A California company has sued to stop the city of Chula Vista’s cannabis permitting process, alleging it’s “fatally flawed” and improperly administered.
The suit was filed by CV Amalgamated, a company seeking four storefront retail licenses, on Sept. 22 in San Diego County Superior Court. (Read here) The listed defendants are the city of Chula Vista and 50 unnamed agents alleged to have acted on behalf of the city.
The lawsuit charges the city and its agents with failing to follow its own ordinance while improperly scoring applications submitted by CV Amalgamated. It seeks to have the licensing process halted until applications are properly rescored.
The lawsuit says the city “inexplicably refused to consider” all of the info submitted by CV Amalgamated in its applications, and then rejected those same applications “based solely on the improper low score” they were assigned.
David Demian, an attorney with Finch, Thornton and Baird, which is representing the plaintiffs, said the city ignored its own rules and failed twice – with the original review and then on appeal – to properly score the applications from CV Amalgamated.
“It seems like the city and its agents had predetermined who the winners were going to be before they even started,” Demian said.
“It’s likely that our client may not be the only instance of this abuse of discretion,” he added, noting that halting the process could serve to restore public trust in the city’s ability to fairly manage its licensing program.
Chula Vista, a city of about 270,000 between San Diego and the Mexico border, adopted its cannabis ordinance in March 2018.
It approved a two-phase licensing application process, with the first phase involving a merit-based scoring system put in place to narrow the pool of applicants. The top scoring applicants move on to the second phase, which involves the submission of more detailed plans.
The city reported receiving 136 total applications, with 84 of them seeking the eight available storefront retail licenses.
In addition to the city, the lawsuit takes aim at Hinderliter, de Llamas and Associates (HdL), a third-party consultant the city contracted to score applications.
The suit alleges the city and HdL arbitrarily scored – and then rescored – applications without regard for the system outlined in city regulations. Had CV Amalgamated had its applications scored according to the city’s rules, the suit alleges, the company would have been one of the top finalists.
In particular, CV Amalgamated took issue with some of the deductions reflected in its score.
The lawsuit contains transcripts of testimony from an HdL representative who scored an application submitted by CV Amalgamated, as well as comments from the Chula Vista city manager that appear to show the plaintiff had its score lowered due to disorganization and poor formatting in its application, rather than for lack of substance.
That contradicts the city’s guidelines, according to the suit, as well as prior testimony from the same HdL rep who said at an appeal hearing that the manner in which the application was organized did not factor into the application’s amended score.
“It may have been easier for HdL to score the applications in that manner, concentrating on form over substance, but the result is a disaster for the City,” the lawsuit read.
The suit further alleges the city abused its discretion by not properly rescoring the CV Amalgamated application on appeal, and that the city was unduly prejudicial by allowing the same person who scored the company’s initial application to perform the rescore.
The lawsuit also includes details of an unrelated company that qualified for Phase II of the process, despite the CV Amalgamated CEO claiming that the applicant in question “may not even be minimally qualified to operate a cannabis retail business.”
The Chula Vista City Attorney’s Office said HdL has destroyed scoring details for applications, according to the suit. The company’s attorney argued that information was critical to public trust and should have been saved.
The suit characterizes the current situation as a dilemma of the city’s own making and suggests that the city has two routes it can take: Push forward and begin collecting cannabis tax revenue as soon as possible – “despite knowing that HdL based its scores on hidden, non-substantive criteria” – or temporarily forgo that tax money and incur the cost of rescoring applications to ensure fairness.
The suit calls for the latter.
“Any other outcome would not only be contrary to the law, it would be irreparably harmful to the City of Chula Vista and its residents,” it says.
In addition to stopping the application process and forcing rescores, the suit seeks damages from the city to reimburse CV Amalgamated for its application preparation costs, as well as other cost recovery, including attorney’s fees.
Attorney Lou Blum, another member of the plaintiff’s legal team, said Chula Vista’s process was “irretrievably broken.”
“We believe the citizens of Chula Vista deserve better, and we strongly believe the State of California will agree,” he said.
So far, the city of Chula Vista has issued conditional approvals for two cannabis businesses. They are both expected to open this year.
The Chula Vista City Attorney’s Office declined comment on the CV Amalgamated lawsuit, citing a policy to not discuss pending litigation.
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