Municipalities around the state have largely settled their litigation with cannabis dispensaries regarding Community Impact Fees (CIFs), as they should, although it appears one dispensary will be taking its claim to trial following a recent decision in Haverhill Stem LLC v. City of Haverhill. The June 10, 2024 opinion is instructive, as it is the first to analyze issues directly relevant to Great Barrington’s CIFs litigation. In light of this opinion and before Great Barrington’s taxpayers’ dollars go up in smoke, let’s get into the weeds to consider if it is misguided for Great Barrington to continue to defend rather than resolve the pending cases.
As has been discussed previously, prior to applying for a license to sell recreational marijuana, each cannabis dispensary must have a Host Community Agreement (HCA) with its municipality. Like Stem, Great Barrington’s dispensary claims alleging breach of their HCAs are governed by both the original Massachusetts statute and its November 2022 amendment, which provides as follows:
Any cost imposed upon a host community by the operation of a marijuana establishment … shall be documented by the host community and transmitted to the licensee not later than 1 month after the date of the annual renewal of a final license to operate the marijuana establishment … If a licensee believes the information documented by a host community is not reasonably related to the actual costs imposed upon the host community … the licensee may bring a breach of contract action against the host community and recover damages, attorneys’ fees and other costs encompassed in the community impact fee that are not reasonably related to the actual costs imposed upon the city or town.
Stem commenced its suit because the City of Haverhill provided no documentation establishing a CIFs claim. No doubt in response to the lawsuit, the city later provided what the court deemed a “somewhat anemic” analysis justifying its right to $700,000, the entirety of Stem’s CIFs payments. Although minimal, the court held that a jury should determine if the city’s “anemic” analysis was so deficient as to amount to a breach. Consider, then, that while the city provided Stem with at least information establishing costs were incurred, Great Barrington willingly acknowledged it had incurred no costs.
The court issued the June opinion in response to each party’s motion for a summary judgment. Although the court held that certain factual matters require a jury’s determination, cannabis dispensaries will no doubt view the opinion favorably. The opinion provides, first, that “reasonably related costs imposed upon the municipality by the operation of the marijuana establishment” means “connected to a fair or moderate degree”; and second, that the phrase “costs imposed on the municipality by the operation of the marijuana establishment” means “actual costs imposed on the City by the operation of the Haverhill Stem LLC’s business.” Thus, the city has to establish a claim to actual incurred costs, not that it has a fear that cannabis sold by Stem may one day have a currently unknown and unknowable deleterious effect, an issue previously considered in this space. In other words, only actual out-of-pocket costs need apply.
Following this opinion, the town should find the nearest litigation exit because Great Barrington stated to each of the dispensaries essentially as follows:
The Town of Great Barrington has reviewed our records covering the period of November 2021 to the present date, and we have concluded that no significant direct costs have been incurred by the Town related to the operation of your establishment …
Well, that is game, set, and match. There is nothing left to litigate. The court held that a cost report is required to claim CIFs. Here, Great Barrington reported no costs were incurred. The only remaining issue to be determined is why Great Barrington has not returned funds it acknowledges it is not due. Each dispensary suing Great Barrington should staple the June opinion to a summary judgment motion. Case closed.
Based on the opinion, it is plainly unreasonable for Great Barrington to defend rather than settle its CIFs cases. There is surely downside for risk averse and cost-conscious taxpayers if the litigation continues to trial. I spoke with Thomas MacMillan and Kristin Yasenka, Stem’s counsel who also serve as counsel to Calyx Berkshire in its claim against Great Barrington, to ask about the financial ramifications for municipalities that lose at trial. Mr. MacMillan noted that if judgment is rendered following trial, the judgment is subject to an additional 12 percent interest rate from the date of the filing of the complaint. Ouch.
Together, Theory Wellness, Calyx Berkshire, Rebelle, and Farnworth have paid approximately $6.4 million in CIFs to the town, of which the town distributed about $1.4 million to worthy causes. If the claims are tried in 2025 and the town loses as the law requires, the town would owe the dispensaries roughly $7.5 million, but only $5 million in CIFs is in its “free cash” account. That big cannabis hit is without consideration of the attorneys’ fees and costs that will mount as the cases go on. Trial is not an option. And if summary judgment is entered against the town, pre-judgment interest will also be assessed. It is time for the town to extricate itself from this mess.
Two things are becoming increasingly clear. One, based on the facts and law, it is downright dopey not to settle. Two, the town has persistently received bad counsel. In 2022 and 2023, Town Counsel David J. Doneski, of KP Law, advised the town it could distribute CIFs, when a cautious lawyer would have advised that holding the funds would have been prudent. And while Mr. Doneski’s law firm settled Caroline’s Cannabis’ claim against the town of Uxbridge based on similar facts and law, Mr. Doneski advised the town in 2024 to again distribute funds, until the current lawsuits mandated a change of opinion.
Advice concerning the CIFs litigation is only one of Mr. Doneski’s recent missteps. While both Stockbridge and West Stockbridge submitted statements in opposition to the Housatonic Water Works (HWW) and DPU’s proposed rate case settlement, Mr. Doneski submitted no statement on behalf of the town. Rather, at the 11th-hour, Mr. Doneski advised the DPU only that Great Barrington would reserve its statement for the June 20 virtual public meeting, a maneuver to which HWW rightly objected. Surely Mr. Doneski knows that a failure to oppose is tantamount to approval. Last, when questioned at the May 2024 Town Meeting, Mr. Doneski failed to acknowledge a recent change in Massachusetts voting standards requiring only a simple majority to enact certain multifamily and mixed-use development zoning changes. As a result of this misstep at Town Meeting, it appears one of the articles failed to pass.
Mr. Doneski, we are aware of at least these three strikes. It is reasonable to wonder how many strikes a town counsel gets before moving on to other pastures. If you can resolve the litigation by having the town agree to pay no more than CIFs held as “free cash,” you should be able to stay in the batter’s box for at least one more strike, but please keep your eye on the ball.
Survey Monkey Questions
Here is a link to the following Survey Monkey poll: Should Great Barrington settle the Community Impact Fees litigation?
Survey Monkey Results
A recent column asked the following survey questions:
- Do you agree that HWW is due no return on equity?
- Do you agree the Commonwealth should contribute to the utility’s repair?
As of publication, 100 percent of respondents said “yes” to each question.
