Two More Challenges to City's Cannabis Permitting Process Are Filed

On Tuesday, a marijuana retailer cried foul with a Federal suit. Now comes word two more lawsuits have been filed challenging the application/permitting process

Published : Friday, September 6, 2019 | 4:58 AM

[Updated] To be perfectly clear, retail marijuana was not something Pasadena City officials had pursued.

In a recent interview with Pasadena Now, Mayor Terry Tornek said he’d watch other municipalities such as Los Angeles struggle with the issue and was content to see what came out in the wash elsewhere before tackling the topic in Pasadena (if it came to that).

But it did come to that when a sufficient number of Pasadenans wanted their weed and used the vote to secure its sale locally.

Charged with making the electoral wishes of Pasadenans a policy the City, led by the City Manager and the Department and Planning and Development, drafted an ordinance limiting the number of stores to six citywide, with each occupying its very own city Council District.

Pasadena isn’t the first place this process has been unpacked and the City contracted with consultant HdL, which has experience implementing processes for legalized, recreational marijuana sales.

An application fee of some $14,000 was established, perhaps to filter out industry bottomfeeders and also to cover verifying and processing, an ornate application was developed, although two new legal complaints charging that the application is was not specific enough have been filed in state Superior Court.

The City opened the application process and took in what amounted to an embarrassment of riches: 122 applicants (five more for laboratories and nurseries) wanting to sell cannabis.

Ultimately six were chosen. One missed out by a point, was not very happy, and made some pointed accusations about certain of the winners.

A company called Atrium had a winning application, and submitted a preferred location in Council District Three. But Harvest of Pasadena already had dibs on that District because it had submitted its application first.

The City’s one store per district rule meant Atrium’s application would not be processed. The company said it could not find another location that could meet all the City’s requirements and on Tuesday filed a lawsuit in federal court, naming both Harvest and the City as defendants.

Allison Margolis is a long-time cannabis legal advocate out of Beverly Hills. Her firm, Margolin and Lawrence, filed the two previously mentioned cases Sept. 3 in challenging the application/permitting process.

“The City of Pasadena’s regulations lack sufficient specificity thereby allowing for unlawful abuse of discretion on the part of evaluators,” the filing on behalf of Real Green Remedies said.

“Remarkably,” the complaint observed, “in its written evaluation, the City provides no scores for any of the subcategories. Limited written explanations are given, but there is no specificity in the evaluation process.”

Most important, the complaint said, and prejudicial to Real Green Remedies’ case, is the lack of “detailed, numerical findings in the subcategories, the result of which plaintiffs said, was an overly subjective review, both “arbitrary and capricious.”

Margolis filed an almost identical petition on behalf of applicant Kyle Ryan. Plaintiffs in both cases want the denial of their licenses set aside and a court order that the City consider them anew.

There are, on the City’s website, approximately 65 requests for public records access related to cannabis licensing in Pasadena.

These include requests for the winners’ applications, the applications and scoring sheets for specific companies, communications between entities, the cell phone numbers of city officials and so forth, so that it would not be unreasonable to anticipate further lawsuits.

Jennifer McGrath is a Huntington Beach-based attorney who specializes in assisting cannabis companies comply with the law.

She observed that litigation, in and of itself, is not a sign Pasadena has done anything wrong.

“It’s very common to have litigation regarding cannabis permitting,” she explained, “and that’s not necessarily limited to cannabis. In all businesses trying to open, it’s not uncommon to have litigation regarding who preceded who.”

The way Pasadena ranked its applicants has been applied elsewhere in the state and it leads to challenges about who got what points, how the points were arrived at, why one company didn’t get as many as another applicant, explained McGrath.

“And then on top of that, because of the system of ranking and capping, like in Pasadena where there’s only going to be six — and one per Council District — it’s not uncommon that that type of regulation results in legal conflict,” she said.

Such an arrangement is not a free market, which McGrath said she favors. “It really limits the opportunity for where, or when, anybody can go.”

In Pasadena, there are three or four companies that went through the process to garner a top ranking. “And they are in conflict with each other as far as location,” she stated.

McGrath said the situation in Pasadena is one of an unfair playing field further complicated by having chosen winners before they’d identified where they wanted to put their store.

“Those top six then have to go out and find a location,” she continued, “where you have an overlay of one per district. They also have to be worried about being within 1,000 feet of each other, about schools and daycare centers, and rehabilitation facilities.”

McGrath said winning applicants are given permission to do something they really aren’t permitted to do.

“Jurisdictions that are permitting cannabis are creating a competitive system that does not allow the industry to succeed,” she opined. “In creating bans and limitations on districts, they’re not permitting this industry to be treated like any other industry.”

That’s where Proposition 64 comes into view.

“The vote of the people was that adult use cannabis is legal,” McGrath concluded. “Yet it is permitted by local jurisdictions that get to dictate what legal looks like.”

On June 5, 2018, Pasadena voters approved Ballot Measures CC and DD.

The first allows a limited number of cannabis retailers, cultivators, and testing labs to operate within specifically zoned areas of the City.

Measure DD levies a business license tax on commercial cannabis businesses of up to $10 per canopy square foot (for cultivation) and between 4 percent and 6 percent of gross retail sales receipts.

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