Posted by: Patricia Salkin | March 24, 2019

MI Appeals Court Finds that Refusal to Rezone Medical Marijuana Property was Arbitrary and Capricious

This post was authored by Amy Lavine, Esq.

A Michigan case decided in March held that a city’s refusal to rezone property used as a medical marijuana dispensary was arbitrary and capricious, emphasizing that the rezoning would place the property in the same classification as other nearby parcels, would not result in any negative impacts to the neighborhood, and had been recommended by the zoning administrator and the planning board. The court also declined to adopt the city’s post hoc rationalization for its denial of the rezoning. Gamut Group owned a building that was used as an unlicensed medical marijuana dispensary. The property was zoned E-2, which permitted “local convenient type shopping,” but a zoning amendment passed in 2017 restricted medical marijuana uses to zones F, F1, G2, H, and I and required them to be licensed. In anticipation of these zoning changes, Gamut Group requested that its property be rezoned to the F designation so that its dispensary use could continue. The rezoning request was given a positive recommendation from the zoning administrator and planning board, there was no public opposition, and the three other lots at the property’s intersection had already been rezoned to the F designation. Despite these circumstances, however, the city council ultimately denied Gamut Group’s rezoning request. Gamut Group then filed this declaratory judgment lawsuit, claiming that the rezoning denial violated its rights to substantive due process. The circuit court found that the city had treated its property differently than the other properties at the intersection and without any reasonable government interest for doing so, and it rejected the city’s defense that Gamut Group could not prove any damages until it had obtained a dispensary license, finding that it was reasonable for a property owner to seek rezoning prior to submitting a license application.

The court began its analysis on appeal by noting that property owners alleging substantive due process violations must show that the ordinance “serves no rational relation to the public health, safety, welfare and prosperity of the community,” and that “the governmental conduct [is] so arbitrary and capricious as to shock the conscience.” This standard, the court explained, applied equally to substantive due process challenges to existing zoning ordinances as well as rezoning denials, and it accordingly rejected the city’s argument that Gamut Group did not have a constitutionally protected interest in its rezoning request.

The court also emphasized that substantive due process claims are distinct from zoning ordinance confiscation challenges, and it rejected the city’s argument that Gamut Group could not prove its claim because the rezoning denial did not eliminate all reasonable uses of the property. Landowners, the court explained, are not required to prove that all reasonable uses of a property will be precluded unless their claims allege a taking of property, and Gamut Group in this case did not, making it unnecessary for it to plead or prove a loss of all reasonable uses of the property.

The city next argued that the rezoning denial was reasonable, relying on evidence that the property had been zoned E-2 since 1970 and that the three other properties at the intersection contained uses consistent with an E-2 designation. But the court emphasized that the reasonable governmental interest standard requires something more, and that a zoning ordinance “must bear a direct and substantial relation to the objectives of police power, the preservation of the public health, safety, morals, and general welfare, of the community as a whole.” Although the city explained before the circuit court that the zoning changes were intended to move dispensaries into business corridors and away from residential neighborhoods, the court noted that it failed to articulate any reasons for its denial at the time of its decision. The court also emphasized that the city had allowed the dispensary to operate since 2011 and that the zoning administrator had determined that the rezoning would not have any negative effects on traffic, pedestrians, environmental concerns, or future development patterns. The circuit court had also determined that the property was located in a business corridor, not a residential area, and “so the belated explanation for the city council’s rezoning denial could not be genuine…. Rather, the denial of the rezoning request seemed to be political.” Accordingly, the court could find no reasonable government interest to support the city’s denial and was left with the conclusion that it was instead arbitrary and capricious.

Gamut Group v. City of Lansing, 2019 WL 1265161 (Mich. App. 3/19/19).

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