The licensing and permitting of any business is often challenging, time consuming, and frustrating. Those challenges are exponentially increased in the highly-regulated and constantly-evolving cannabis industry, which, while illegal under federal law, is now authorized and regulated for medical use in 33 states, with 11 of those states also allowing adult use.

Authored By: Joseph D. Lipchitz and Zachary W. Berk[1]

Joseph D. Lipchitz

Zachary W. Berk

 

Joseph D. Lipchitz and Zachary W. Berk are partners in the Boston office of Saul Ewing Arnstein & Lehr LLP and members of the firm’s national Cannabis Law Practice. Mr. Lipchitz focuses his practice on complex commercial litigation, representing businesses and high-level executives in civil litigation nationwide, particularly in high-stakes disputes. He can be reached at Joseph.Lipchitz@saul.com. Mr. Berk focuses his practice on business and real estate litigation, with a particular emphasis on permitting and zoning disputes. He can be reached at Zachary.Berk@saul.com.

ARTICLE

The licensing and permitting of any business is often challenging, time consuming, and frustrating. Those challenges are exponentially increased in the highly-regulated and constantly-evolving cannabis industry, which, while illegal under federal law, is now authorized and regulated for medical use in 33 states, with 11 of those states also allowing adult use.

Massachusetts is one of the 11 states that has authorized and currently regulates cannabis for both for medical and adult use.[2] In so doing, the Massachusetts Legislature sought to greatly ease the typical licensing and permitting burden of registered medical marijuana dispensaries (“RMDs”), which are also referred to in the regulations as Medical Treatment Centers (“MTC”), seeking to sell cannabis to the adult-use or “recreational” market in recognition of their willingness to undertake substantial risk in building and investing in the infancy of the marijuana industry.

However, certain of the Commonwealth’s cities and towns have sought to regulate the adult-use industry as they see fit, through local ordinances and zoning, without regard for the statutory protections passed by the Legislature and signed into law by Governor Baker. Courts are now having to step in to enforce the clear terms of the state adult-use statute. The most recent example is the Land Court’s April decision in Rosenfeld v. Town of Mansfield, in which the court ruled that a town could not use its zoning bylaws to prevent the prompt conversion of plaintiff’s MTC to an adult-use dispensary.[3] Given that the conduct of cities and towns, like Mansfield, are not isolated and have been the subject of public criticism by the very legislators who drafted the adult-use cannabis law, it is worth discussing the evolution of authorized or “legalized” marijuana in Massachusetts, the protections of Chapter 94G for MTCs, and how courts, like the Rosenfeld Court, will be called on to apply the clear terms of the statute.

 

A Trip Down Memory Lane

When the sale and use of marijuana was first legalized in Massachusetts, it was limited to medical-related uses. Specifically, in 2012, Chapter 369 of the Acts of 2012, An Act for the Humanitarian Medical Use of Marijuana, was approved by the voters of the Commonwealth. This allowed for the sale and regulation of marijuana for medical purposes to qualifying patients with “debilitating medical conditions,” as documented in writing by their physicians.[4] However, there is a fundamental difference between legalizing, at the state level, the sale and use of medical marijuana, and the challenge of encouraging companies to risk millions of dollars to invest in and build the infrastructure, supply chains, and businesses necessary to make this nascent industry a success. Indeed, given that marijuana was, and remains, a Schedule 1 drug under the Federal Controlled Substances Act, Massachusetts’ early foray into legalized marijuana came with potential risk for MTCs and their strategic partners.[5]

Notwithstanding those risks, MTCs spent the next several years investing millions of dollars into Massachusetts to build the infrastructure necessary to support an industry that had no prior legal, financial, or regulatory framework. From 2012 to 2017, MTCs became licensed by the Massachusetts Department of Health, and later the Cannabis Control Commission, servicing over 61,000 “certified patients” with debilitating medical conditions.[6]

