The City Attorney's Office Wednesday sued a South Los Angeles commercial cannabis business for allegedly operating illegally and selling pot found to contain a dangerous pesticide.
The lawsuit marks the first time the City Attorney's Office is seeking potential penalties of up to $20,000 per day of each violation at an illegal shop -- penalties some City Council members have recently been advocating.
"Today I want to announce that we are opening up a new front in our efforts to effectively enforce the city's rules regarding marijuana,'' City Attorney Mike Feuer said. "This compliments our criminal efforts in doing so, and we have filed a civil action against multiple business operators, property owners and real estate defendants.''
Feuer announced the legal action during a news conference at City Hall East alongside City Councilman Curren Price, in whose district the alleged illegal shop is located, and Councilman Marqueece Harris-Dawson, who has been
critical of Feuer's office for not pursuing civil-penalty cases against any of
the hundreds of illegal pot shops in the city.
The civil lawsuit names Kush Club 20, branding it an illegal commercial cannabis business at 5527 S. Central Ave. The lawsuit alleges the business operates without a proper license for cannabis sales, and that testing initiated by Feuer's office found the presence of paclobutrazol, a plant growth regulator pesticide. The pesticide is banned on cannabis and not registered for use on other food crops in California, although it is used for golf turf management to increase density and color in the grass, the suit states.
Among those named in the lawsuit are the property's owner, 5527 S. Central LLC, and Michael Lerner, its CEO. It also names D/AQ Corporation, known as Daum Commercial Real Estate; Benjamin R. Spinner, an associate vice president at D/AQ Corp.; and James Vu, a vice president of D/AQ Corp., for allegedly leasing the property to Amy Sahadi Diaz. The transaction was designed to misrepresent the actual nature of the business on the lease, the lawsuit says.
When reached by City News Service, both Vu and Spinner said they were unaware of the lawsuit and its allegations. They both said they were involved in leasing the property, with the understanding that Diaz would be opening a licensed, legal shop. They also said when they found out her shop was operating without a license, they initiated eviction proceedings against the business which started 10 months ago and are still ongoing.
Both Vu and Spinner said they were unaware of any attempt to conceal the true nature of the business -- which Feuer said was designed on the lease to show it would be a "church and other related uses'' -- and that they believed the site would be used for a legal shop.
"We just did the paperwork, we're not the owner. We're just the broker,'' Vu said.
Diaz and Lerner could not be reached for comment.
Spinner said, "We leased this to a tenant who said they were going to go the legal, licensed route, and as soon as we found out it was unlicensed we started the necessary steps to evict them, and that's all that we know. We did everything legal and by the book. We can't control what the tenant does. They told us they were going to do everything legal.''
The lawsuit also seeks an injunction prohibiting further illegal commercial cannabis activity at the location, and immediate closure and eviction of the business operators from the location. The lawsuit is also seeking penalties up to $20,000 for each day the offense occurs, which Feuer said could reach up to $7.5 million, as well as costs and attorneys' fees associated with the investigation.
Feuer said the lawsuit is believed to be the first civil enforcement action in California alleging cannabis sold by an unpermitted location contains pesticide.
At a City Council meeting last week, Harris-Dawson grilled a member of Feuer's staff about why the office had not filed any civil penalty cases, despite the hundreds of criminal cases it has pursued. He was told the cases can take years to prosecute and a judge's view of the cases can be unpredictable, so the office has focused on criminal cases.
Both Feuer and Harris-Dawson said at Wednesday's news conference that the new civil case should send a message to other illegal pot shop operators and landlords.
Harris-Dawson said "we are sharpening our tools'' and predicted at least a few more civil penalties cases would also be pursued.
"Today, the announcement of this lawsuit, which I expect to be the first of a handful -- because once these property owners get the message, we won't have so many people feeling like they can open up an illegal dispensary just anywhere,'' he said. "So we think this is a very, very strong action and we appreciate that it is being made in a high-profile way, and we think this will help create the path to again have a sage, legal, managed and regulated cannabis market here in the city of Los Angeles.''
The problem of illegal pot shops has been a frequent topic of discussion among city leaders over the last few months. The City Council recently gave the green light to shutting off utilities at the sites.
Mayor Eric Garcetti said recently huge increases should be included in the next city budget for cracking down on illegal pot shops.
Since the beginning of 2018, all businesses conducting commercial cannabis activity in Los Angeles are required to be licensed by both the state and city, but hundreds without the proper licenses are believed to be operating, according to the LAPD.
Feuer said that since May 2018, his office has filed 217 cases related to illegal cannabis activity involving 172 total locations and two delivery services, with 840 defendants. At least 113 illegal storefronts have been closed, he said.