Marijuana Application Appeal

Six months in and Michigan does not have a single medical marijuana licensee. Michigan’s Department of Licensing and Regulatory Affairs (LARA) began its licensing program on December 15, 2017, with an ambitious intent to have a slew of licenses issued by June 15, 2018. With its 180-day emergency rules issued December 4, 2017, LARA allowed businesses that were existing at the time licensing began to get a temporary operating attestation so long as each operator filed a state application by February 15, 2018 and thereafter received its MMFLA license by June 15, 2018. Of course, in order for a license to issue the licensing board, made up of 5 unpaid political appointees, needs to meet and approve the licenses.

Section 302 – The Board’s General Responsibility

Section 302 of the MMFLA provides that the board has general responsibility for implementing the act and this its duties include:

(a) Granting or denying each application for a state operating license within a reasonable time.
(b) Deciding all license applications in reasonable order.
(c) Conducting its public meetings in compliance with the open meetings act, 1976 PA 267, MCL 15.231 to 15.246.

Therefore, no matter how many applications LARA receives or how many its analyst’s review, investigate, recommend and prepare for consideration by the board, the decision of granting or denying an application is solely that of the appointed board. Whether they are actually making decisions “within a reasonable time” is debatable but one thing is for sure, its actual decisions raise numerous questions and while a few of the board’s denials make sense, there were several that do not make sense and require the applicant to appeal.

Make no mistake, for those who have been denied, the appeal process will not be easy. In section 407(3) of the MMFLA, it states:

After denying an application for a license, the board shall, upon request, provide a public investigative hearing at which the applicant is given the opportunity to present testimony and evidence to establish its suitability for a license. Other testimony and evidence may be presented at the hearing, but the board’s decision must be based on the whole record before the board and is not limited to testimony and evidence submitted at the public investigative hearing.

The process for appealing the board’s decision is found in the emergency rules and in particular Rules 44, 45 and 46.

Rule 44 – Agency Denial

Rule 44 offers definitions related to the “agency’s” denial, suspension or revocation of a license. Curiously, in (a) the use of the word “agency” in the following rules, may apply to “the department, bureau, board, authority, or officer created by the constitution, statute, or agency action” and in (f) further defines a “Public investigative hearing” as a proceeding before the medical marihuana licensing agency to provide an applicant an opportunity to present testimony and evidence to establish suitability for a license, in accordance with MCL 333.27407(3). To this end, the hearing which is to be held before “the agency”, could be before the department, bureau, board or 1 or more administrative law judges per Rule 46(5) which authorizes the agency to take testimony under oath, receive evidence and set the schedule for the hearing.

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Rule 46 – Time Frame to Appeal

Pursuant to Rule 46, an applicant has 21 days from “service of notice of the denial” to appeal the board’s decision and the agency shall thereafter respond and set the hearing timeline.

“During the public investigative hearing, the applicant and the agency must be given a full opportunity to present witnesses and questions or cross-examine the opposing party’s witnesses, and to present all relevant information to the agency regarding the applicant’s eligibility and suitability for licensure.” R.46(7).

The applicant shall at all times have the burden of establishing, by clear and convincing evidence, its eligibility and suitability for licensure under the act and these rules. R.46(8)

Following the public investigative hearing, the matter must be considered by a quorum of the agency at a regular or emergency meeting properly noticed, at which the agency shall decide whether to affirm, reverse, or modify in whole or in part the denial of license. R.46(10)

The agency’s decision to affirm, reverse, or modify in whole or in part the denial of license must be based on the whole record before the agency and not be limited to testimony and evidence submitted at the public investigative hearing, in accordance with section 407(3) of the act. R.46(11)

The applicant will be held to a higher burden of proof and must be prepared to establish why the board with wrong thru witness testimony, documents and other evidence that is clear and convincing. To be clear and convincing evidence, the applicant must do more than merely persuade the agency that the proposition is probably true. To meet its burden of clear and convincing proof, the applicant must present evidence strong enough to cause the agency to have a clear and firm belief that the proposition is true.

Rule 12 – Additional Ways of Denial

In addition to the board’s findings under section 407 to deny an application, please do not forget Rule 12 which provides additional ways an applicant may be denied:

(1) If an applicant fails to comply with the act or these rules, a license may be denied as provided under the act and these rules.
(2) In addition to the reasons for denial in the act, a license may be denied as provided in the act and these rules for the following reasons:
(a) The applicant’s marihuana facility plan does not fully comply with the act or these rules.
(b) The applicant’s proposed marihuana facility or marihuana facility is substantially different from the marihuana facility plan pursuant to Rule 8 and these rules.
(c) The department is unable to access the proposed marihuana facility for pre-licensure physical inspection or the applicant denied the department access to the proposed marihuana facility.
(d) The applicant made a material misrepresentation on the application.
(e) The applicant failed to correct any deficiencies within the application in accordance with section 403 of the act and these rules.
(f) The applicant has failed to satisfy the confirmation of compliance by a municipality in accordance with section 205 of the act and these rules.
(g) The applicant is operating a proposed marihuana facility or a marihuana facility without a license after December 15, 2017, except for as provided in Rule 19, that would otherwise require an application for a state operating license as required under the act and these rules.

In all, when an applicant is denied, there is a process to appeal and seek a redetermination. When doing so, it’s important to know the rules, the process and how to present evidence so as to meet the elevated burden upon an applicant. While we think some denials seem unjust and without cause, we must be mindful that the burden shall fall squarely on the applicant prove it and have it overturned.

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Craig Aronoff (13 Posts)

Craig Aronoff is a senior attorney with the Cannabis Legal Group. His practice areas include cannabusiness, real estate and civil litigation. Craig works with cannabusiness entrepreneurs, municipalities, caregivers and patients on licensing strategy, business planning, industry segmentation, entity formation, real estate acquisitions or tenancy, municipal ordinances, licensing preparation, application packages and industry advocacy. Craig brings with him extensive experience as an educator and lecturer on topics such as real estate, litigation and public policy. Craig has been certified by the State of Michigan to teach continuing education to real estate professionals, collaborating and presenting four separate courses totally 21 credits over four years to over six thousand licensees from Detroit to Marquette. Craig has sat as an expert on panels with the Oakland County Bar Association and presented a course on representing clients in financial distress to the State Bar of Michigan’s General Practice Section. Craig has also been privileged to have presented his seminar on distressed properties to hundreds of homeowners at community workshops around the State. Since the enactment of the Michigan Medical Marijuana Act in 2008, Craig has also advised and counseled dozens of Caregivers, Patients, real estate professionals, investors and business owners on licensing, compliance, entity formation, municipal compliance and landlord/tenant related matters.

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