In 2016, Massachusetts voters approved Question 4, Legalization, Regulation, and Taxation of Marijuana, Chapter 334 of the Acts of 2016, which legalized the adult use of marijuana in the Commonwealth. Citing concerns with Question 4, the Massachusetts Legislature convened a committee comprised of members of the House and Senate to investigate issues with, and recommend amendments to, the law. This resulted in Chapter 55 of the Acts of 2017, An Act to Ensure Safe Access to Marijuana, which Governor Baker signed into law on July 28, 2017. The Cannabis Act implemented a comprehensive and carefully crafted statutory scheme governing the licensing and regulation of adult-use marijuana businesses. In so doing, the Legislature, in recognition of the substantial risk undertaken by MTCs in building the cannabis infrastructure in Massachusetts, provided those MTCs, licensed or registered not later than July 1, 2017, with a statutory right to convert their medical use marijuana businesses to businesses that are permitted to sell both medical- and adult-use marijuana, otherwise known as a “co-located” marijuana businesses. The Legislature protected this statutory right in several fundamental ways.

First, it mandated that neither the Cannabis Control Commission, nor local municipalities, could prevent the conversion of MTCs to adult-use businesses.[7] Second, it provided that MTCs not only had a statutory right to convert their licenses, but they were entitled to “expedited” and “priority” review of their applications before the Cannabis Control Commission.[8] Third, the Legislature expressly limited the authority of municipalities to regulate cannabis businesses through local ordinances and bylaws. Specifically, in G.L. c. 94G, § 3, entitled “Local Control,” the Legislature delegated narrow authority to cities and towns permitting them to “adopt ordinances and by-laws that impose reasonable safeguards on the operation of marijuana establishments, provided they are not unreasonably impracticable, and are not in conflict with [the adult-use statute] or with regulations made pursuant to [the adult-use statute]” and that (1) create time, place, and manner restrictions, (2) limit the number of marijuana establishments in their locale, (3) mitigate public nuisances, (4) restrict public signage, and (5) establish civil penalties.[9]

 

Municipalities Draw The Ire Of Legislators For Interfering With MTCs

Despite the clear terms of the Cannabis Act, certain municipalities have sought to delay and otherwise prevent MTCs from converting to adult-use or co-located businesses within their jurisdictions. This practice became so prevalent that in 2019, State Representative Mark Cusak, who was the co-author of the Massachusetts adult-use cannabis law, wrote the Cannabis Control Commission, stating:

It has been brought to my attention that some applicants attempting to convert and co-locate a current medical marijuana treatment center and recreational business, that municipalities are once again disregarding the law in order to prevent their openings. The law clearly states that a municipality’s local zoning ordinances and by-laws shall not ‘prevent the conversion of a medical marijuana treatment center licensed or registered not later than July 1, 2017 engaged in the cultivation, manufacture or sale of marijuana or marijuana products to a marijuana establishment engaged in the same type of activity.’ If these treatment centers wish to convert and co-locate, and have been given approval by the Cannabis Control Commission, a municipality shall not be able to create new by-laws to prevent it…

These continued obstacles to getting priority applicants through the application process, lack of licensed stores being opened and municipality related issues to name a few have unfortunately been well-documented in the press. They are also costing and will continue to cost the commonwealth millions of dollars in revenue. This is unacceptable.

See Representative Cusak’s letter dated June 27, 2019 {link}. Unfortunately, however, the Cannabis Control Commission lacks the authority to regulate municipalities. As a result, MTCs’ only recourse has been to seek relief from the courts.

Rosenfeld v. Town of Mansfield  

On April 20, 2020, the Massachusetts Land Court issued its decision in Rosenfeld, granting the plaintiff summary judgment and entering judgment that the “Town of Mansfield[’s] zoning bylaw shall not operate to prevent the conversion of the medical marijuana treatment center licensed or registered to CommCan, Inc. to operate at the property…to an establishment for the sale of marijuana to adults.”[10] The plaintiff was a real estate trust that owned a piece of property in Mansfield and whose trustee was the president of an CommCan, which was a registered MTC. While the town had granted CommCan a special permit to operate a medical marijuana dispensary at the property in 2016, it had not yet commenced operations due to various appeals by abutting landowners. In 2017, CommCan informed the town that it intended to convert its medical dispensary to an adult-use business even though the non-medical sale of marijuana to adults was not permitted by the Mansfield Zoning Bylaw in the business district in which the property was located.[11] The town refused to meet with CommCan and disagreed that it could operate an adult-use business on the property.

