Cannabis attorneysToday’s Cannabis Case Summary looks at a novel example of the intersection between state-legal  cannabis and employment law. The plaintiff, Bobbie Henry, worked at an Outback Steakhouse in Flint, Michigan, from 1997 to 2014 when she was fired along with four other employees because of drug-related activities. Henry, a registered medical marijuana caregiver under Michigan law, sued Outback, alleging her medical marijuana activities were used as a pretext for age discrimination and her termination on that basis was defamatory. Unfortunately for Henry, a federal judge disagreed and the U.S. District Court for the Eastern District of Michigan granted Outback’s motion for summary judgment.

The meat (pun intended) of this case is in its facts, which involve two different groups of Outback employees involved in two very different kinds of “drug activity.”

One was made up of Henry and a second Outback employee who was a registered medical marijuana cardholder and a patient of Henry’s. Henry transferred cannabis to the co-worker patient in her role as a registered medical marijuana caregiver permitted by state law.

The second was a group of four employees the kitchen manager had observed exchanging a “small black object” he suspected was an illegal substance for cash. The employees claimed it was a “bridge card,” but after an investigation and a conference call with management the four employees were terminated for cause. The four employees did not go quietly, however, and in exit interviews alleged Henry was “selling drugs” and “dealing dope” at the restaurant. When confronted, Henry claimed that though she did sell medical marijuana to her co-worker patient she did not sell medical marijuana to her co-worker patient on company property. She was terminated the same day for behavior “unbecoming” of the company.

Henry sued Outback, first alleging that her medical marijuana-related activities were used as a pretext for age based discrimination. Henry’s claim was based on the fact that she was the longest-tenured member of the team and had been there for fourteen years before being terminated, despite winning service awards for “Top Performing Bar Team.” She also pointed to an unlitigated situation where a second employee had been terminated for what he felt was age-based discrimination.

The court looked at the pretext issue and was unsympathetic towards Henry, pointing out that she admitted to having a medical marijuana card and to selling drugs to a co-worker. Based on these two things, the court concluded there was a legitimate, non-pretextual reason for Outback to terminate Henry. The court secondarily found that Outback, as Henry’s employer, had a qualified privilege to discuss allegations that she sold medical marijuana to co-workers, which she did not dispute.

This case is just another example of how a state’s permissiveness of medical marijuana or adult-use cannabis will usually not impose a duty on an employer to tolerate marijuana use or override other legal doctrines that give power to employers. Even though Henry was apparently correct that she was in compliance with Michigan law, a little discretion could still have gone a long way. We cannot resist noting the foolishness of an employer terminating a good employee for helping a co-worker.

NOTE: The above is part of our plan to summarize all cannabis civil cases with a published court decision. By civil case, we mean any case that involves cannabis or the cannabis industry that is not a strictly criminal law matter. These cannabis case summaries are intended both to keep you up to date on cannabis laws as interpreted by the courts and also to serve as a resource for anyone conducting cannabis law research. We also will seek to provide key unpublished cannabis law decisions as well, when available.

Cannabis insuranceWith the advent of state-legal cannabis, the businesses that make up the rapidly growing billion-dollar cannabis industry are still having to struggle to secure many professional services non-cannabis businesses obtain as a matter of course – most notably banking. One bright spot for cannabis businesses, however, is insurance. Dozens of insurance companies that cater to the cannabis industry have sprung up in recent years and federal courts have held cannabis inventories is insurable despite federal prohibition.

But, what if you cultivate state-legal marijuana at home for your own use? Will your general homeowner’s insurance policy cover cannabis plants in the event of theft or fire? A number of large insurance providers would tell you the answer is “no,” and federal court decisions do not consistently side with policyholders. Here is what you need to know about the state of the law and factors to consider when approaching the issue of insuring cannabis in your home.

