Cannabis Entrepreneurs Sue LA Over Process Approving Shops

Marijuana entrepreneurs who want to open new pot shops in Los Angeles are suing the city, arguing that the application process for licenses was unfairly implemented, according to a newspaper report.

The lawsuit by the Social Equity Owners and Workers Association asks a judge to require the city to vet each of the hundreds of applications submitted under a first-come, first-served process for licenses, the Los Angeles Times reported Saturday. Barring that, the suit seeks a new process that gives everyone “an equal, fair and transparent opportunity” to compete for a license.

The group filed its suit about three weeks after an audit of the highly competitive process for handing out LA licenses for new pot shops was released.

Hundreds rushed to submit applications in September, vying to be first in line for just 100 licenses that were expected to be awarded through the process. Mere seconds made the difference in whether someone had a shot, the newspaper said.

When cannabis applicants discovered that some people started their applications before the official 10 a.m. launch time, many argued that the process had been tainted. City officials called for an audit scrutinizing what had happened, and the licensing process was put on hold for months.

The audit by Sjoberg Evashenk Consulting found that although some applicants got into LA’s application system ahead of its official launch time, the city took “reasonable and appropriate” steps to prevent any unfair advantage — by pushing their applications back in line to where they would be if they began the process at 10 a.m.

The city administrative officer, one of the top officials in Los Angeles, said the newly released report found “no evidence of bias or unfairness” and that the city should press forward with awarding licenses.

Critics pointed out, however, that the audit also showed that the department had told some applicants they couldn’t sign onto the online system at all before 10 a.m., a necessary step before beginning their applications. That wasn’t accurate — and auditors found it could have put some marijuana entrepreneurs at a disadvantage because they waited to do so.

The audit found that 226 applicants accessed the online platform before 10 a.m., although only 14 of them actually started their applications before that time. The lawsuit argues that those 226 applicants had a “significant advantage” over others who waited to log on.

“Fundamental to any fair race is that the competitors must start at the same time or, at the very least, be given accurate information about when the race will begin,” the group argued. “The record demonstrates that this did not occur.”

Attorneys representing both the group and one of its members, cannabis applicant Madison Shockley III, in the newly filed case did not immediately respond to a request for comment by the Times.

The Department of Cannabis Regulation declined to comment. Rob Wilcox, a spokesman for Los Angeles City Attorney Mike Feuer, said their office would review the complaint and had no further comment.