MSC To Hear Open Meetings Act Issue Involving City Of Royal Oak Retail Marijuana Ordinance
The Michigan Supreme Court is set to hear arguments in a case addressing whether the City of Royal Oak violated the Open Meetings Act because the city commission effectively delegated its governing authority to the city manager, who chose in closed-door meetings which applicants would be awarded retail marijuana licenses.
The plaintiffs in Exclusive Capital Partners, LLC v City of Royal Oak applied for marijuana retail licenses in the City of Royal Oak (the city). They filed a lawsuit in Oakland County Circuit Court 1) challenging the city’s award of marijuana retail licenses to other applicants under the Michigan Regulation and Taxation of Marihuana Act (MRTMA), MCL 333.27951 et seq. and 2) alleging the city violated the Open Meetings Act (OMA), MCL 15.261 et seq., because the city commission delegated its governing authority to the city manager, who in turn chose licensees in closed meetings.
The trial court granted summary disposition to the city on the plaintiffs’ allegations. The plaintiffs appealed.
In a December 2024 published opinion, the Court of Appeals (Docket Nos. 366247 and 366257) affirmed the trial court’s dismissal of the MRTMA claims, but reversed the OMA dismissal. The Court of Appeals remanded the matter “to determine whether the licenses awarded … should be invalidated under MCL 15.270(2).”
The city appealed the OMA issue to the Michigan Supreme Court, which has agreed to consider the case (Docket No. 168243). “We direct the Clerk to schedule oral argument on the application,” the Michigan Supreme Court ordered. “The parties shall file supplemental briefs … addressing whether the City of Royal Oak’s city manager was a ‘public body’ as defined by MCL 15.262(a), subject to the Open Meetings Act, MCL 15.261 et seq. …”
Background
“These cases occur against the backdrop of the MRTMA,” the Court of Appeals explained in its opinion. “We recently summarized the origins and relevant sections of the MRTMA in a similar case, Yellow Tail Ventures, Inc v Berkley, 344 Mich App 689 … (2022) ….”
In July 2020, the city adopted a recreational marijuana ordinance (Royal Oak Ordinances, § 435 et seq.) that “authorizes all types of marijuana licenses allowed by the MRTMA, but limits the number of licenses available. … With respect to retail licenses, relevant here, the marijuana ordinance limits the number of municipal licenses to two. … The marijuana ordinance grants the city manager ‘the power to fully and effectively implement and administer the municipal license application process.’” While the MRTMA allows municipalities to opt out of the 1000-foot school buffer-zone requirement, the city “initially did not reduce the requirement within the marijuana ordinance, but it adopted amendments to its zoning ordinance to allow such reduction on a case-by-case basis,” the Court of Appeals said. “In other words, the [c]ity [c]ommission could approve a reduction of the buffer-zone requirement for a given site plan, but only on the recommendation of the [p]lanning [c]ommission.”
The city accepted applications for retail licenses from December 7, 2020 through February 7, 2021, according to the Court of Appeals. “The city manager at the time, Paul Brake, received a total of 31 applications, including, respectively, from Quality and Exclusive [the plaintiffs].”
In the meantime, the plaintiffs filed several lawsuits against the city alleging due process violations, OMA violations and violations of the MRTMA’s competitive-process and school-buffer requirements. The trial court consolidated the cases. The city filed a motion to dismiss the complaints. When the city subsequently denied the plaintiffs’ applications and issued licenses to other applicants, the plaintiffs amended their complaints. The city also renewed its motion for summary disposition.
The trial court ultimately dismissed the plaintiffs’ claims, stating: “[T]he claims challenging the ordinance for vagueness are dismissed. The city manager was required to consider certain factors, which he testified were indeed considered. The ordinance does not infringe on [F]irst [A]mendment rights, does not prohibit certain conduct, and does not grant the finder of fact unfettered discretion. Thus, the ordinance is not void for vagueness. Next, the claims that the city manager violated the ordinance are dismissed. The city manager complied with the statute and the ordinance. The claims regarding this issue are dismissed pursuant to C-10. Lastly, the claim seeking injunctive relief is moot. As noted by [the city], the licenses have been issued to two non[-]parties. The court cannot create a new license, nor can the court remove the licenses from the non[-]parties. The claim for injunctive relief is dismissed as moot.”