A U.S. District Court in Hawaii ruled in 2012 that the federal prohibition on cannabis meant that a homeowner’s insurance policy did not cover the theft of medical marijuana plants grown in accordance with state law. The policy in question contained an exclusion for coverage of “cocaine, LSD, marijuana and all narcotic drugs,” but included an exception for “legitimate use of prescription drugs by a person following the orders of a licensed physician.” The plaintiff argued that because she had fully complied with Hawaii’s medical marijuana laws, her plants should have been covered under her homeowner’s insurance policy. The court disagreed, concluding that it could not enforce the insurance contract against the insurer because of the Controlled Substances Act and the supremacy of federal law. A more recent case, on the other hand, should give policyholders hope: a 2016 decision in the U.S. District Court in Colorado held in favor of a cannabis business that sought coverage for its cannabis inventory. Like many aspects of state-legal cannabis, however, the insurability of cannabis is likely to remain uncertain and contested and state-by-state until there is reform at the federal level.

So, what should you do to protect yourself and your plants if you grow at home?

  1. Look at your policy and talk to your insurance provider. The terms of a homeowner’s insurance policy can vary, but most include some version of the language above regarding controlled substances and illegal activities. Only your insurance provider can tell you if it considers state-legal cannabis cultivation to violate this clause. Some insurers are more aggressive about enforcing these provisions than others.
  2. Do not become a business. Nearly all homeowner’s insurance policies do not cover business activities. The definition of what that means is not uniform in all jurisdictions, but be especially careful if you are a caregiver cultivating marijuana for someone else or if you sell your excess cannabis supply into state-legal channels.
  3. Stay compliant with state laws. It should go without saying, but be sure to maintain compliance with all state laws. At issue in the case from Hawaii was whether the plaintiff had more than the allowed number of cannabis plants under Hawaii state law. Even if you have a friendly insurer, failing to follow state marijuana laws will be a deal breaker. No insurer will be obligated to cover damage or theft to marijuana plants in excess of state limits.

For more on growing cannabis in your home state, check out the following:

 

Ohio and Michigan home grown cannabisAs cannabis reform has spread across the United States, it has given birth to a marketplace increasingly driven by business interests. This is the third installment in our series looking at how the changing landscape of cannabis policy affects a key group of often-overlooked stakeholders: medical marijuana patients who choose to cultivate their own supply of medicine. Go here for the home grown laws in Washington and Oregon, and here for  the home grown laws in California and Alaska. Though there are undeniably many benefits to the expansion and professionalization of the commercial cannabis industry, it is also important to account for these small-scale medical marijuana producers that started it all.

This week we look to two Midwestern states that have, to varying degrees, embraced medical cannabis: Michigan and Illinois. These states are relatively new entrants to the medical marijuana scene, legalizing in 2008 and 2013, respectively. Michigan and Illinois are also useful case studies of wildly different approaches to legalizing, regulating, and managing medical marijuana programs at the state level.

Michigan. As of 2013, medical marijuana dispensaries are illegal in the state of Michigan. Accordingly, patients must either grow their own medicine or acquire it from a registered caregiver, who is limited to five patients apiece. Patients who choose to cultivate their own supply are, however, allowed to possess a fairly generous twelve cannabis plants, provided those plants are in a private and locked facility. From these twelve plants, a patient may possess only two and one-half ounces of usable marijuana at a time. Patients should be careful to follow all Michigan laws when transporting usable marijuana, which require all transport be done securely and according to specific rules.

Illinois. As would-be home growers of medical marijuana in Illinois will know all to well, the state’s medical marijuana program does not currently permit home cultivation of any amount of marijuana. Nor does the law allow for cannabis caregivers to cooperatively cultivate any amount of marijuana for patients. This is partly because the state initiative that first authorized medical marijuana was styled as a “pilot program,” intended for the state to test the waters of marijuana reform. Unlike Michigan, patients are able to obtain marijuana from state-approved medical marijuana dispensaries. Patients are allowed to possess up to two and one-half ounces of usable marijuana in a fourteen day period. Nonetheless, patients committed to cultivating their own cannabis supply are out of luck in the Land of Lincoln.

As always, patients and caregivers in Michigan and Illinois should be careful to stay up to date on current state cannabis laws and be ready for things to change over time.

Next week we will set our sights to the east as we analyze home grown medical marijuana laws in the states of New York, Rhode Island, and Vermont.

