Hoover v. Michigan Department of Licensing and Regulatory Affairs

          OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS (ECF NO. 10) AND DENYING PLAINTIFF'S REQUEST FOR LEAVE TO AMEND THE COMPLAINT

          PAUL D. BORMAN UNITED STATES DISTRICT JUDGE.

         On June 5, 2019, Plaintiff Sherry Hoover filed her Verified Complaint for Declaratory Judgment and Injunctive Relief against Defendant Michigan Department of Licensing and Regulatory Affairs. (ECF No. 1.) That same day, Plaintiff also filed an Emergency Motion for Ex Parte Temporary Restraining Order, Preliminary Injunction, and Declaratory Relief (ECF No. 2, Pl.'s TRO), which was subsequently denied in an Opinion and Order issued on July 18, 2019, because the Court found that Plaintiff had demonstrated no likelihood of success on the merits of her claims. (ECF No. 23.) Defendant now moves to dismiss Plaintiff's Complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). The matter is fully briefed and the Court held a hearing on January 14, 2019. For the reasons that follow, the Court GRANTS Defendant's motion to dismiss and DENIES Plaintiff's request in her response brief for leave to amend her Complaint.

         INTRODUCTION

         In this action, Plaintiff Sherry Hoover asks this Court to require the Defendant Michigan Department of Licensing and Regulatory Affairs (“LARA”) to “modify and extend” certain temporary and now-expired Emergency Rules that were previously put in place under the Medical Marihuana Facilities Licensing Act (“MMFLA”).^[1] Plaintiff seeks an extension of these expired Emergency Rules so that she can continue to purchase untested marihuana from a licensed dispensary.

         In short, under Michigan law, licensed provisioning centers were permitted to sell only safety-tested marihuana and to purchase product only from licensed growers and processors.^[2] Pursuant to two Board resolutions setting a March 31, 2019 deadline, licensed provisioning centers were able to purchase untested product outside the regulated system (as pertinent here from “caregivers” who purchase and supply untested product) without facing disciplinary action. After the March 31, 2019 deadline, licensed provisioning centers are no longer able to purchase and sell untested marihuana outside the regulatory system. As a result, according to the Plaintiff's Complaint, the caregivers have no market for the product they obtain and the provisioning centers are unable to keep up with demand if required to sell only tested product from licensed processors and growers. As a consequence, Plaintiff alleges, she has been without access to her medical marihuana medication since May 15, 2019. Plaintiff asks this Court to order LARA to “modify and extend” long-expired emergency rules to enable her to purchase marihuana outside the bounds of state law.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Overview of Marihuana Regulations in Michigan^[3]

         Marihuana is an illegal Schedule 1 controlled substance under federal law. 21 U.S.C. § 812(c). Marihuana is also listed as a schedule 1 controlled substance under Michigan law, Mich. Comp. Laws § 333.7212(1)(c), with the exception that the drug is categorized in schedule 2 “if it is manufactured, obtained, stored, dispensed, possessed, grown, or disposed of in compliance with this act and as authorized by federal authority.” Mich. Comp. Laws §§ 333.7212(2), 333.7214(e).

         In 2008, voters passed the Michigan Medical Marihuana Act (“MMMA”), Mich. Comp. Laws § 333.26421 et seq., by ballot initiative. The MMMA did not create an affirmative right to use or possess marihuana but created protections under state law for medical use to qualifying patients and their caregivers who comply with the MMMA's requirements. Mich. Comp. Laws §§ 333.26422(b); 333.26424. LARA was charged with administering the MMMA and maintaining a cardholder registry. Mich. Comp. Laws § 333.26426.

         In 2016, the Michigan Legislature enacted the Medical Marihuana Facilities Licensing Act (“MMFLA”) “to license and regulate medical marihuana [facilities].” Mich. Comp. Laws § 333.27101 et seq. The Medical Marihuana Licensing Board (“the Board”) was created within LARA and charged with implementing and enforcing the MMFLA. Mich. Comp. Laws § 333.27301(1). The MMFLA provides protections for those granted a license and engaging with activities within the scope of the MMFLA. Mich. Comp. Laws § 333.27201. Under the MMFLA, licensed provisioning centers are authorized to purchase safety-tested marihuana only from licensed growers and processors and are authorized to sell it in limited quantities to patients and caregivers who are registered under the MMMA. Mich. Comp. Laws § 333.27504.