The plaintiffs filed motions for reconsideration, which the trial court denied. With the exception of the buffer requirement, the trial court held that the plaintiffs “merely repeated the arguments of their original briefs.”
The plaintiffs appealed.
In its opinion, the Court of Appeals explained the issues as follows:
“In Docket No. 366247, [the plaintiff] … argues that the circuit court erred by dismissing its claim that the marijuana ordinance was void for vagueness. In Docket No. 366257, [the plaintiff] asserts that the circuit court erred by granting summary disposition because (1) the marijuana ordinance is inconsistent with the Michigan Regulation and Taxation of Marihuana Act (MRTMA), MCL 333.27951 et seq., school-buffer requirement, MCL 333.27959(3)(c); (2) the marijuana ordinance is inconsistent with the MRTMA’s competitive process requirement, MCL 333.27959(4), both facially and as applied; (3) the [c]ity violated the Open Meetings Act (OMA), MCL 15.261 et seq., because the [c]ity [c]ommission delegated its governing authority to the city manager who selected licensees in closed-door meetings; (4) [the plaintiff] sufficiently alleged and established a claim of substantive due process; (5) [the plaintiff] sufficiently alleged and established that the marijuana ordinance was unconstitutionally vague; and, (6) injunctive relief was proper because invalidation of a license is a proper form of relief.”
Ordinance Not Void For Vagueness
At the outset, the Court of Appeals addressed the plaintiffs’ argument that the city ordinance should be declared void because it was unconstitutionally vague.
Notably, the Court of Appeals rejected the city’s argument that the void-for-vagueness doctrine was inapplicable because the plaintiff lacked a “valid property interest” as a first-time license applicant. “The cases on which the [c]ity relies hold that a first-time license applicant does not possess a property interest, but none of those cases support the proposition that a first-time license applicant’s void for-vagueness challenge fails for lack of such interest. At its core, the void-for-vagueness doctrine is concerned that laws provide fair notice and prevent arbitrary enforcement rather than with the deprivation of a claimant’s property or liberty interests; the doctrine applies regardless of whether a property or liberty interest is clearly established.”
In addition, the Court of Appeals rejected the city’s assertion that the void-for-vagueness doctrine did not apply because the doctrine “commonly applies in connection with penal laws or First Amendment rights.” To support its argument, the city relied on Hackel v Macomb County Commission, 298 Mich App 311 (2012), which “recognized that courts have applied the void-for-vagueness doctrine” in other situations. “And, while we are unaware of Michigan precedent applying the void-for-vagueness doctrine in the context of a first time license applicant challenging a licensing scheme, we have applied the doctrine more broadly than criminal laws.”
Despite the foregoing, the Court of Appeals rejected the plaintiffs’ void-for-vagueness argument. The plaintiff “contends that the marijuana ordinance is unconstitutionally vague because it is so lacking in standards as to grant the city manager unfettered discretion, and thus fails to put applicants on notice about how the ordinance is applied. … The plain text of the ordinance illustrates that the city manager was not without guidelines, and the public was not without notice as to the ordinance’s application. The ordinance undoubtedly allows the city manager some leeway and discretion in administering the licensing process. But it does not do so to the extent that it renders the ordinance constitutionally infirm. The ‘prohibition against excessive vagueness does not invalidate every statute which a reviewing court believes could have been drafted with greater precision. Many statutes will have some inherent vagueness, for ‘[i]n most English words and phrases there lurk uncertainties.’”
The plaintiff “cite[d] no authority for the position that a city official’s confusion, or interpretation, regarding the meaning of an ordinance he or she is charged with implementing itself establishes that the ordinance is unconstitutionally vague,” the Court of Appeals said. “Due process ‘does not preclude a city from giving vague or ambiguous directions to officials who are authorized to make … recommendations.’ … The relevant inquiry is whether the ordinance is so lacking in standards as to give those charged with implementing it carte blanche to follow their personal predilections. This ordinance does not. Even assuming that the city manager was confused with respect to implementation of the ordinance’s competitive process, this alleged fact, if established, would not necessarily indicate that the city manager acted with unbridled discretion.”