The Land Court applied the clear terms of the statute to rule that Chapter 94G, §3(a)(1) constituted a “grandfathering provision” that prevented towns from thwarting the conversion of a sited MTC to an adult-use business.[12] The town sought to avoid the application of the statute by arguing that CommCan had not yet “engaged” in the sale of medical marijuana under the statute because its facility had not yet been operational due to the prior appeals of the abutting landowners. The court rejected this argument. “The plaintiffs have ‘engaged in the cultivation, manufacture, and sale of marijuana’ by pursuing the activities necessary to commence the sale of medical marijuana at the licensed dispensary, including active litigation of the claims of the abutter seeking to annul the special permit necessary to the operation of the licensed dispensary.”[13]

Conclusion

As the Commonwealth’s adult-use cannabis market continues to take shape and expand, it is critical that MTCs, who took risk and helped build the industry into what it is today, be properly afforded their statutory rights to promptly and expeditiously convert their licenses without interference from municipalities. If cities and towns attempt to prevent such conversions, they can expect fierce opposition in the form of legal challenges from licensed cannabis businesses. And as demonstrated by the Rosenfeld

court, which had no trouble applying the clear terms of Chapter 94G, it seems unlikely that other courts would allow municipalities to thwart these conversions and further delay the public’s access to adult-use cannabis businesses.

 

AUTHOR BIOS & SOURCES

37079857.5

[1] Joseph D. Lipchitz and Zachary W. Berk are partners in the Boston office of Saul Ewing Arnstein & Lehr LLP and members of the firm’s national Cannabis Law Practice. Mr. Lipchitz focuses his practice on complex commercial litigation, representing businesses and high-level executives in civil litigation nationwide, particularly in high-stakes disputes. He can be reached at Joseph.Lipchitz@saul.com. Mr. Berk focuses his practice on business and real estate litigation, with a particular emphasis on permitting and zoning disputes. He can be reached at Zachary.Berk@saul.com.

[2] See G.L. c. 94G, §1 et seq. and c. 94I, §1 et seq.

[3] Rosenfeld v. Town of Mansfield, 2020 WL 1819671 (Mass. Land Ct. April 8, 2020).

[4] See G.L. c. 94I, §1, et seq. “Under Massachusetts law, as a result of the [medical marijuana] act, the use and possession of medically prescribed marijuana by a qualifying patient is as lawful as the use and possession of any other prescribed medication.” See Barbuto v. Advantage Sales and Marketing, LLC, 477 Mass. 456, 459-460 (2017) (reversing dismissal of handicap discrimination claim based on a qualified and registered patient’s use of medical marijuana).

[5] See 21 U.S.C. §§801 et seq.

[6] “Certified Patients” are those individuals who have been certified by their physicians as to having a Debilitating Medical Condition for which medical marijuana would help treat and then registered and approved by the Cannabis Control Commission to purchase medical marijuana from a MTC. See G.L. c. 94I, §2(a); 935 C.M.R. 501. The statute defines “Debilitating Medical Condition” as “cancer, glaucoma, positive status for human immunodeficiency virus, acquired immune deficiency syndrome, hepatitis C … Crohn’s disease, Parkinson’s disease, multiple sclerosis and other conditions as determined in writing by a registered qualifying patient’s registered healthcare professional.” G.L. 94I, §1.

[7] See G.L. c. 94G, §§3(a)(1) and 4(c)(4).

[8] See Chapter 55 of the Acts of 2017, §§56(a)(i) and 73(b); 935 CMR 500.101(2) (“Priority application review will be granted to existing [MTC] Priority Applicants”).

[9] The phrase “unreasonably impracticable” is defined as measures necessary for compliance with ordinances that “subject licensees to unreasonable risk or require such a high investment of risk, money, time or any other resource or asset that a reasonably prudent businessperson would not operate a marijuana establishment.” G.L. c. 94G, §1.

[10] Rosenfeld v. Town of Mansfield, 2020 WL 1830060, *1 (Mass. Land Ct. Apr. 8, 2020) (Judgment).

[11] Id. at *2 and fn.5.

[12] Id. at *3-4

[13] Id. at *6