         In November 2018, Michigan voters initiated legislation to legalize non-medical marihuana use, possession, cultivation, and sale by adults age 21 and over. Mich. Comp. Laws § 333.27951 et seq. The Michigan Regulation and Taxation of Marihuana Act (“MRTMA”) sets possession and use limits and creates an additional layer of state licensing and regulation for commercial marihuana establishments. Mich. Comp. Laws §§ 333.27955, 333.27959. The State issued the first five recreational marihuana licenses on November 19, 2019, and, according to Defendant's supplemental brief, the MRA has recently issued additional medical marihuana facility licenses as well as adult-use (recreational) marihuana establishment licenses. (See ECF Nos. 32-2 and 32-3.)

         LARA issued four sets of emergency rules under the MMFLA, in December 2017, May 2018, September 2018 and October 2018, the last set of which expired in March 2019. (ECF Nos. 10-2 through 10-5.) None of these emergency rules allowed provisioning centers to obtain marihuana products directly from caregivers or sell it to patients without prior testing. (See id.) According to Plaintiff, however, the Emergency Rules allowed LARA and the Board to adopt two resolutions, one on January 16, 2019 and another on March 21, 2019. (Compl. ¶¶ 15-16; ECF Nos. 10-7 to 10-8.) The January 16, 2019 Resolution expressed the Board's intent to not discipline a licensee for purchasing “marihuana products that have not been tested in full compliance with the law and administrative rules, ” and selling the untested products to patients, if the licensee obtains the patient's consent in writing on a LARA-provided form, until March 31, 2019. (Compl. ¶ 15; ECF No. 10-7 at 2.) The March 21, 2019 Resolution reconfirmed the March 31, 2019 deadline. (Compl. ¶ 16; ECF No. 10-8.)

         In March 2019, Governor Gretchen Whitmer issued an executive order abolishing the Board and LARA's Bureau of Marihuana Regulation (“BMR”) effective April 30, 2019. Mich. Comp. Laws § 333.27001(1)(b), (e). The Governor's Executive Order transferred all powers, duties, functions and responsibilities of LARA, BMR, and the Board to a newly created Marijuana Regulatory Agency (“MRA”). Mich. Comp. Laws § 333.27001(1). The MRA was “created as a Type I agency within the Department of Licensing and Regulatory Affairs.” Mich. Comp. Laws § 333.27001(1)(a), and all of LARA's “authorities, powers, duties, functions, and responsibilities . . . under the [MMA, MMFLA, MRTMA]” among other statutes were transferred to the new MRA. Mich. Comp. Laws § 333.27001(1)(d). The MRA exercises its powers and duties independent of LARA's direction. “When any board, commission, or other agency is transferred to a principal department under a type I transfer, that board, commission or agency shall be administered under the supervision of that principal department. Any board, commission or other agency granted a type I transfer shall exercise its prescribed statutory powers, duties and functions of rule-making, licensing and registration including the prescription of rules, rates, regulations and standards, and adjudication independently of the head of the department. Under a type I transfer all budgeting, procurement and related management functions of any transferred board, agency or commission shall be performed under the direction and supervision of the head of the principal department.” Mich. Comp. Laws § 16.103 (emphasis added).

