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Richard McLellan

Richard McLellan

Why Closing Dispensaries is a Mistake

September 15, 2017

In February 1969 I joined the newly installed governor’s policy staff and, since I was the only lawyer, was assigned drug abuse and organized crime among other issues.  Fortunately, I was also assigned the funding from President Johnson’s Crime Control and Safe Streets Act and was required to spend it within six months, so I had no trouble funding the ideas I brought to Governor William Milliken.

I learned that Michigan had no state programs to deal with the emerging issues of substance abuse (except adult male alcoholics). To respond, the Governor created the Office of Drug Abuse in the Executive Office of the Governor and told me to implement it. Thus began my 45-year intermittent involvement in Michigan’s marihuana policy.  In 1969 and through 1971, Michigan had the toughest criminal penalties in the country. We knew something had to change when poet and activist John Sinclair was sentenced to ten years in prison for possession of two joints, and after the Michigan Supreme Court ruled that the state’s marijuana statutes were unconstitutional. 

The Governor sought to offer an approach that recognized substance abuse, including marihuana, as both a health issue and a criminal law matter.  This period was the first of several that marked transition in the state’s approach to marihuana regulation. Michigan state government is now in a similar transition.  Other transitional changes in drug laws include:

  • Creating the Office of Substance Abuse Services (OSAS) and creating a large bureaucracy and programs to treat drug dependency.
  • In June 1971, President Nixon declared a “war on drugs” and dramatically increased the size and presence of federal drug control agencies.
  • Marihuana “decriminalization” became a code word for liberalizing marihuana use and it was never adopted in Michigan. But, cities like Ann Arbor essentially legalized possession of pot and the state did little to oppose these efforts.

Michigan’s latest transition began when I received a call from a Washington, D.C. organization I had never heard of asking my firm to draft a proposed initiated law regulating medical marihuana. The petition was drafted, circulated and the People adopted it in 2008. The Core Concept of the Initiated Laws was that implementation was the responsibility of medical marihuana users – “patients” – and individuals who assisted them were called “caregivers.” The authors, knowing of the efforts by state and federal politicians to deny the validity of medical marihuana, sought to create a widespread system of individual growers with limited capacity and supply. The thinking was that with dispersed growing, the DEA and their “black helicopters” would have less incentive to swoop in on little old ladies growing some pot for their arthritis pain. 

Many products and services have both an illegal or prohibited market and a regulated or licensed market for the same or similar product or service. For example: Gambling (NCAA betting pools vs. licensed casinos), alcohol (underage drinking vs. licensed bar) pharmaceuticals (“street use” vs. prescribed drug), and massage (“erotic massage” vs. licensed therapeutic massage).  The Initiated Law of 2008 made medical marihuana a lawful regulated service.

State government’s role was limited to issuing marihuana cards to qualified patients and caregivers. There was no licensing board, no power to issue extensive regulations and only a limited bureaucracy to implement the MMA. And there was no taxation to satisfy the insatiable needs of state government for money. There was neither express approval nor disapproval of retail transfers of marihuana.  But in drafting the Law we did not count on at least two of the consequences:

  • The efforts many state and local officials efforts to thwart the vote of the People and make a political issue out of lawful medical marihuana.
  • Patients and caregivers quickly found out that they could create a great excess of “product” from a lawful amount of plants and there was no clear way to monetize the product. This, in my view, created a moral hazard where people were supposed to destroy a valuable product and sought a way to turn it into a profitable business.

Thus the implementation of the MMA has been bumpy and created both a system of dispensaries with no legal foundation and a complex series of court cases.  Which leads Michigan to its next major transition, probably the largest and most significant we will face. The Medical Marihuana Facilities Licensing Act (MMFLA) has created a classic case of “Regulatory Capture” when a law, created ostensibly in the public interest, instead advances the concerns of special interest groups that want to dominate the industry the law charged with regulating. 

The MMFLA, and its “seed to sale” policy, creates 5 new types of licenses, with complex barriers to entry to all except well-funded companies. The legislature and governor have delayed the implementation process so that only “emergency rules,” sprung on the public with no statutory hearings, and implemented just before the deadline for applications. The legislature has delegated to the Board the determination of the level of taxation and fees charged, with no oversight. 

The new MMFLA is, of course, also the latest “Lobbyists and Lawyers Retirement Act.” (If I were not retired, I would be in the thick of it.) 

Dispensaries are now operating with local approval and forbearance by state officials and federal officials from efforts to deny patients access to their medicine.  Some Marihuana Board members, however, are seeking to get ahead of their authority by proposing to somehow order the closure of dispensaries under the MMA when they have not begun to implement to MMFLA licensing.  The Board cannot accept applications under MMFLA until late December and they need to accomplish many steps, including:

  • Establish a statewide monitoring system to track marihuana and marihuana products. The department must promulgate rules and contract with a private party “to deliver the functioning system by 180 days after award of the contract.”
  • The board’s actions are subject to the administrative procedures act of 1969, including licensing, contested case and rule making requirements; all these impose bureaucratic delays. But the legislature did find the necessity to operate under clear requirements and “to establish the need to promulgate emergency rules to preserve the public health, safety, or welfare.”
  • The Board can take disciplinary action only as the board considers appropriate to prevent practices that violate [the MMFLA] and [the as yet unpromulgated] rules, and including the contested cases provisions of the APA.

My conclusion is that during Michigan’s transition in marihuana regulation, the status quo under the MMA should prevail.  The Board should focus on its extensive duties under the MMFLA, beginning in 20018.  The department of licensing and regulatory affairs (LARA) is now charged with implementing both the MMA and MMFLA and will continue with the dual regulatory laws going forward. In the interests of the citizens and the patients relying on the MMA and the dispensaries tolerated under it by local ordinance, LARA should not seek to shut down existing dispensaries operating under MMA and local ordinances until new licensing structure is implemented. 

The threat by some Board members to retroactively punish applicants that in good faith are operating under the existing law is wrong and should be rejected.

Richard McLellan is a lawyer who has practiced administrative and constitutional law for 49 years in Lansing. He has served in a wide variety of public appointments by multiple governors.

September 14, 2017 · Filed under Richard McLellan



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