A Montana judge has ordered state cannabis regulators to delay the enforcement of steep new fees for marijuana dispensary business licenses while a suit challenging the new fee structure is heard by the courts. The 60-day preliminary injunction was ordered by Lewis and Clark County District Court Judge Mike Menahan, with the move agreed to by attorneys for the state and three cannabis businesses that filed the legal action in August.

The plaintiffs in the case are challenging new fees established by the Montana Department of Revenue’s Cannabis Control Division under a law passed by the state legislature earlier this year. Under the new fee schedule, business owners are required to pay a fee of $5,000 for the first dispensary, with the fee increasing by $5,000 for each additional dispensary license.

“This means a license’s initial dispensary fee is $5,000, its second dispensary renewal fee is $10,000, its third is $15,000, and so on,” Angela LeDuc, an attorney for the plaintiffs, wrote in court documents filed last month, as reported by the Independent Record.

The owners of the businesses that brought the suit—Granite Peak Holdings, Inc. doing business as Elevated; TSB Montana LLC, and MariMint LLC—say that if the new licensing fees were to go into effect, they would be forced to close several dispensary locations. Such a move would result in layoffs for the employees who work at the shuttered weed dispensaries and a lack of access to medical marijuana for patients, the plaintiffs argued. Elevated noted in court documents the license fees for 10 of its dispensaries would increase by 680%, from $50,000 to $280,000.

“Enforcement would require Plaintiffs to cease many of their business operations through the state; it jeopardizes their licensure with the state and would result in the loss of their interest in those licenses; it would cause the loss of hundreds of jobs and expose Plaintiffs to liability based on their inability to continue to honor their leasehold interest in those dispensaries and it would jeopardize the medical marijuana patrons that they serve,” attorneys for the plaintiffs wrote in their amended complaint, according to report from the Daily Montanan.

State Attorneys Defend New Fees

Attorneys for the Montana Department of Justice and the lawyers for the plaintiffs have spent months arguing if the new fee structure is legal. Under state law, the Montana Department of Revenue is prohibited from collecting fees beyond the costs of regulating the cannabis industry. Attorneys for the plaintiffs say that the new fees are far more than the revenue department’s costs to regulate the marijuana program.

Attorneys for the state countered that because Montana is the fourth-largest state in the union by land mass, regulators need more funding to adequately regulate the state’s marijuana industry.

“All of this takes time and resources for which the taxpayers of Montana should not be on the hook,” the state argued in a brief opposing a preliminary injunction.

The state’s attorneys also argued that the plaintiffs’ claims of injury by the new fees should not be upheld by the court because the business owners can avoid the charges by simply operating only one dispensary. The argument also suggested that the legal action was filed purely over money.

“There exists one reason and one reason only that Plaintiffs seek to open different marijuana industry locations under the same license – they want to make money,” the state argued in an October 24 court filing. “Logic dictates that if a fee of $5,000.00 for a new location is going to make or break that location, then it is not a profitable location and should not be opened in the first place. Plaintiffs just want to make more money at the expense of the taxpayers.”

The plaintiffs are also challenging the new fees on procedural grounds, arguing that they were added to the bill without an opportunity for public comment after the legislation had been approved in committee. Other legal issues in the case revolve around separate legislation that changes the conditions for preliminary injunctions like the one issued by Menahan.

Last week, attorneys for both sides agreed to a 60-day preliminary injunction to pause enforcement of the fees while the lawsuit is litigated. Under the agreement, the new license fees will be put on hold for all licensees, not just the dispensaries owned by the plaintiffs.

Menahan’s order allows him to extend the injunction beyond its current 60 days if both sides agree to an extension. The order also reinstates the fee structure in place before the new hikes and directs the Department of Revenue to return any of the new fees already collected. 

Attorneys for both sides in the case told the judge they are negotiating and hope to reach a settlement in the next 60 days.

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