Jeremy NobileThis story was republished with permission from Crain’s Cleveland Business and written by Jeremy Nobile.
Klutch Cannabis fought the law and won — more or less.
The vertically integrated cannabis company with headquarters, cultivation, and processing facilities in Akron said it has reached a settlement with the state of Ohio that resolves years of litigation and, as a result, enables the business to open two new marijuana dispensaries in Northeast Ohio.
“We would like to express our sincere gratitude to the leadership and staff of the Division of Cannabis Control, who have endeavored to amicably resolve these cases despite undertaking a mountain of work readying the state for its new adult-use program,” said Klutch founder and CEO Adam Thomarios in a statement. “We are thrilled to be able to finally put these cases behind us and are ready to get to work preparing these stores for our patients and future adult-use customers.”
One of these two shops, according to the company, will be in downtown Cleveland at 300 Prospect Ave. E.
The long-vacant storefront there was once home to Record Rendezvous, a legendary music shop that occupied the space between 1945 and 1987. The shop’s owner, Leo Mintz, is credited with helping coin the term “rock ‘n’ roll,” thereby playing a role in establishing Cleveland’s heritage as a rock ‘n’ roll city.
Klutch currently operates marijuana dispensaries in Lorain and Canton that have been operating under the brand name “The Citizen by Klutch.”
Its future Cleveland store, though, which is a stone’s throw from East 4th Street and Rocket Mortgage FieldHouse, will be the most high-profile shop in the Klutch footprint.
Thomarios describes it at Klutch’s future flagship store, noting its design will pay “homage to its unique musical heritage.”
“Our Cleveland location is located right in the heart of downtown Cleveland’s entertainment district and is a historical landmark with an amazing cultural connection to the city and region,” said Klutch vice president Pete Nischt. “It’s a shame that it’s been vacant for so long, but we are on a mission to restore it to its former glory. We want this next iteration of the building to honor its past while being the best representation of our brand, company, and vision thus far.”
Klutch said its other new store will be at 10650 Northfield Road in Northfield Village, which is across the street from the MGM Northfield Park racino and “uniquely positioned to serve Northern Summit County and surrounding communities.”
The settlement enabling these new dispensaries follows three lawsuits that Klutch brought against the Ohio Board of Pharmacy challenging the results of its processes for awarding dispensary licenses.
These suits were related to applications to operate retail shops at locations in Akron, Cleveland Heights, and Euclid.
The first lawsuit dates back to the state’s inaugural round of medical marijuana dispensary licensing, a process known as RFA I. (RFA stands for “request for applications.”)
Applications for RFA I opened in 2017, and permit winners were selected in that round via a scoring system that rated applications on a series of criteria.
Klutch challenged scoring discrepancies between it and other applicants as it appealed the results on the application for its proposed Akron shop.
Klutch’s other two suits stem from the state’s second dispensary application process or RFA II.
RFA II applications opened in 2021. However, the state switched its approval process from a scoring dynamic to a lottery system — in large part due to litigation that resulted from RFA I. Applications still had to meet particular criteria to be eligible, but winners were ultimately selected through a drawing conducted by the Ohio Lottery Commission.
“In one case, we challenged a rule that, as applied, prevented the award of a license. That rule has since been reinterpreted to match the controlling statute,” Nischt said. “In the other case, we challenged what we felt was the non-application of a requirement that resulted in another applicant winning a license at a site we applied on.”
Klutch’s suits were filed against the board of pharmacy as that agency was previously the primary regulator for dispensaries under the Ohio Medical Marijuana Control Program. All other business activity was regulated by the Ohio Department of Commerce.
At the beginning of 2024, the state removed the Board of Pharmacy as a cannabis regulator and flattened the regulatory dynamic from two agencies to one. The state’s primary marijuana industry regulator is now the Division of Cannabis Control, or DCC, which operates within the commerce department.
As far as how this settlement was achieved, Nischt said the transition to DCC “provided all involved with a good opportunity to take a step back and evaluate everything.”
“Despite how busy they were, the DCC made time to try to resolve these issues with us. Our settlement resolved all three cases and resulted in the award of two licenses,” Nischt said. “At the end of the day, we are satisfied with the outcome, appreciative of the time spent working through these issues with us, and are excited to show these new locations what we are made of.”
Crain’s has reached out to DCC officials for comments on the settlement with Klutch.
Klutch must complete build-outs for its new shops in Cleveland and Northfield Village ahead of regulators allowing them to serve the public.
Nischt said the expectation is that the Cleveland store will come online first but that the company expects both to be operational in the first quarter of 2025.
Meanwhile, in conjunction with the announcement about this settlement and its new dispensaries, Klutch said it will rebrand its retail operation from “The Citizen by Klutch” to simply “Klutch Cannabis.” The company said more details about this rebrand will come in the fall as official rules for the adult-use program are finalized.
