Cannabis Industry Files Amended Lawsuit Over Unaccounted Social Equity Funds

KENT COUNTY, Michigan — Six Michigan cannabis companies have filed an amended lawsuit against the city of Grand Rapids, alleging fraud and conspiracy in connection with a city-backed social equity program. The complaint names former City Commissioner Joe Jones and the nonprofit Seeding Justice Grand Rapids as additional defendants, claiming millions of dollars collected from the businesses remain unaccounted for.

The suit was filed on March 17 in Kent County Circuit Court, expanding an original February 2025 lawsuit that targeted the city's Cannabis Social Equity Program.

The Core Allegations

The companies, affiliated with Fluresh LLC, Ascend Cannabis, High Profile and Skymint Cannabis, collectively paid nearly $2.3 million in social equity fees to the city between 2022 and 2024. According to the amended complaint, these funds were meant to go to Seeding Justice Grand Rapids, an independent nonprofit created to collect money for social equity work.

"Our clients have filed an amended complaint expanding their challenge to the legality of the city of Grand Rapids' Cannabis Social Equity Program," Will Thompson, a partner at Varnum LLP who represents the companies, told Crain's Grand Rapids Business via email. "The amended complaint adds new claims and parties, reflecting serious concerns about the management and distribution of millions of dollars in social equity funds collected from cannabis operators that remain unaccounted for."

The companies are seeking a refund of all payments made to the city from 2022 to 2025 for the social equity program, which they claim totals more than $3 million in earmarked funds.

A History of Contention

The city of Grand Rapids previously denied the companies' allegations, calling the social equity program a form of "municipal extortion" that put their operating licenses at risk. A city spokesperson said the city is unable to comment on the March 17 complaint "due to pending litigation."

Jones, via text message, said "nothing has changed on Seeding Justice's end," and that the nonprofit is still awaiting IRS approval for its 501(c)(3) status. The plaintiff companies claim that the tax-exempt status is required for the organization to operate properly.

The March 17 filing represents the latest development in the companies' legal battle that began in February 2025, targeting the city's Cannabis Social Equity Program. The program drew criticism and confusion from the industry since it was first adopted in July 2020.

Originally framed as voluntary, the program gave applicants several options to make equity commitments from their business. These options included having local ownership and residency, and achieving workforce supplier diversity targets. Making the commitments also gave companies priority in the licensing queue during the city approval process.

However, the city commission later amended the social equity program to tie commitments to cannabis operators' special land use that is required for cannabis businesses to legally operate in the city. A company was at risk of losing their operating license if they were out of compliance with their once-voluntary equity goals, according to the plaintiffs' allegations.

The Point System and Coerced Payments

The city determined in August 2022 that most businesses were unable to comply with their initial commitments, and created a point system to allow companies to achieve compliance. One way to get back into compliance was to make contributions to Seeding Justice, an organization the city commission voted to form in February 2022.

Licensees only partially complying with the social equity program could pay up to 3 percent of their gross annual sales to achieve compliance. However, the plaintiff companies allege this has amounted to an unlawful tax that has generated unaccounted for revenue.

The city received $711,364 in transfer payments from cannabis operators as of April 5, 2024, according to the lawsuit that now claims the money was "coerced" from the businesses.

On June 4, 2024, the Grand Rapids City Commission approved an agreement with Seeding Justice in the amount of $711,364 "to serve underserved communities, invest in business development, facilitate employment opportunities and provide grants to the local community in accordance with the city's social equity policy."

Jones told Crain's Grand Rapids Business in April 2025 that the city would transfer the payments to Seeding Justice once the nonprofit was fully established. However, the plaintiffs allege the payments to the city, the city's transfer to Seeding Justice, and the nonprofit's expenditures to date have included "no public accountability," and have cost the companies in lost revenue, diminished property values and legal expenses.

"The City has, in effect, weaponized its social equity policies," according to the March 17 filing. "These policies are nearly impossible to comply with, and as a result, the City has developed a scheme to tax, fine, or penalize cannabis licensees to generate additional revenue for the City."

Jones Pushes Back Against Allegations

Jones, who represented the city's second ward from 2016 to 2022, has strongly denied the fraud and conspiracy allegations directed at him.

"I'm extremely disappointed, I guess we can go ahead and call it righteously indignant, that they would have the gall to include me in the lawsuit," Jones told Crain's Grand Rapids Business Friday afternoon. "They seem to be painting a picture that I'm somehow benefiting from all of this. In fact, a nonprofit board of directors, it's a volunteer position."

Jones claims that the city has not disbursed all of those funds to the nonprofit, and that the only money delivered so far has been to establish Seeding Justice, including consulting fees.

"I can only assume the funds are in a fund that is being administered or held by the city of Grand Rapids," Jones said.

Jones also cast a vote in favor of forming Seeding Justice when he was a city commissioner. He also serves as the vice president of the organization, according to court documents.

The Companies' Defense

Jones argues that the companies willingly entered into the equity program and should bear responsibility for their own commitments.

"I think they willingly knew when they signed the equity agreement everything that came with it," Jones said. "If not, then what can I say to that? That's essentially a mistake they made."

Jones added that the companies benefited significantly from the program by moving up in the licensing queue and getting their operating licenses sooner than others who did not participate.

"I think this all just comes down to them being derelict in their duty, to follow through on the policy and all the requirements that were noted. But they benefited, right? They all got moved up in line, they all got the opportunity to get their license sooner than others," Jones said.

Seeding Justice's Mission

Jones said Seeding Justice is still working through the lengthy process of obtaining its tax-exempt 501(c)(3) status through the IRS. Once organized, the nonprofit's mission is "essentially to invest in community solutions that support economic empowerment for individuals who were systematically affected by cannabis convictions."

"It's really just to benefit those who historically have been affected by cannabis, by the war on drugs," Jones said. "More specifics would be worked out once the nonprofit is formalized."

The Amended Complaint

The amended complaint includes 10 counts against the city, Seeding Justice and Jones, together or individually. The companies claim the city's Cannabis Social Equity Program violates the Michigan Zoning Enabling Act and the Headlee Amendment in the state constitution. They also allege the city is in breach of contract, among other charges.

The claims against Seeding Justice and Jones include common law fraud and common law civil conspiracy. Jones, who is listed as president and treasurer of the organization, received the vote to form Seeding Justice when he was a city commissioner.

The Bigger Picture

This lawsuit represents one of the most significant challenges to Grand Rapids' cannabis social equity program to date. The original 2020 program was designed to promote diversity and inclusion in the growing industry while ensuring that communities historically impacted by cannabis prohibition could benefit from legalization.

However, the evolution of the program from voluntary to mandatory compliance has created ongoing tension between the city and cannabis operators. The companies allege that the city's enforcement of the program has crossed the line into extortion, while the city maintains that the program is a legitimate effort to promote equity and community investment.

As this legal battle unfolds, the outcome could have significant implications for how other Michigan municipalities structure and enforce their own cannabis social equity programs.