There is a lot happening with Michigan cannabis right now beyond just the two ballot initiatives that may go to voters next November. In addition to various groups collecting signatures on behalf of ballot initiatives, there are also bills in the State Legislature that would create regulations and a licensing board for the State’s medical marijuana industry. The aptly named HB 4209, or “Medical Marihuana Facilities Licensing Act” was approved by the House of Representatives in October of this year and is currently in the Senate Judiciary Committee, along with HB 4210 which would allow for the sale of medical marijuana in non-smokeable forms and HB 4827 which would establish a seed-to-sale tracking system.

The bill is seen as a foundation for regulating marijuana in Michigan, and it is part of broader preparations for legalizing recreational marijuana in the state. Widespread legalization may happen as soon as next fall if voters approve either the MILegalize or Michigan Cannabis Coalition ballot initiatives, one or both of which we may see on the November 2016 ballot.

Michigan Medical Marijuana. Change will be a constant. (Photo from
Michigan Medical Marijuana. Change will be a constant.

What would HB 4209 do? This bill would license and regulate medical marijuana growers, processors, provisioning centers, transporters, and safety compliance facilities (collectively, “medical marijuana facilities”). To do this, the bill creates a “Medical Marihuana Licensing Board” and extensive rules on creating and operating the Board.

Michigan’s Department of Licensing and Regulatory Affairs and local governments currently regulate Michigan medical marijuana. Under the existing Michigan Medical Marijuana Act, “caregivers” may grow up to twelve marijuana plants for up to five patients each. HB4209 would allow more businesses to get into Michigan’s legal marijuana market by setting out licensing and regulation for companies looking to grow, process, and provide medical marijuana across the State.

The Licensing Board would consist of five members appointed by the governor, and it would establish licensing and rule making at the state level. The bill allows municipalities to authorize or limit facilities in its jurisdiction and to collect up to $5,000 as a non-refundable annual licensing fee. The bill would also create an advisory panel to advise the board, with participants from state and local government, as well as the public.

In addition to creating the Licensing Board and the rules for authorizing or denying licenses, the bill would create revenue for the State through application fees, a tax on gross retail income of facilities, and a “regulatory assessment.” The bill would impose a 3% tax on the gross retail income of facilities  and create a “medical marihuana excise fund” to receive the majority of fees, fines, and charges collected under the Act. The bill currently earmarks 30% of this revenue for municipalities and 45% for counties, based on the number of marihuana facilities in the jurisdiction, with the remaining 25% going to the State’s general fund.

In addition to licensing fees and the 3% tax on gross retail income, the bill would create a “regulatory assessment” on facilities, to be based on the administrative costs of the regulation. Class A growers (the largest grow facilities) can only be charged up to $10,000, but there there are no limits on how much other types of facilities may be charged.

These three bills are currently in the Senate Judiciary Committee headed by Sen. Rick Jones, R-Grand Ledge, who says his Committee could have a bill before the State Senate before the end of next year. We will keep you posted on the status of these various bills.

We are always watching for new lawsuits involving state-legal marijuana. Even to the casual observer these cases can be compelling: the issues are often novel, the plaintiffs can be quite sympathetic, and even a highly local dispute can have implications across the country as judges grapple with fast-changing and often inconsistent or conflicting laws and look for guidance wherever they can get it. The rise of litigation is just one more sign of the mainstreaming of marijuana and it serves to raise awareness about cannabis issues.

Bringing a bad lawsuit does not help the cause, it just doesn't.
Bringing a bad lawsuit does not help the cause, it just doesn’t.

Not every lawsuit, however, advances the cause. A lawsuit filed recently in a Macomb County, Michigan, circuit court is an unfortunate example of the “throw the spaghetti at the wall and see what sticks” style of advocacy.

