Montana Judge Temporarily Halts State Fee Hike for Medical Marijuana Businesses

“There is only one reason why Plaintiffs want to open multiple marijuana industries under the same licence–they are looking to make money.”

By Blair Miller of the Daily Montanan

A district court judge granted last week a preliminary injunction that prevents the State of Montana assessing and collecting higher fees from businesses who operate multiple marijuana dispensaries throughout the state. The changes were passed by the Montana legislature in the final days of this session.

Last Tuesday , the state and attorneys representing three Montana marijuana companies agreed that they would ask Lewis and Clark District Court Judge Mike Menahan for a 60-day preliminary order because renewal fees were due. The businesses said that if the fees had to be paid, they would have to close multiple locations, layoff workers and prevent medical marijuana patients receiving their product. The request was granted on Wednesday.

In a lawsuit originally filed in August, attorneys for the plaintiffs –Granite Peak Holdings Inc. doing business as Elevated, TSB Montana LLC, and MariMint LLC — challenged the new fee structure that was passed by an amended version House Bill 903 during the final two weeks 2023 legislative session.

Attorneys for plaintiffs and the Department of Justice have been arguing for several months about whether or not the new fee structure implemented by the Legislature was illegal. They also argued over the constitutionality of another law passed by the Republican supermajority Legislature, Senate Bill 201. This was intended to set a New burden in Montana for preliminary injunctions.

In the last two weeks of this spring’s session, legislators amended HB903 to include a fee structure that is cumulative for each dispensary owned and operated by a company. The previous law charged a $5,000 license fee for each dispensary, regardless of whether it was the first or 10th.

The language was changed by lawmakers so that each additional location would incur a fee of $5,000. This means a second location would have a fee of $10,000, a third location a fee $15,000, and so on.

According to law, Montana Department of Revenue is not allowed to impose taxes or fees beyond the amount necessary to cover costs of regulating state marijuana industry. Plaintiffs in the lawsuit claim that the fees and taxes the state will collect under the revised law are far more than the cost of regulation.

Attorneys representing the three marijuana companies, which each operate multiple dispensaries throughout the state and some are currently building or renovating new buildings to open others, as well as employing hundreds of Montanans, say their fees will increase by tens or hundreds of thousands of dollars every year.

The renewal fees for all three companies were due in the last month and a quarter. Although the companies can pay a 20% down payment, the say that they would have to close their stores and layoff employees to make the down payment based on the cumulative rate structure.

In their latest amended complaint, attorneys stated that “Enforcement” would force Plaintiffs to stop many of their operations in the state. It would also jeopardize their licenses with the state which would lead to the loss in interest of those licenses. It would also cause hundreds of job losses and expose Plaintiffs as liable for their inability of continuing to honor their leasehold interests in these dispensaries.

The legislators also claimed that the amendments were not discussed on the floor of the House or Senate, despite the fact that the bill had been amended following the committee hearings, where the public was able to comment. The House passed the final version of the bill on the last day of the legislative sessions by a 49-47 margin.

The Attorney General’s Office had argued before the agreement was filed to place a 60-day hold on the transaction. They argued that because Montana is the 4th largest state by land mass, it’s Department of Revenue must regulate the industry in a large area and therefore needs additional money.

In a previous brief, the state said that the taxpayers in Montana shouldn’t be held responsible for the time and resources spent on this.

The state also argued plaintiffs’ claims that they were injured by the cumulative fees would not stand up, because they could simply choose to operate one marijuana dispensary rather than multiple, and the lawsuit was about money.

The state had previously stated in an October 24, filing that “Plaintiffs” only wanted to open multiple marijuana industry locations with the same license because they wanted to make money. “Logic dictates if $5,000.00 is required to open a new marijuana industry location, it’s not going to be profitable and shouldn’t have been opened at all. Plaintiffs are only looking to increase their profits at the expense taxpayers.”

On November 3, however, the plaintiffs submitted a new brief which also challenged SB 191. The lawmakers had stated that SB 191 was an attempt to use the same standards in a state-level preliminary injunction as are used in the federal courts system. Attorneys for dispensaries, however, say that SB 191 was also unconstitutional as lawmakers dictated court procedures which should only be in the hands of the judiciary.

Menahan also signed it on the same day. The injunction was to be extended not just to the plaintiffs but also all licensees of dispensaries.

Menahan’s order allows him to extend the preliminary restraining order beyond 60 days if the parties agree. However, the remainder of HB 903 remains in effect. The order also reinstates the old structure fees for the moment and states that the Department of Revenue must return any fees collected if the law is permanently overturned.

Both sides said that they were working to negotiate a settlement, which they hoped to reach within the next 60-days.

The story was originally published by Daily Montanan.