Weed war intensifies in small Michigan U.P. town:

posted 08/28/2023 mlive

MENOMINEE, MI — Marijuana turf wars have moved from street corners to city hall.

The “kingpins” are now mostly law-abiding investors. They prefer lawsuits to bullets, but the multi-million-dollar battles remain fierce.

An example is playing out Menominee, a city of about 8,300 located along the northwestern shores of Lake Michigan in the Upper Peninsula, where claims of questionable ethics, backroom dealings, and conflicts of interest abound.

At least eight business are competing for a place in the Menominee marijuana market that, on the surface, doesn’t seem lucrative, but is worth “tens of millions,” according to a federal lawsuit filed Monday, Aug. 21.

That’s not because residents consume inordinate amounts of cannabis.

“This is so because Menominee is located on the Wisconsin border and Wisconsin does not permit the retail sale of adult-use recreational marihuana and is unlikely to permit retail sales for several years,” the lawsuit said.

Over-the-border business is booming.

The turf war begins

Michigan regulators don’t limit the number of cannabis businesses allowed to operate in a community. Instead, licensing allotments are determined by local government or voter initiatives. Many Michigan cities, townships and villages have passed ordinances banning marijuana business altogether.

Menominee was among them, until the city council passed its own marijuana licensing ordinance in October 2020, establishing a scoring system for applicants and a plan to allow two recreational marijuana shops.

First Property Holdings, which operates retail stores under name Rize, and the Fire Station won the two licenses in September 2021. Fourteen businesses applied.

Some of the losers claimed the selection process was flawed and sued Menominee.

The companies that sued include: Lume, a large chain operated by Attitude Wellness; Higher Love, owned by OI Holdings and Higher Love Corp.; Nu Group, operating seven retail licenses under the name Nirvana Center Provisioning; Highwire Farms with stores in Adrian and Coldwater; and Rocky North, the company that operates Green Pharm stores.

Rize and the Fire Station weren’t allowed to open until the lawsuits worked their way through the courts over the next two years. On May 17, Judge Mary Barglind dismissed the lawsuits. The Fire Station opened in July and Rize in August.

The cannabis companies lost in court, but the fight was far from over.

Settlement agreement

Prior to lawsuit dismissal, the cannabis companies submitted a settlement offer to the city council. In exchange for withdrawing the lawsuits, the city would agree to issue business licenses to the businesses, the settlement proposed.

“I was against even acknowledging the settlement agreement,” Menominee City Councilwoman Donna Marineau told MLive.

Along with Marineau, Mayor Jean Stegeman and Councilman Michael DeDamos opposed the settlement.

“We wanted to patiently wait for Judge Barglind’s ruling,” Marineau said. “When it did come down, we just wanted to stop this whole process. Nobody would listen.”

The settlement called for City Council to alter its marijuana ordinance and uncap the number of retail marijuana licenses available, with the first six going to the Lume, Nu Group, Highwire Farms, Higher Love, Green Pharm and Agri-Med. It didn’t mention any guaranteed licenses for Rize or the Fire Station.

The Menominee City Council approved the settlement agreement, 6-3, at a meeting on May 25, a week after the lawsuit dismissal.

This settlement is now at the center of a lawsuit attorneys for Rize and the Fire Station filed in federal court on Aug. 21, claiming actions of Menominee politicians and the benefiting marijuana companies amount to “civil conspiracy.”

“We obviously do not believe that there is merit to their federal claims,” said attorney Denise Policella, who represents Nu Group, one of the defendants. “The plaintiffs are alleging a lot of things that we disagree with, but we are not going to make anymore comments at this time. There are many, many attorneys on both sides involved in this matter.”

Councilwoman Marineau isn’t sure why some of her colleagues were so adamant about issuing more marijuana licenses, especially to companies that had sued and lost in court.

“I don’t know the backdoor stuff,” Marineau said. “The three of us that were voting ‘no,’ that we didn’t want to move forward on this, were kind of left out of the loop.”

‘Backdoor stuff’

The lawsuit claims attorneys for the competing cannabis companies, especially OI Holdings, for months were communicating directly with some councilmembers who later voted in favor of their settlement.

The lawsuit said it is a violation of the attorney code of ethics for a lawyer to speak directly to an opposing party when they have their own legal representation.

One of the attorneys hired by OI Holdings, Joe Jones, is the brother of Councilman Josh Jones, the lawsuit said.

Marineau said that information was disclosed, but the council — before she joined it in 2022 — determined the relationship didn’t present a conflict of interest.

According to the Michigan Municipal League handbook, “a conflict of interest is any interest competing with or adverse to our primary duty of loyalty to the public interest. A competing interest may be a personal interest, or it may be a duty or loyalty we owe to a third party.”

The lawsuit claims attorney Joe Jones “repeatedly” spoke to his brother in private about the feelings of other council members and “a strategy of settling the litigation in manner that was favorable to (OI Holdings).”