The plaintiffs in the Warren case are twenty-three registered medical marijuana patients, several of whom are also caregivers under Michigan’s Medical Marihuana Act (“MMMA”), as well as Michigan Safe Transfer Center, LLC (“MSTC”) and Legal Real Estate, LLC. The defendants are the City of Warren and its mayor, chief zoning inspector, zoning inspector, police commissioner, and a police detective, whom the plaintiffs allege “created a climate of hostility and fear” towards medical marijuana patients in Warren, preventing them from obtaining their medicine. The complaint goes on to assert that plaintiffs were the victims of a systematic effort to close down MSTC, perpetrated through illegal searches and seizures and suspicionless roadblocks. If taken as true, the plaintiffs’  allegations suggest that Warren city officials overstepped the bounds of permissible policing activity and may have unjustly harassed MSTC patients. But, as we’ve seen in case after case, that bad behavior probably won’t be enough to secure a victory where the plaintiffs’ own actions are of questionable legality.

In a 2013 decision, State v. McQueen, the Supreme Court of Michigan deemed medical marijuana dispensaries illegal under the MMMA. Noting that the MMMA is silent on the topic of “dispensing,” the Court determined that § 4’s immunity provision applies only to patients’ own use of medical marijuana, and therefore does not allow one qualifying patient to transfer marijuana to another qualifying patient. It is against this backdrop, and the ever-present federal prohibition, that the Warren case must be evaluated.

The Warren plaintiffs allege seven distinct causes of action, but we don’t view any of them as particularly viable. They are:

42 USC § 1983: Section 1983 creates civil liability for transgressions of federal (usually civil rights) law committed under “color of law.” These are usually the kinds of cases filed against police departments for brutality (think Ferguson, MO). Importantly, Section 1983 is a procedural mechanism; the claim must be based on some other substantive law. Here, plaintiffs contend they were unlawfully detained and subjected to search and seizure, and deprived of equal protection. Liberty, as guaranteed by the constitution, is a proven and powerful right, and the plaintiffs here may have a decent argument if they were truly stopped for no reason or were simply on their way to Walgreens. The problem, however, is that the entire case is tainted by the fact that the plaintiffs were attempting to access MSTC, which will in all likelihood be viewed as an illegal medical marijuana dispensary.

Plaintiff Bryan Mazurkiewicz (who is a patient as well as business partner in MSTC with the plaintiffs’ attorney Michael Greiner) asserts that MSTC is not a dispensary because it is not a “walk-in clinic,” but we doubt the court will find that distinction very persuasive. The McQueen case also involved a members-only facility. Mazurkiewicz is quoted as saying MSTC has four grow rooms and that “everything’s locked, the paperwork is all there — stating whose plants they are — and no one has more marijuana than they’re allowed to have.” It sounds to us like MSTC is likely pooling resources and plants, particularly since Mazurkiewicz claimed MSTC had, at one time, 100 caregivers operating there, who could serve other 500 qualifying patients in what appears to be a relatively small building. If that is true, MSTC and its members should be defeated by MMMA’s provision that immunity may be rebutted by a showing of possession of allowable limits.

Even if MSTC were operating in perfect compliance with Michigan law, Raich v. Gonzales clearly held that federal law recognizes no right to obtain or use medical marijuana, so these plaintiffs will have a difficult time convincing a court that any substantive federal law supports their § 1983 claim. Such was the case in a 2014 Colorado case, Young v. Larimer County Sheriff’s Office. In that case, Young successfully asserted the affirmative defense of medical use of marijuana under Colorado’s Medical Marijuana Amendment. After that acquittal, Young’s seized plants were returned to him dead and Young sued for damages on the basis of § 1983. Like the Warren plaintiffs, Young argued that he was deprived of property, liberty, and just compensation. The Colorado Court of Appeals, drawing on a similar California case, Barrios v. County of Tulare, held that the destruction of Young’s plants did not impair a federal right, and the municipality was entitled to summary judgment. There are no facts present in the Warren case to suggest a different result.

