Michigan Court Upholds $6M Cannabis Lease Dispute Ruling

A Michigan appellate court has upheld most of a lower court’s ruling requiring KISA Enterprises MI LLC to pay under a $52,500-per-month lease for a cannabis facility it never used. The case centers on a 10-year commercial lease for a 45,000-square-foot building in Morenci, Michigan, originally owned by KISA and later sold to 16 Holdings LLC.

After selling the property in 2020, KISA sought to reenter the cannabis cultivation market and negotiated to lease back the space in July 2021. The company argued that the lease functioned only as a “placeholder” agreement contingent on securing a joint venture with a multistate operator, MariMed Inc. However, when the partnership failed to materialize, KISA sought to invalidate the lease, claiming there was no binding contract.

The Lease Dispute

KISA’s position was that all parties understood the agreement depended on MariMed joining as a guarantor and that without the larger operator’s involvement, the lease was never intended to take effect. According to court records, KISA’s CEO, Mark Silver, pursued the deal to facilitate MariMed’s potential cultivation operations in Michigan.

KISA’s counsel, Timothy Diemer of Jacobs & Diemer PC, maintained that “[e]verybody knew a third party joint venture partner was necessary for this agreement.” The defense emphasized that the lease included a signature space for a guarantor, which they said reflected an expectation of MariMed’s participation.

16 Holdings, represented by Mary Massaron of Plunkett Cooney PC, rejected that argument, asserting that the executed contract was unconditional and legally binding. The company contended that KISA’s failure to occupy the space did not nullify its financial obligations.

The Court’s Ruling

The Michigan Court of Appeals ruled that the written lease contained no language conditioning its enforceability on a joint venture or third-party guarantor. The three-judge panel found that the signed document and the parties’ actions demonstrated a valid and enforceable agreement.

“The trial court was not required to understand the minds of the parties,” the panel wrote. “Rather, the trial court was required to look at the words the parties expressed in the agreement and their actions.” The panel concluded that “there was a meeting of the minds and a valid lease agreement signed by both parties.”

As a result, the appellate court affirmed the trial court’s finding that KISA breached the lease by failing to make payments. However, the panel reversed the $6.7 million damages award, holding that the trial court erred in awarding the full value of future rent payments plus interest. Under Michigan law, damages must reflect the present cash value of lost future payments, not the total amount due over the lease’s term.

Legal Implications

The decision reinforces Michigan’s contract law principles emphasizing the written word over parties’ unexpressed intentions. Courts continue to apply a strict construction approach to commercial contracts, particularly in contract disputes where one side alleges informal conditions not reflected in the document.

The ruling also provides a useful illustration for practitioners handling summary judgment motions, as the appellate panel highlighted the sufficiency of written agreements in establishing contractual intent without extrinsic evidence.

From a business perspective, the case underscores the risks faced by cannabis operators structuring speculative leases in anticipation of partnerships or license approvals. Michigan’s courts appear disinclined to infer contractual contingencies not memorialized in writing, even in rapidly evolving industries like cannabis.

The Path Forward

The case will return to the trial court for recalculation of damages consistent with the appellate ruling. The lower court must determine the present value of the lease’s unpaid rent rather than the total contractual balance, ensuring compliance with Michigan’s prohibition on overcompensatory awards.

Although KISA avoided the full $6.7 million liability, the company remains responsible for substantial financial obligations under the lease. The appellate decision affirms that commercial tenants cannot evade lease duties based on informal understandings or failed third-party arrangements.

Case Details

Case Name: 16 Holdings LLC v. KISA Enterprises MI Inc.
Court Name: Michigan Court of Appeals
Case Number: COA 369754
Plaintiff Attorney(s): Mary Massaron, Plunkett Cooney PC
Defense Attorney(s): Jacobs & Diemer PC