Cannabis company takes city of SLO to court over denial of commercial permit
A San Jose-based cannabis business is taking the city of San Luis Obispo to court over the city’s commercial marijuana permitting process and its “capricious and arbitrary decision” to deny the business a permit in October.
San Luis Obispo Wellness Center — which state records show filed articles of incorporation in January 2019 and has no relation to local chiropractic business SLO Wellness Center — filed a petition in San Luis Obispo Superior Court seeking a judge’s intervention in reversing the city’s denial.
While the plaintiff in the case is listed as San Luis Obispo Wellness Center, it names the same principal partner and records show it applied to the city as Elemental Wellness, one of five businesses that were granted contingent operator permits for brick-and-motor facilities within city limits in March 2019.
However, the city announced in a news release in October 2019 that Elemental Wellness “did not satisfy certain required components.”
The business’ attorney, Orange County-based James Murphy, did not respond to a message left at his office for comment.
Provided with the complaint Tuesday afternoon, San Luis Obispo city attorney Christine Dietrick wrote in an email that she believed the city had not yet officially been served with the legal filing.
However, Dietrick wrote in the email that the city is “confident that our process was conducted fairly, thoroughly, consistent with the policy direction of the city council in establishing the selection criteria, and in the best interests of ensuring legally compliant, locally vested retailers in our community.”
Cannabis company sues SLO over permit denial
San Luis Obispo Wellness Center is tied to professional poker player Tommy Le, who the petition says consults for the company. Le won a World Series of Poker Omaha championship event in 2017.
The court filing states that the business was awarded 121.6 of a possible score of 140 for its application for a commercial cannabis business operators permit.
But during the background check phase of the process, the lawsuit states, “the city engaged in irrationally over-broad background investigation regarding all principals” in the business.
The petition states that one principal for example, Randolph Dale, checked “no” on the application whether he “had been involved in any tax liens.”
“However, when Mr. Dale was asked the same question during his police interview, he responded, ‘No ... I paid late, but I paid,’ without follow-up interview from the interviewing officer whether Mr. Dale understood the question or cared to elaborate,” the filing reads.
The city’s investigation found that Dale had 10-year-old tax liens that had been expunged, the lawsuit states, and the city “cited this lack of knowledge of past, expunged, and uncollectable (tax liens) as a key (for) the denial of petitioner’s permit application.”
The business contends that Dale suffers from a traumatic brain injury for which his sister has a power of attorney to assist him. The city “irrationally characterized Mr. Dale’s disability and his sister’s limited power of attorney as an effort to defraud the city,” the petition reads.
In another example, Jonathan Martines, another partner, answered no when asked “whether he had any recent police contacts,” the filing says.
Martines allegedly understood the question to mean whether he had been charged with a crime, issued a citation or been involved in an official police report.
The city indicated that one of their officers “talked to Martines in response to a noise complaint over an argument he was having, and so deemed Mr. Martines’ answer intentionally false and misleading,” with the city relying heavily on the response as condition for denial, the lawsuit reads.
The lawsuit then challenges the legal definition of “contact.”
The business lastly argues that part of the approval process involved extra points for “sponsoring social equity candidates — persons of poor economic status, who may have also had a non-violent criminal history involving cannabis.”
One of the stated grounds for denial of the permit was that its three “social equity candidates” did not show to an in-person meeting, though the business argues that they were not “expressly requested” to attend the meeting.
The business is asking the court to issue a preemptory writ commanding the city to reverse its decision and “order the city to exercise its discretion in a rational, non-abusive manner such that petitioner may be granted a business permit to operate a lawful cannabis business within the city of San Luis Obispo.”
The plaintiff is also requesting to recoup legal fees from the court action.
In its October 2019 news release, the city’s economic development manager, Charlene Rosales, wrote that “The standards we have in place were established through a collaborative process with the city and community. They’re designed to help ensure permitted cannabis businesses are set up for success in our city.”
Coastal Delivery SLO and Megan’s Organic Market SLO were the first two cannabis businesses to complete the background process, and received their operating permits in September 2019.
A case management conference in the San Luis Obispo Wellness Center civil case is scheduled for March 2.
