SALEM — A Lawrence Superior Court judge has thrown out what remained of a lawsuit filed on behalf of an unsuccessful applicant for a marijuana host community agreement in Salem, finding that the city was within its rights not to enter into negotiations with Mederi Inc.
“At bottom, the (host community agreement) application process was far from the ‘backroom deal’ Mederi claims,” Judge Jeffrey Karp wrote in his decision, released Thursday. “The (city’s) decision to deny Mederi an opportunity to enter into an HCA is supported by a rational basis and is neither arbitrary nor capricious.”
Nor does the city’s decision not to enter a host agreement with Mederi usurp the authority of the Cannabis Control Commission in deciding whether to issue licenses, given that the state commission does not address issues of local concern, such as traffic, neighborhood impact and security.
Mederi was vying for one of the five available host community agreements the city made available, which would have then allowed them to seek a retail license from the state’s Cannabis Control Commission. When they didn’t make the final cut, they went to court last year.
The decision comes nearly two months after a hearing on cross-motions for judgment on the pleadings, which took place over two days on Oct. 10 and Oct. 30.
Karp found that the city’s evaluation process was not akin to a quasi-judicial proceeding — an issue that had been raised by lawyers for Mederi, who had argued that officials did not have a rational basis for the decision.
The city’s evaluation process looked at each application’s strengths and weaknesses in four categories, including the proposed site, traffic and parking, security and the firm’s track record of experience and financing.
The city’s review committee decided that three other applicants, and a fourth potential applicant, were stronger proposals.
The committee also came to the conclusion that Mederi’s “lack of sufficient capitalization” was a concern, as well as the firm’s lack of experience.
The city then proceeded to notify the applicants who had passed their initial review that it would be willing to enter negotiations for a host community agreement, starting with Seagrass, then Atlantic Medicinal Partners, INSA, NS Alternatives and Witch City Gardens that they were in contention for the three remaining host community agreements.
Witch City had not initially been among the top contenders, but city officials concluded that other factors, including geographic diversity and a potential positive impact on the neighborhood by replacing an existing business on Jefferson Avenue.
Mederi and two other applicants were told that they would not be considered for the three remaining licenses.
Mederi sued on the grounds that the city had made substantial errors of law in its decision. But Karp concluded that the review process was not made in any sort of adjudicatory or evidentiary proceeding.
“It documents only the opinions and recommendations of the review committee,” Karp wrote in his 29-page ruling, “which the mayor in the exercise of her discretion was free to weigh.”
“In fact, the act’s broad parameters regarding the content of (host community agreements) necessarily involves the exercise of discretion on the part of city officials,” Karp wrote.
Karp said Mederi attempted to put the review committee’s memo under a “microscope” as to the panel’s areas of focus, something he called “misplaced.”
“First, it is important to note that the review committee memo is not the (city’s) final decision,” Karp wrote. “Thus, any inconsistencies in it … do not render the mayor’s ultimate decision arbitrary or capricious.”
The judge also said that it’s not the court’s role to “second-guess” the mayor’s decision-making process, given that each of the eight applications had their own strengths and weaknesses.
“This is not a case where the applicants with the most boxes checked ‘won,'” Karp continued.
Karp further found that, having approved two other Highland Avenue locations, the city had a “rational basis” to consider applications for other locations in Salem.
“With six of the eight applicants proposing locations on Highland Avenue, it was inevitable that some of those applicants would be rejected because of their location, even if they were otherwise well[-qualified,” Karp wrote. Mederi was one of four proposed marijuana sellers on Highland Avenue.
The judge also found that the two successful applications for Highland Avenue locations were more experienced, “and could reasonably have been viewed by the mayor as being more capable of navigating the complexities of the new retail marijuana industry than Mederi.”
Karp rejected Mederi’s contention that the city based its decisions on “which applicants could best fill the city’s coffers” and that the city intended to charge higher fees than allowed by law. Karp noted that one of the successful applicants, Witch City, was willing to pay only the minimum amount required by the city.
Karp also found that the city’s decision did not exceed its authority or infringe on the rights of the state Cannabis Control Commission.
Mederi had pointed to an Appeals Court decision last year involving the town of Salisbury’s denial of a permit for a Clear Channel billboard that would have also required state permission. But Karp concluded that unlike in the Salem dispensary dispute, Salisbury officials had relied on legally irrelevant grounds, and that Mederi’s reliance on the decision is misplaced.
In the Mederi case, the judge found, the Cannabis Control Commission plays a different role in the decision-making progress because it leaves many issues regarding the operations of marijuana businesses to the local community, including traffic or burdens on particular neighborhoods.
Michael Tucker, an attorney for Mederi, said he is still reviewing the decision.
Tucker said he takes a different view on the relevance of the Clear Channel decision, one area that could be an avenue of appeal, and noted that Karp used a different standard of review than the judge who had ruled on earlier motions in the case, Judge Timothy Feeley.
Mayor Kim Driscoll did not immediately return a message seeking comment on the ruling.
Courts reporter Julie Manganis can be reached at 978-338-2521, by email at firstname.lastname@example.org or on Twitter at @SNJulieManganis.