Therefore, the plaintiff “failed to overcome its burden of demonstrating that the marijuana ordinance is unconstitutionally vague,” the Court of Appeals held. “Because no genuine issue of material fact exists concerning whether the marijuana ordinance is unconstitutionally vague, the [trial] court did not err by granting the [c]ity summary disposition with respect to [the] void-for-vagueness claim.”
MRTMA Claims
Next, the Court of Appeals focused on the plaintiffs’ arguments regarding the MRTMA’s 1) 1000-foot school-buffer requirement and 2) competitive process mandate.
As to the school-buffer mandate, the “lead argument is that the [c]ity violated the MRTMA’s … requirement, and the [trial] court erred by failing to address this issue and denying summary disposition,” the Court of Appeals observed. And while the plaintiffs described this issue as “the most simple and straightforward in these consolidated cases,” the Court of Appeals disagreed and said “[i]t is actually the most convoluted.”
The Court of Appeals emphasized the city ordinance indeed contained a school-buffer requirement in Section 5 – “the section of the ordinance relating to operations.” Consistent with the MRTMA, the ordinance provides that “[n]o Marihuana Establishment shall be permitted within a 1,000-foot radius of any school,” the appeals court said. “Again, this is an operational requirement, not an application or licensing consideration.”
The Court of Appeals “acknowledge[d] that the marijuana ordinance requires the city manager to consider likelihood of success, which would implicate compliance with the MRTMA, including the school[-]buffer requirement. But both the MRTMA and the [c]ity’s ordinances contemplated a reduction of that requirement. … To the extent that the city manager had to consider this as part of the competitive criteria, we accept that he could also consider the likelihood that the [c]ity [c]ommission would eventually validly approve a deviation from the school-buffer requirement for [another applicant].” Meanwhile, the city commission “amended its ordinance to allow it to validly deviate from the school-buffer requirement on June 26, 2023. Any operation after that point would not violate the statute.”
The Court of Appeals further rejected the plaintiffs’ “conflict pre-emption” argument. “Our review of the [c]ity’s ordinances applicable during the application process reveals no conflict with MCL 333.27959(3). Because the [c]ity adopted an ordinance allowing reduction of the buffer zone consistent with MCL 333.27965(3) and MCL 333.27959(3), the [c]ity’s ordinances, on their face, do not conflict with the MRTMA. While MCL 333.27959(3)(c) does not require a municipality to adopt the buffer requirement, that statute indicates that a municipality may adopt an ordinance reducing the buffer requirement for purposes of state licensing. A review of the [c]ity’s licensing and zoning scheme, which allows a reduction of the buffer zone, reveals no inherent incompatibility between the then-existing licensing and zoning provisions and the MRTMA.”
Ultimately, the Court of Appeals concluded the trial court properly granted summary disposition to the city because 1) the marijuana ordinance and general zoning scheme did not conflict with MCL 333.27959(3)(c) and 2) awarding the retail license to [other applicants] “did not violate the MRTMA’s school-buffer requirement despite the close proximity to a school.”
Next, the Court of Appeals turned to the plaintiffs’ argument regarding the competitive process mandate in MCL 333.27959(4). The plaintiffs claimed the city ordinance conflicted with the MRTMA’s competitive process mandate “on its face” and the ordinance application violated the mandate.
“We disagree,” the Court of Appeals said. The argument that the process is not “competitive” because “competition requires a ‘situation in which people or businesses are trying to be more successful than each other …’ is not persuasive,” the appeals court said. While the city “used a series of yes-or-no factors and did not use a numerical scoring system, there were still meaningful ways to distinguish the applicants, thus satisfying the ‘competitive’ requirement within the meaning of MCL 333.27959(4).”
Moreover, the MRTMA does not define “competitive process,” the Court of Appeals observed. “We therefore rely on the plain meaning and ordinary understanding of ‘competitive’ which is ‘relating to … competition,’ or ‘a contest between rivals’ or ‘the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms.’ … In other words, any criteria adopted must bear some relation to determining who is best suited to operate in compliance with the act, and must also aid in evaluating who offers the most favorable terms.”
