State judge: CCC lacks power over contents of local marijuana contracts
You might call it a spaghetti lawsuit.
Mederi, a would-be marijuana operator trying to open a retail shop in Salem, found out late last year that the city had decided not to award it a host community agreement, the contract every cannabis firm must sign with its host municipality before it can win a state license from the Massachusetts Cannabis Control Commission.
The company promptly sued to contest that decision, saying that Salem had acted arbitrarily, exceeded its authority, and — well, about 100 other things. Whatever might stick on the wall, right?
Luckily, we’re not here to dissect the nap-inducing complexities of Mederi’s claims. But just before I dozed off while skimming some filings in the case, one of the company’s arguments caught my eye.
Mederi had complained in court that the other four applicants who were selected by Salem for its remaining retail pot shop slots (say that 10 times fast) had promised in their host agreements to pay the city illegally large sums of money — payments in excess of a cap in state law limiting the value of local “community impact fees” imposed on pot firms to 3 percent of each operator’s annual revenue.
(Longtime friends of the newsletter may recall that we spotlighted Salem’s questionable host community agreement terms last summer, plus those demanded by other communities.)
That, Mederi’s lawyers said, meant the contracts were void. The company went on to name the cannabis commission as a new defendant in the case, contending the agency had a duty to reject the other four Salem agreements.
Of course, the commission last August voted against reviewing the contents of the host community agreements (or HCAs) signed by marijuana companies seeking licenses, and to instead only require a certification that each company has signed one. Four of the agency’s five commissioners at the time essentially said that state marijuana law doesn’t clearly give the commission the power to police such contracts, leaving their terms to be decided in negotiations between municipalities and cannabis firms.
Now, in a decision that puts new judicial weight behind the commission’s decision, Essex County Superior Court Judge Timothy Q. Feeley has agreed that state law does not grant the commission explicit power to review host community agreements.
“As the [commission] argues, it has been its consistent position that it has no role under [state law] in reviewing the contents of HCAs, and the court agrees,” the judge wrote in a ruling dismissing the commission as a defendant in the Mederi case. “The statute requires as part of a license application the inclusion of a certification that an HCA has been executed. The statute gives the [commission] no further role in looking beyond the certification to the contents of the HCA.”
The ruling is a setback to advocates who have argued that municipalities are routinely (and unfairly) shaking down operators for large sums, and keeping smaller and disenfranchised players out of the industry. It’s also a setback to the very lawmakers who came up with the cap on payments in the first place, as they have argued that the existing law already gives the commission authority over the deals.
The judge’s decision doesn’t completely close the door on further appeals or challenges to the commission’s stance on not reviewing host community agreements, such as the one brought forward by the Massachusetts Growers Advocacy Council, but it sets a precedent that could be difficult to overcome. The commission declined to comment.
However, the commission recently voted to seek explicit authority over host community agreements from the state Legislature. And indeed, several bills are pending that would require the commission to review host community agreements, including one proposed by state Senator Julian Cyr, a Truro Democrat.
“I think it’s important that local communities get to have a big say in these [marijuana] facilities,” Cyr explained, “but you have to have standards around that control.”
Cyr said municipalities should be free to work out the conditions under which a marijuana shop can operate within their borders, but said the state should set basic parameters, or a standardized contract, to provide consistency for businesses and local officials. He noted that the state already plays a similar role when it comes to health codes and other such regulations.
Cyr is also worried that expensive local fees could freeze out smaller companies and those participating in the state’s equity and empowerment programs, which are trying to boost minorities and other entrepreneurs affected by the war on drugs.
He said the new ruling in the Salem case is “helpful,” and could help prompt legislators to act on his bill.
“These are clearly businesses that are doing quite well, and there is a genuine impact on communities,” Cyr said. “But on the other hand, I worry about having a very big, corporate industry here that doesn’t allow for craft cultivation and entrepreneurs to succeed at a smaller scale. The law is explicit about the inclusion of certain communities, and we don’t want these HCAs to be a further burden.”