Detroit operators could see licenses invalidated even though stores are open

Exclusive Capital Partners and Quality Roots might get a second chance at snagging licenses in Detroit. The two cannabis operators sued Royal Oak, a suburb of the Michigan city, over the application process in April 2022, before the licenses were awarded.

Ultimately, the city awarded the two licenses to PGSH Holdings LLC (Gatsby) and Royal Oak Treatment LLC (Royal Treatment), leaving Exclusive Capital and Quality Roots out.

According to Law360, a three-judge appellate panel found that the city of Royal Oak, Michigan, committed no due process violations nor did it run afoul of the state’s marijuana law when it passed over the plaintiffs. Additionally, the judges rejected arguments that the city’s cannabis ordinance was vague.

Open Meetings Act violated

However, on a positive note, the panel did find that the city technically violated the state’s Open Meetings Act (OMA), and as a result, that claim must be reexamined.

The court wrote: “For these reasons, the circuit court erred by granting summary disposition in favor of the City with respect to the OMA claim. We reverse the court’s decision related to the OMA claim and remand to the circuit court to determine whether the licenses awarded to Gatsby and Royal Treatment should be invalidated under MCL 15.270(2).”

Ultimately, the city manager was tasked with scoring the applicants and formed a workgroup of several city officers to do so. According to the written opinion, the group met in four closed-door sessions to help the city manager assess the applicants. After the meetings concluded, the city manager ranked the applications in three categories, including a recommendation that the top two applicants be awarded a license.

The City Commission adopted the city manager’s recommendation without apparent deliberation, and the minutes of the City Commission meeting did not reflect any discussion of other applicants.

“Consequently, the city manager effectively selected who would receive the two recreational marijuana licenses,” the opinion noted. “Because the city manager made a de facto policy choice for the City Commission, the city manager met the definition of ‘governing body,’ and, thus, was subject to the OMA. It follows that the meetings that the city manager had with his workgroup should have been noticed and made open to the public.”

The two companies that were awarded licenses have already opened stores. Gatsby Cannabis opened its store in June, and Royal Treatment opened in July.