Ultra Vires Activity: Ultra vires activity is simply activity taken outside one’s authority. Here, the Warren plaintiffs contend the traffic stops, seizure of plaintiffs’ property, and the issuance and prosecution of zoning violation citations are unfounded and unauthorized by law. Again, our sense is that the court will likely focus on plaintiffs’ operation of what is probably an illegal grow/dispensary rather than procedural misdeeds by law enforcement. In the wake of McQueen, Michigan attorney general Bill Schuette explicitly told prosecutors they are empowered to shut down dispensaries; in that political climate, the court is unlikely to take a negative view of Warren’s issuance of zoning infractions. Plaintiffs complain that the City of Warren “has not adopted any ordinance that directly regulates the cultivation and transfer of medical marihuana.” But that may be precisely the problem – by plaintiffs’ own admission, the MSTC building is zoned for a medical office, so it does not seem unreasonable that a dispensary or “transfer center” might violate local ordinances. At the very least, the lack of local law on the matter doesn’t mean anything goes, especially after McQueen. And if MSTC’s activities are suspected to be illegal, stopping its patrons is also probably not ultra vires.

Americans with Disabilities Act: Another claim with a failing track record. Title II of the ADA prohibits public entities from denying public services to individuals with a disability. The Warren plaintiffs contend they are qualified individuals with a disability under the ADA, and that the “climate of hostility and fear” perpetrated by the defendants has prevented them from receiving needed medication. This argument must fail for two reasons. First, Section 12210(a) of the ADA specifically excludes from its protections those “engaging in the illegal use of drugs when the covered entity acts on the basis of such use.” Second, the Warren plaintiffs haven’t connected their allegation that Warren officials prevented them from obtaining medicine to the denial of any “public services,” a strict requirement of an ADA claim.

Fraudulent Misrepresentation: This claim is probably the most bizarre. Plaintiffs contend that Warren officials called qualifying patients, claimed to be Bryan Mazurkiewicz, and told those patients that MSTC had been closed. As a result, plaintiffs contend they have suffered “embarrassment, humiliation, stress, fear, nightmares, loss of income and physical pain.” First off, police do not have to be completely honest when conducting investigations and interviews; some amount of deception is allowed. If Warren officials are investigating MSTC as a criminal matter, the alleged phone calls are probably within the realm of the permissible. If we had to guess, this claim is really about the “loss of income” that MSTC has suffered as a result of investigations into its operations. Again, if MSTC’s operations are of questionable legality, the court is not going to award MSTC damages for the loss of illicit income. In any event, fraud is notoriously difficult to prove, and this claim too is likely to go nowhere.

Taking of Real Property Without Due Process and Compensation: Yet another claim where the facts just don’t fit. Takings claims generally challenge some government (federal, state, or local) regulation that effectively deprives an owner of all or nearly all economically viable use of that land. A takings claim may also lie where the government has physically invaded the owner’s property. Here, MSTC makes the former claim; that the hostile environment has led to a decrease in patient traffic, which has cost MSTC profits, rendering it unable to pay rent to plaintiff Michigan Real Estate, LLC. But landowners are not entitled to compensation where only their favored use has been regulated or prevented; in other words, just because MSTC can’t pay rent doesn’t mean Michigan Real Estate cannot find another suitable (paying) tenant — i.e., another “economically viable” use. The court will certainly be asking whether Michigan Real Estate has made efforts to find a new renter. If the the answer is no, the takings claim has no chance.

Malicious Prosecution and Abuse of Process: Both of these claims are premised on the allegedly improper issuance of zoning citations by Warren city officials. Plaintiffs cite Ter Beek v. City of Wyoming, in which the Michigan Supreme Court held that a city ordinance penalizing patients for engaging in lawful, MMMA-compliant medical marijuana use was preempted by the MMMA. Unlike the Warren plaintiffs, however, Ter Beek simply wanted to home grow his medicine, and there was no question his use would be lawful. As we’ve preached throughout this post, where the Warren plaintiffs’ activities are questionable, Ter Beek probably won’t help them. Moreover, malicious prosecution and abuse of process claims require the plaintiffs to demonstrate that they prevailed in an earlier proceeding that was brought for an improper purpose. The Warren plaintiffs have not alleged that they have prevailed in the zoning matter or been the subject of a criminal action, and there is no valid claim for merely “investigating” MSTC – these claims must be based on an earlier proceeding. Without more, these claims amount to nothing more than complaining, without any chance at real legal recourse.