The ordinance’s “competitive criteria indicate that [it] does not lack a competitive process for selecting the applicants best suited to operate consistently with the MRTMA,” the Court of Appeals stated. “Taken as a whole, the criteria serve as guideposts allowing a decision-maker to determine which applicants are most favorable for operating in compliance with the MRTMA, providing criteria an applicant may satisfy by varying degrees. Because the criteria allow for meaningful distinctions between applicants, the criteria are necessarily competitive. There being no conflict with the MRTMA, and no allegation of unreasonable impracticality, [the plaintiffs] … failed to show that the [c]ity’s competitive criteria improperly conflict with the MRTMA. Summary disposition was proper. … In sum, [the] facial and as-applied challenge regarding conflicts with the MRTMA’s competitive-process mandate both fail.”
Open Meetings Act Violated
In conclusion, the Court of Appeals held the trial court wrongly dismissed the plaintiffs’ OMA violation claims.
“Here, authority rested with the [c]ity [c]ommission, ‘the public body,’” the Court of Appeals said. “It delegated authority to the city manager who was the de facto decisionmaker on awarding retail licenses. Relying on our Supreme Court’s decision Pinebrook Warren, LLC v City of Warren, ___ Mich ___ … (2024) (Docket Nos. 164869 through 164877) (Pinebrook II), which addressed this very same issue on similar facts, we conclude that an OMA violation occurred.”
In Pinebrook II, the Michigan Supreme Court “held that the de facto decision maker, a review committee, similar to the city manager in this case, was subject to the OMA,” the Court of Appeals noted.
Relying on Pinebrook II, the Court of Appeals said the city manager in the present case, along with his “designees,” acted as a public body subject to the OMA. “By way of analogy, here, the [c]ity [c]ommission is to the city manager and his workgroup as the city council was to the review committee in Pinebrook II. … The [c]ity [c]ommission is a public body that granted the city manager ‘the power to fully and effectively implement and administer the Municipal License Application process.’ … On paper, the marijuana ordinance did not grant the city manager authority to make the final decision on awarding retail licenses. Rather, the ordinance indicated that the ‘[c]ity shall decide among Applications’ which were best suited to operate in compliance with the MRTMA …. In practice, however, the city manager’s role was not limited to administering the applications process and scoring the applicants: whichever applicants made it through the city manager’s process received licenses. The [c]ity received 31 applications for two retail licenses. To rank the applicants, the city manager formed a workgroup composed of several city officers. They met in four closed-door sessions to help the city manager assess the applicants. Ultimately, as a result of these meetings, the city manager ranked the applications in three categories, including a recommendation that the top two applicants be awarded a license.”
Although the ordinance tasked the city with determining which applicants would be permitted to operate, and with approving the applicants’ special-land-use and site permits as a predicate to issuing licenses, “the [c]ity [c]ommission adopted the city manager’s recommendation without apparent deliberation,” the Court of Appeals emphasized. “The [meeting] minutes … do not reflect any discussion of other applicants. Consequently, the city manager effectively selected who would receive the two recreational marijuana licenses. Because the city manager made a de facto policy choice for the [c]ity [c]ommission, 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.”
According to the Court of Appeals, “We understand our Supreme Court’s decision in Pinebrook II as implicitly rejecting the [c]ity’s argument that the [c]ity [c]ommission did not delegate authority to the city manager because the MRTMA provided the city manager with an independent source of executive authority. Similarly, here, the [c]ity [c]ommission enacted an ordinance under the MRTMA, and, although the commission did not create the office of city manager through the ordinance, the commission authorized that officer to act on its behalf. The city manager’s power in the licensing process derived from the marijuana ordinance, through the [c]ity [c]ommission, not from the text of the MRTMA itself.”
As a result, the trial court erred by granting summary disposition in favor of the city with respect to the plaintiffs’ OMA claim, the Court of Appeals ruled. “We reverse the [trial] court’s decision related to the OMA claim and remand … to determine whether the licenses awarded to [other applicants] should be invalidated under MCL 15.270(2).”
In conclusion, “[w]e affirm the [trial] court’s grant of summary disposition in all respects except as it relates to its handling of the OMA violation,” the Court of Appeals wrote. “Because an OMA violation occurred, the [trial] court erred in dismissing those claims. We therefore reverse the [trial] court’s decision regarding the OMA violation and remand … to address whether invalidation of the license awards is appropriate under MCL 15.270(2) and to provide the public body with the opportunity to remedy to violation. … In all other respects, we affirm.”
Stay with the Speaker Law Blog for updates on the case.
