

The limited number of businesses that are able to obtain licenses by that point will “absolutely not” be in a position to adequately serve the 297,515 registered patients across the state, Thompson said.

The board has so far approved licenses for seven marijuana growers, four processors, three secure transporters, four safety compliance facilities and 19 provisioning centers, otherwise known as dispensaries.

“The important thing to realize is it’s not the number of licenses approved by the board, it’s the number that are open and operating and serving patients,” Thompson said. “The only relevant factor is how many are available for patients to utilize.”

Hundreds of existing provisioning centers were given a break earlier this year when the state issued emergency rules allowing them to continue operating while seeking a state license. The window was meant to ensure patient access to medical marijuana during the licensing period.

Businesses that filed a pre-qualification application by Feb. 15 could continue operating without a license through June 15 under the initial rules. That deadline later was pushed to Sept. 15, then Dec. 15 by court order.

Borrello’s September ruling prohibited the state from “treating temporarily operating medical marijuana businesses differently based on whether the business filed a Step 2 application more than 90 days in the past." 

The new rules do not treat existing businesses differently based on when they applied, Harns said. “There is one deadline for both.”

The new emergency rules also set up new transition requirements for existing medical marijuana businesses that are licensed. Within 30 days, those shops must record, tag or package all marijuana in accordance with a new state tracking system. 

Growers and processors must comply with testing requirements before transferring any marijuana, and dispensaries must obtain written acknowledgment from patients consenting to the transfer of untested product they sell. 

After those 30 days, any marijuana not obtained through a licensed channel must be destroyed.

"As the process of issuing state operating licenses continues to improve and the board works diligently towards issuing further licenses, emergency rules are needed for the continued integrity of the licensing of marihuana facilities and to ensure continued access for patients," the state said in the new rule