* * *

This post is not intended to bash the Warren plaintiffs. Our point is simply that causes like safe access for patients, or even full legalization, are of paramount importance and they are not promoted by lawsuits lodging legally insufficient claims (and a multitude of claims at that). The real injustice here is that patients in Warren may be suffering, but the way to really fix the problem for good is to ensure that Michigan’s medical marijuana program is revamped to provide for safe, regulated dispensaries. Like Washington state after KentMcQueen blew a huge hole in the MMMA, resulting in a dysfunctional and unfair medical marijuana regime.

More than 60% of Warren voters reportedly favored the MMMA. These plaintiffs’ time, effort, and money could almost certainly have been much better spent working towards legislative amendments giving effect to that public sentiment than bringing this sort of lawsuit.

Michigan was the first Midwestern state to legalize medical cannabis in 2008, and it has a good chance to be the first to legalize recreational cannabis in 2016. Right now there are two separate legalization campaigns underway in Michigan—the Michigan Cannabis Coalition (“MCC”) and the Michigan Comprehensive Cannabis Law Reform Committee (or “MILegalize”).

How are they similar?

Both initiatives are trying to do the same thing in the same way: legalize recreational cannabis through voter-initiated legislation.

Procedurally, the Michigan initiatives are more like Oregon’s Measure 91 and Washington’s i-502 than Colorado’s Amendment 64 in that the two proposals seek to directly enact legislation, rather than amend Michigan’s constitution. Substantively, both initiatives legalize cannabis cultivation, possession, and consumption for people aged 21 and over, permit home cultivation, and authorize taxing the commercial sale of cannabis. Neither would alter the state’s existing medical program and both earmark tax revenues for certain purposes.

How do they differ?

Though both initiatives purport to achieve the same goal, when you drill down into their details there are more differences than similarities.

The most important difference centers on the issue of state versus local control.  The MCC would create a five-member, Governor-appointed Michigan Cannabis Control Board to regulate and license commercial cannabis businesses, whereas the MILegalize’s proposal calls for local governmental bodies to license and regulate cannabis.

The two initiatives would tax cannabis commerce differently: MCC grants the state legislature authority to set cannabis tax rates while MILegalize establishes an excise tax capped at 10 percent. The MCC establishes only vague parameters for how cannabis tax revenues must be spent, whereas MILegalize specifically earmarks a 40/40/20 split between the Michigan Department of Transportation, the School Aid Fund, and the local municipality in which the taxable activity occurs.

Their restrictions on home cultivation also differ, with MCC allowing up to two flowering plants per home (or four if permitted by local ordinance) and MILegalize allowing up to twelve. Both address driving under the influence of cannabis, but with varying specificity. MILegalize prohibits the state from establishing per se impairment limits. MCC basically just reiterates that its measure does not allow impaired driving, without restricting or defining impairment.

Which proposal is better?

There are good aspects to both initiatives, and either would be a big improvement over Michigan’s current “program.”

Perhaps the biggest issue is local control. Allowing for city or counties to opt out can be really messy. Additionally, allowing various municipalities to establish their own licensing and regulatory apparatuses is a nightmare from a compliance perspective, especially for companies that want to operate throughout the entire state. Under MILegalize’s proposal, Michigan would essentially become a microcosm of the national patchwork of cannabis laws.

Yet the MCC initiative granting the state more power has its own issues. Republicans control the Governor’s office and both chambers of the legislature, so some are weary of giving state lawmakers too much discretion for fear that they will drag their feet or even try to torpedo the program altogether.

Where are they now and what happens next?

Both initiatives have received the go-ahead this summer from the Board of State Canvassers to collect voter signatures, and people are out pounding the pavement to gather voter support.

Each initiative must gather at least 252,523 signatures to go to the Michigan State Legislature for a vote on whether to be passed into law. The expectation is that the legislature will reject both initiatives, at which point one or both will be placed on the ballot for voters to decide. Voters can choose to vote for either, both, or neither initiatives.

There is a real possibility that Michigan voters will see two legalization initiatives on the same ballot, which would be a first in the nation. If both receive more than a simple majority vote, the initiative receiving the higher number of total votes will prevail over the other. The fear is that having two initiatives on the same ballot will cannibalize voter support and split the cannabis vote, causing both measures to fail.

We will continue to keep you updated on Michigan’s legalization efforts.