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Grover Beach marijuana shop can stay open, winning legal challenge from dance studio

Hemp and Cannabis Fair comes to Alex Madonna Expo Center

The first Hemp and Cannabis Fair was held at the Alex Madonna Expo Center in San Luis Obispo, California, on Saturday, June 9, 2018. The event celebrates the legalization of marijuana in the state.
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The first Hemp and Cannabis Fair was held at the Alex Madonna Expo Center in San Luis Obispo, California, on Saturday, June 9, 2018. The event celebrates the legalization of marijuana in the state.

A San Luis Obispo judge ruled that one of Grover Beach’s two storefront cannabis dispensaries may continue to operate, shooting down a legal challenge made by a neighboring dance studio.

The owners of Coastal Dance and Music Academy sued several businesses that own properties on Huston Street in June for opening the Natural Healing Center across the parking lot — about 150 feet away — from the studio’s front door, saying the dispensary negatively impacted the youth-centered business.

The Natural Healing Center, which sells both medicinal and recreational marijuana, opened in July.

Kathy Schultz, an owner of the dance studio company, filed a request for a preliminary injunction, asking the court to revoke the city permits issued to the dispensary because, the lawsuit argued, the city violated a state law that requires cannabis businesses to be at least 600 feet from schools and youth centers.

In an Oct. 2 ruling, however, Superior Court Judge Linda Hurst denied the request to shut down the storefront at 998 Huston St., finding that not only did the dance studio wait to file the litigation until nearly six months after all permits were issued, but it also failed to provide any evidence that the studio’s business has suffered.

Though the studio was unsuccessful in asking Hurst to order the dispensary immediately cease operations, the lawsuit still seeks damages for various causes of action such as anticipatory breach of contract, breach of the implied covenant of quiet enjoyment and intentional infliction of emotional distress.

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The lawsuit filed in San Luis Obispo County Superior Court alleges the Cannabis Regulation and Safety Act requires a separation between commercial cannabis operations and sensitive uses, such as schools and other facilities that cater to minors, and that marijuana businesses “shall not be located within a 600-foot radius of a school ... day care center, or youth center.”

Youth centers are broadly defined to include, “any public or private facility that is primarily used to host recreational or social activities for minors.”

But Grover Beach’s city attorney, David Hale, previously told The Tribune the state law is irrelevant in this case because the city’s ordinance only requires cannabis facilities be set back 600 feet from schools.

In a filed opposition to the injunction, Thomas Green, attorney for Natural Healing Center, wrote that Schultz’s civil complaint is “rife with hyperbole” and that she’s seeking to close down a legitimate business “because some perceived amorphous stigma might result in some unspecified and speculative harm to (the studio’s) business.”

“Not only did Plaintiff offer no support for this position but it is completely based on unfounded fear, speculation and a misunderstanding of the strict regulatory framework and reality of modern cannabis business operations in the State of California,” Green wrote.

In her ruling, Hurst wrote that the dispensary owners had attempted to negotiate a buy-out of the studio’s lease and relocation of the studio. They reached agreements with all tenants of the business park except for the studio’s owners, who decided that it was not in their financial best interest to move.

Schultz alleged threatening behavior on the part of the cannabis business’ owners in negotiating the buyout.

According to Hurst’s ruling, the owners have spent more than $1.5 million in improvements building their cannabis-related facilities. The studio, which has operated since 2011, says it has spent about $500,000 on improvements to create its business.

Hurst wrote that the studio supports its claim of irreparable harm solely based on a sworn declaration of Schulz, who said the studio has “seen unprecedented lowering in enrollment for our courses, and have been told by parents that they would not come to the dance studio with their children because of the marijuana business.”

But Hurst wrote that Schultz “submitted no evidence showing the extent of the drop in enrollment, or evidence that any drop in enrollment was because of the application for the marijuana dispensary. Nor did Plaintiffs submit any declarations or evidence submitted showing the impact of the dispensary on Plaintiffs’ business now that the dispensary has been open for approximately three months.”

With any possible damages to the studio still to be proven, Hurst also wrote that an injunction would have completely shut down the dispensary and displaced 12 trained full-time employees.

On Friday, the dance studio’s attorney, Michael Schulte, admitted that the request for an injunction was filed too late in the process, when the dispensary was about to open.

“Had we tried earlier, it probably would have been a different result,” Schulte said, noting that his client is still seeking a jury trial.

Court records show a case management conference scheduled for Jan. 23.

Matt Fountain: 781-7909, @mattfountain1

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