Councilman Jones later voted for the settlement agreement that benefits his brother’s client.

In addition to licensing changes, the settlement ordinance that Jones and five other councilmembers supported amended ethics language that the lawsuit said “paved the way for a majority of City Council to agree to the settlement agreement and release.”

The previous ethics language said no council member “shall have an interest, directly or indirectly, in a marihuana establishment.”

The revised version only excluded elected officials from owning or operating a marijuana business.

Neither Jones brother responded to MLive requests for comment.

The lawsuit claims an attorney with OI Holdings met with Councilwoman Jacqueline Nutter at a local bar to discuss the lawsuit. When contacted by MLive, the attorney denied that happened. Nutter didn’t respond to requests for comment.

Councilwoman William Plemel, who’s also accused of communicating with OI Holdings representatives prior to the settlement, is one of two councilmembers who spoke with MLive. He said his vote in favor of the settlement was a matter of political philosophy and an effort to avoid more lawsuits.

“I’m kind of a believer in free markets,” he said. “Free enterprise is what tells you how many care dealers you’re going to have or how many grocery stores you’re going to have, and I feel the same way about marijuana.”

Plemel also voted in favor of the original 2020 ordinance that limited the number of marijuana shops in Menominee, but said that was based largely on the recommendation of the city attorney.

Another councilmember, Joe Dulak, works in real estate. When contacted by MLive by phone, he declined comment.

The lawsuit alleges Dulak “stands to gain, or has already received funds, financially through commissions or referrals, whether directly or indirectly, from the sale of properties involving” the interested cannabis companies.

“Mr. Dulak has stated at public meetings that his status as a real estate broker (who could or would presumably make money off property sales to new marihuana applicants) does not preclude him from voting on marihuana matters,” the lawsuit said.

A voter referendum

After City Council passed the settlement, Menominee resident Adam Michaud and others created the Committee to Stop Unlimited Marijuana Shops and began a petition drive aimed at getting the issue before voters as a ballot initiative.

According to Michaud’s attorney, Eric Doster, Councilwoman Nutter seemed aggravated by the effort. He shared with MLive a letter he wrote to the elected official about an incident that occurred during an outdoor concert at the marina in Menominee.

“It is my understanding you forcibly grabbed at least one petition directly from the hand of one of my female petition circulators while a voter was preparing to sign the petition, separated the petition from the ordinance, crumbled up the petition and threw it in the face of one of the circulators,” the letter said.

The committee collected the required signatures by July 25, which meant City Council had the option to repeal the new marijuana ordinance or allow voters to make that decision at the next election.

The lawsuit claims the council majority found a loophole.

“Working with OI, Highwire, Nu Group, and Rocky North, certain members of the City Council decided not to put the settlement ordinance to the test of the voters of Menominee in November because defendants knew they would lose at the ballot box,” the lawsuit said.

Instead, the council called a special meeting on July 27 that the lawsuit claims only stated that it would include a closed session to discuss “possible actions for marijuana.”

When the council emerged, the majority voted to repeal the contested ordinance. They then voted to approve a “virtually identical” ordinance that included a $15,000 appropriation for the police department.

Under the Menominee City Charter, ordinances that include appropriations are “referendum-proof” and can’t be contested by voters, the federal lawsuit said.

According to the federal lawsuit, during public comment and prior to the closed session or passage of a new marijuana ordinance, a political ally to Plemel, Jones and Nutter publicly praised the City Council for its decision to grant $15,000 to the police department.

“This statement by a non-council member that a new marihuana ordinance would be introduced surprised Mayor Stegeman, City Manager (Brett Botbyl), and City Attorney (Michael Celello), as none of them knew anything about a new ordinance being proposed that night.”

The special meeting outcome spurred yet another lawsuit filed on Aug. 17 in Menominee Circuit Court by the ballot committee, Rize and the Fire Station. It alleges a violation of the Open Meetings Act and asks the court to negate the councils’ actions.

“To upend this status quo, the Menominee City Council held a rushed special meeting … did not disclose in the meeting agenda what it intended to discuss, went into a closed session without any valid purpose and failed to deliberate in public before deciding on actions to moot the referendum petition,” the lawsuit said. “Plaintiffs seek to remediate the secrecy and improper conduct the Council and shine a light on its future hearings — for as in the words of Justice Brandeis, ‘sunshine is the best disinfectant.’”

Former University of Michigan ethics professor John Chamberlain said his classes often discussed some of the ethical issues raised by the lawsuits filed against Menominee.

“Wow,” Chamberlain said, regarding the council’s move to bypass the voter initiative. “If I were on the other side of this I’d start my recall petition right now and really complicate things.

“This has a smell to it, but if every step in this process is legal, then I guess you’re stuck with it.”

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