         B. Plaintiff's Allegations

         Plaintiff alleges that she suffers from Stage 4 cancer and that her doctor prescribed medical marihuana for her. (Compl. ¶¶ 7-8.) Plaintiff obtained a medical marihuana patient identification card from LARA. (Id. ¶ 7.) Her medical marijuana medicines include CBD/THC gummy cubes, THC extreme medicated pain balm, cannabis flower Sunshine Kush, Purple Punch Rick Simpson Oil, and specialty ribbon chews 200mg THC chill medicated lozenges. (Id. ¶ 9.) She alleges, however, that the supply of medical marihuana is insufficient because “[a] de minimus amount of grower, processor, transport, and testing facilities have been approved by LARA to operate under the MMFLA” and that a “lack of access to medical marijuana” has adversely affected her health. (Id. ¶¶ 10-12, 20.) Specifically, she contends that “LARA has only granted provisioning center licenses to 94 operations, grow licenses to 68 operations, processing licenses to 12 individuals, secure transporting licenses to seven operations, and testing licenses to only four safety compliance centers, ” which is “clearly insufficient to supply the tens of thousands of pounds [of] medical marijuana for the 300, 000 Michigan medical marijuana patients per month, leaving medical marijuana patients without a means to fulfill their medicinal needs.” (Id. ¶¶ 27-28.) Plaintiff alleges that the lack of access to her medical marihuana regimen affects her health and well-being by failing to alleviate her pain, nausea, insomnia and decreased appetite from chemotherapy treatments. She claims that her health and quality of life are deteriorating. (Id. ¶¶ 8-11.)

         According to Plaintiff, LARA established Emergency Rules, with regard to the MMFLA, to prevent harm to Michigan residents “due to the delays … experienced in reviewing applications under the MMFLA” “until the medical marijuana supply-chain is established in Michigan.” (Id. ¶¶ 13-14.) She contends that these Emergency Rules allowed for LARA and the Board to adopt resolutions that allowed licensed provisioning centers to purchase and sell untested marihuana outside the regulatory system, but that, with the expiration of the Board Resolutions on March 31, 2019, licensed provisioning centers are no longer able to do so. (Id. ¶ 15-16.) This, Plaintiff claims, has resulted in her inability to access her medical marihuana medications. She asserts that “[w]ithout such supply of product the medical marijuana industry will end.” (Id. ¶ 23.)

         Plaintiff alleges that medical marihuana continues to be sold to unlicensed facilities who are unregulated and do not need to purchase tested marihuana under the MMFLA, but that if she purchased from, or was even present in, one of these unlicensed operations she risks losing her medical marihuana card. (Id. ¶¶ 31-32.) She contends that LARA can “cure” this issue by “modifying and extending the Emergency Rules to December 31, 2019 to allow Plaintiff to purchase untested medical marihuana from licensed caregivers directly from licensed provisioning centers.” (Id. ¶ 33.) In her Complaint, Plaintiff asks the Court to declare that the MMMA represents an unconstitutional violation of her due process rights under the United States and Michigan constitutions, and seeks declaratory and injunctive relief requiring LARA to “extend[] the Emergency Rules” to allow licensed provisioning centers to purchase marihuana from unregulated caregivers and sell it untested to patients until December 31, 2019, or until Plaintiff and others can “obtain sufficient … supply” via the newly regulated supply chain. (Id. ¶¶ 46-72.)

         C. Plaintiff's Emergency Motion for Ex Parte Temporary Restraining Order, Preliminary Injunction and Declaratory Relief is Denied

         On June 5, 2019, the same day Plaintiff filed her Verified Complaint for Declaratory Judgment and Injunctive Relief, she also filed an Emergency Motion for Ex Parte Temporary Restraining Order, Preliminary Injunction, and Declaratory Relief. (ECF No. 2, Pl.'s TRO.) The Court allowed briefing on Plaintiff's motion and held a hearing on July 17, 2019. On July 18, 2019, the Court issued an Opinion and Order denying Plaintiff's motion, finding that Plaintiff had no likelihood of success on the merits of her claims because Defendant LARA is a state agency entitled to absolute Eleventh Amendment immunity. (ECF No. 23.)

         D. Defendant's Motion to Dismiss

         Defendant filed its Motion to Dismiss on June 26, 2019, arguing that Plaintiff's Complaint should be dismissed for the following reasons: (1) Plaintiff's claims are barred because LARA is immune from suit; (2) the Court lacks subject matter jurisdiction over Plaintiff's claims because they fail to allege a colorable federal question; (3) Plaintiff lacks standing to bring this action because her injuries are not traceable to or redressable by LARA; (4) Plaintiff's claims lack substantive merit; (5) the Court should abstain ...