Northern California cannabis company sues city, alleges corruption in licensing process

A small marijuana retail chain in Northern California has filed suit against the town of Healdsburg and its city council, claiming that a November award of two retail permits to its competitors was “riddled with procedural and substantive errors” and that the process itself was tainted by political donations.

Sonoma County-based Mercy Wellness, which runs two other dispensaries in Santa Rosa and Cotati, alleged in its Feb. 8 lawsuit that Council Member Ariel Kelley and perhaps three other members “had financial and other personal conflicts of interest that prevented them from acting with ‘disinterested skill, zeal, and diligence and primarily for the benefit of the public'” when they voted last fall to give retail permits to applicant retailers JANE and Solful.

That was despite the fact that Mercy Wellness scored the highest of all eight applicants during the review process, the lawsuit asserts. In addition, it contends that JANE didn’t include a mandatory zoning letter with its application documents and only disclosed 65% of its ownership. Solful’s application, the suit argues, is flawed because the company maintains that its site has parking when in fact it does not.

Representatives of both companies – and others of the eight store applicants – gave money to Kelley in January 2023, including $250 from Jamie Shira, the president of JANE, and $100 from Lee Johnson, the controller of the entity behind Solful. Kelley also received $100 that month from another applicant, Sparc, which also lost out in the bidding process.

After the permits were granted to JANE and Solful at the council’s meeting on Nov. 13 last year, Kelley’s campaign for the state assembly received a $5,500 contribution from the mother of Theodore Ubben, who owns 5% of Solful, the suit claims.

Mercy Wellness also contends that the council violated the Brown Act, a California state law prohibiting public officials from meeting in secret to discuss official decisions. That’s exactly what happened on Nov. 13, the court filing claims, when the council skipped any substantive discussion of to whom the two retail cannabis permits would be awarded, and unanimously gave them to the second and third top scorers, bypassing Mercy Wellness.

“The city’s award of the permits to JANE and Solful was arbitrary and capricious and an abuse of discretion,” the suit charges, and asks a Sonoma County Superior Court judge to void the licenses and force the city to redo the final phase of permitting.

A spokesperson for the city council said that the city has not yet been served with the suit, but once that happens, “We will review it and go from there.”

Kelley could not immediately be reached for comment Tuesday.

Lawsuits challenging the licensing process have become commonplace in several U.S. markets, including Alabama and New York.