THE SUPREME JUDICIAL COURT on Friday urged the Legislature to update the state’s marijuana law to provide “much-needed clarity” on issues surrounding the agreements between marijuana shops and their host communities. But the SJC stopped short of mandating any changes.
The SJC’s ruling in Mederi v. Salem was long awaited by marijuana advocates who hoped the court would clarify the roles and responsibilities of local communities in crafting the host community agreements that are required for marijuana businesses to obtain state licenses.
In a 23-page unanimous decision written by Chief Justice Kimberly Budd, the court crafted a narrow ruling that rejected the appeal by Mederi, a company looking to open a store in Salem, of the city’s decision denying it a host community agreement and gave local communities a fair amount of local control of the process. But the court did not rule on two of the thorniest issues – the size of the fees host community agreements can charge marijuana establishments and the role that municipalities play in ensuring an equitable marijuana industry.
The decision urged lawmakers to take another look at those issues themselves. “Implementing the framework governing the new recreational marijuana industry has revealed gaps that the Legislature and commission likely did not anticipate,” Budd wrote. “Closing those gaps would provide much-needed clarity.”
Mederi was one of eight applicants seeking to open a retail marijuana shop in Salem, a city that was only allowing four new stores in addition to an existing medical marijuana dispensary. Salem rejected Mederi’s application to negotiate a host community agreement after city officials decided that four other applicants had stronger applications. Mederi sued the city.
Mederi argued that its application should have been granted, and the denial was arbitrary. But it also challenged the larger process by which host community agreements are granted. The marijuana company suggested that as long as it complied with city conditions on things like zoning and documentation, the city was obligated to grant it a host community agreement. Giving the city more discretion, it argued, took licensing authority out of the hands of the state’s Cannabis Control Commission and put it into the hands of municipalities.
The SJC ruled, however, that there is no requirement that a municipality grant a host community agreement, and communities have discretion over who they enter into agreements with. In this case, the court said Salem officials had a rational basis for choosing the other applicants, even if Mederi disagreed with that decision.
Mederi had also argued that the city was operating an illegal “pay to play” scheme by choosing applicants based on who was willing to pay the most additional financial incentives beyond the 3 percent community impact fee allowed by law. Companies in Salem and elsewhere have routinely negotiated agreements that require them to make charitable donations to particular causes in the community. The court found no evidence that these additional financial incentives were a deciding factor in Salem officials’ decision.
While the decision left current practice regarding host community agreements basically unchanged, the justices did include a section at the end of their decision acknowledging the inconsistencies and gaps in current marijuana law and suggesting lawmakers take another look at them. Budd wrote that while state law requires that the marijuana industry be made equitable, and requires the Cannabis Control Commission to prioritize helping people disproportionately affected by prior enforcement of marijuana laws enter the legal industry, that mandate does not trickle down to municipalities.
State regulations let “economic empowerment” applicants, those disproportionately affected by marijuana enforcement, receive priority for application review on a state level. “However, because municipalities, as the de facto gatekeepers to such priority application review, are not required to consider whether any entity seeking to enter into [a host community agreement] is an economic empowerment priority applicant, such applicants may receive no commission review at all,” Budd wrote.
Budd also acknowledged concerns about communities charging more than the 3 percent impact fee allowed by law, which she wrote creates another barrier for economic empowerment applicants and has the potential to give an unfair advantage to better-funded applicants. But she said the law is silent on whether these additional fees or charitable donations are allowed. The court could not address the issue here because Mederi did not have a host community agreement, so it had no standing to bring that challenge.
Both these issues have been discussed by those in the marijuana industry for years, and marijuana advocates have urged the Legislature to clarify the laws relating to host community agreements. The Cannabis Control Commission actually asked the Legislature for authority to police host community agreements, and the House passed a bill giving it that authority in February 2020. But amid the COVID-19 pandemic the bill never made it through the Senate, and generally lawmakers have been reticent to step back into the marijuana debate.
Jim Smith, a marijuana industry attorney, said he is hopeful after the court ruling that the Legislature will address the host community issue this session.
But Smith said the issue of social equity will be harder to fix, given that over 150 stores are already open, hundreds of host community agreements are signed, and many communities have given out all of their host community agreements already. “The last four years we’ve all learned that this particular process as it’s laid out doesn’t meet the social equity goals that all of us have,” Smith said. But, he added, “It’s very late in the process. You can’t take away licenses from people who already opened.”
Sen. Sonia Chang-Diaz, a Boston Democrat who co-chairs the Joint Committee on Cannabis Policy, said the committee intentionally held its earliest hearings on legislation related to host community agreements and social equity, in particular the creation of some form of publicly administered social equity loan fund, because it hopes to advance both of those policies.
“The committee scheduled hearings on HCA legislation and social equity legislation first up in the hearing lineup this year precisely so we could move them sooner rather than later,” Chang-Diaz said.