Feb. 5—BENZONIA — Lake and Leaf is a small recreational marijuana shop on U.S. 31 that opened in the summer of 2020, inside a vacant building that once housed a hair salon and an employment agency.
“It was destroyed,” Matt Rothermel, co-founder and president, said of the building. “Vandals had gotten in. There were holes in all the walls. There were mice.”
Rothermel, a few family members, some friends and then some friends of friends, invested in the business, helped rehab the facility, secured the necessary permits and licenses, and today the company has 27 full-time employees.
“We want to be part of that story, the one where a small biz moves in, takes over an eyesore and makes it productive,” Rothermel said.
State regulators and policymakers have said they want to structure Michigan’s marijuana industry to be inclusive — offering opportunities for micro-, small and medium-sized businesses like Lake and Leaf, as well as to entrepreneurs who live in communities previously targeted by the War on Drugs.
Here in the north, small start-ups staking their livelihood on marijuana retailing say they’re being squeezed out by corporations with pockets deep enough to open more stores than communities can support —and to sue when they don’t get what they want.
Michigan voters legalized medical use in 2008 and recreational use in 2018, but federal law still bans its use.
That means banks can’t lend to marijuana businesses, which gives big companies with cash reserves an advantage over smaller entrepreneurs.
Rothermel and other proprietors like Steve Ezell, who owns Interlochen Alternative Health, are quick to offer up one name: Lume Cannabis Co.
Lume, which also does business as Attitude Wellness, is based in Troy, has more than 30 retail locations, one of which is in Honor, about 7 miles northeast of Lake and Leaf.
Rothermel said Lake and Leaf is “vertically integrated” — they grow, process and retail — but have still had to cut prices to compete.
“Their game plan looks like they’re flooding the market with as many shops as they can and the ones that don’t make it, they just close them down,” Rothermel said, of Lume. “I hear they’re pretty active in the U.P. now with their lawyers.”
Lume did not return a call seeking comment or respond to questions emailed to the company through its website.
A store employee in Honor previously referred a reporter’s questions to the corporate office; anecdotally, Lume customers said they appreciated the store’s variety of products and competitive prices.
Court records show Lume sued the City of Menominee after officials there limited available recreational licenses to two, and awarded them to Rize and The Fire Station, even though Lume’s application was highly scored.
Lume’s attorney’s argued city officials had violated Michigan law by conducting scoring discussions out of the public eye and by giving weight to factors unrelated to whether an applicant would adhere to state statutes.
Rehabbing a vacant property, like Lake and Leaf did in Benzonia, and which some communities opt to give points for in its scoring determination, wasn’t legal, Lume argued in court records.
“Lume has definitely become the torchbearer in suits like this,” said Matthew Cross, an attorney with Plunkett Cooney, who defended Menominee in what became a consolidated lawsuit with Lume and four other marijuana companies.
“They want to make the argument that they’re best suited to comply with the Act because they have locations all over the state,” Cross said.
“By their logic,” Cross added, “they would win every time they applied, which would eventually lead to a handful of big retailers or a monopoly. That can’t be what the statute contemplated.”
A 41st Circuit Court judge last summer dismissed Lume’s Open Meetings Act claims.
Judge Mary B. Barglind ruled the scoring committee was simply tasked with evaluating each application, not making decisions, so it was not a public body and not subject to OMA rules.
Barglind also dismissed constitutional claims made against Menominee’s marijuana ordinance, which prioritizes awarding licenses to companies committed to economic development and local employment — factors the plaintiffs had called in court, “arbitrary and capricious.”
Lume has made similar arguments in other state and federal courts, including in 2021, when the company sued the tiny downstate village of Pinckney, population 2,441.
Elected officials there had prohibited sales of recreational marijuana inside village limits, then voters passed a ballot initiative triggering a local ordinance which allowed for a single retail license.
The scoring of Pinckney’s applications gave extra points for rehabbing a vacant building, using green business practices and living in the community.
Lume was among three applicants, scored the lowest (65 out of a possible 85 points), and Pinckney awarded its license to The Means Project, which, court records show, received a perfect score.
U.S. District Court Judge Gershwin A. Drain ruled municipalities are afforded great latitude by the state marijuana statute, which says, if there is a competitive process to award licenses, the municipality shall select applicants “who are best suited to operate in compliance with this act within the municipality.”
If officials think “best-suited” means taking an eyesore and putting it back on the tax roles, so be it, the judge ruled.
Cross said he has both legal and practical reasons for hoping more municipalities consider arguing these cases in court, instead of settling outside of it.
“You dig your heels in because you think you’re right on the law, but also because we’re never going to get clear answers to these questions if, whenever there’s legal pressure, a community relents,” Cross said.
Sometimes, the mere possibility of a lawsuit has been enough to steer policy.
In Interlochen’s Green Lake Township, recent discussion on how to handle a competitive process for limited recreational licenses never made it past the township board.
That’s because, after Ezell successfully championed a ballot proposal allowing for two recreational retailers in the township, officials passed an ordinance with no limit.
Discussion during several public township meetings centered on the possibility of lawsuits by cannabis companies that were not chosen so, in a 5-1 vote, trustees agreed not to set a limit at all.
“I had plans to build a new building on property I own west of town, to add employees and make a significant investment,” Ezell, who has applied for a recreational license, said. “Why would I do that now, when Lume could just come in and build right next to me?”
Ezell said, for now, if awarded a recreational license, he’ll stay in the space he’s renting for his medical marijuana business near Interlochen Corners.
The size threat, say proprietors like Rothermel and Ezell, is real.
There is a video on Youtube, posted by a Michigan television station, showing a reporter touring Lume’s new $70 million growing facility in Evart which Rothermel, in spite of himself, called “awesome.”
“They have a half-million-dollar machine that rolls joints. We pay someone $16, $17 an hour to sit at a table and roll joints,” Rothermel said, shaking his head.
Lume is the largest single state cannabis operator in the country; a Lume employee states, on the video, the company expects to have 100 stores open in Michigan by 2024.
Rothermel was asked his response to the argument that this is exactly how capitalism works in other industries: Companies with money who meet customers’ needs often expand faster and are able to dominate the market.
He said that is true — and even fair.
“I’m a capitalist and I get that,” Rothermel said.
“And in our capitalist system, our purchase is our vote,” he added. “Do you want to vote for one company’s decisions about the market — or do you want to vote to have thousands of small, local businesses, and bigger companies, too, make those decisions?”
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