Hashish litigation is rising because the business matures. Lately, we’ve seen a swimsuit associated to false promoting, however we’re additionally seeing extra conventional enterprise litigation round partnership points and contract breaches. In Los Angeles, the repeal of Prop. D and implementation of Measure M brought on a variety of business infighting, a few of which led to litigation. Particularly, the preliminary rush for eligible actual property within the metropolis led many landlords to lease to the very best bidder. Out of that rush is now springing extra landlord/tenant hashish litigation.
CJ World’s hashish litigation
Within the case of CJ World v. 147-151 W. twenty fifth St LLC (which was consolidated with 147-151 W. twenty fifth St. LLC v. GRG Collective), the allegations between the events centered round Part II licensing within the Metropolis of Los Angeles. Particularly, plaintiff CJ World alleged that 147-151 W. twenty fifth St. LLC (the “landlord”):
. . . noticed a chance to almost double the month-to-month hire [it was] accumulating from [its] long-time tenant, CJWorld-LA (“CJ World”), a hashish cultivation enterprise. This chance got here within the type of Downtown Pure Caregivers, Inc. (“DNC”), a competing hashish enterprise that approached [the landlord] about leasing the property for its personal cultivation operation.
Principally, CJ World, a pre-existing Part II cultivator in L.A., alleged that its landlord leased CJ World’s property out from beneath it to DNC, a Part I “present medical marijuana dispensary” (“EMMD“), that was prepared to pay extra hire. Beneath Measure M, EMMDs had been allowed to hunt licenses earlier than non-retail candidates, like CJ World. And on October 23, 2018, DNC secured non permanent approval from L.A.’s Division of Hashish Regulation (“DCR”) at CJ World’s location whereas CJ World nonetheless held a lease to domesticate at that property. CJ World was represented by Arash Sadat and Brie Mills of Mills Sadat Dowlat LLP.
CJ World’s hashish litigation claims
In L.A., it’s not uncommon to come across conditions the place a number of hashish operators declare to have leased the identical location in an effort to safe an annual approval license from the Metropolis. What’s much less customary is to see a hashish litigation matter really go to trial over that situation. In its case, CJ World argued that:
- The owner and DNC labored collectively to unlawfully drive CJ World to vacate the leased premises previous to expiration of lease time period in order that the owner might re-let the property at considerably increased hire. And that this conduct included:
- the owner secretly leasing the property to DNC with out informing CJ World (the “Secret Lease”);
- Making false and deceptive statements to the Metropolis of Los Angeles and the State of California to permit DNC to acquire non permanent approval to domesticate on the property, thus precluding CJ World from acquiring such approval;
- Submitting a baseless and unsuccessful illegal detainer motion towards CJ World which the owner finally deserted; and
- After the owner’s eviction efforts proved unsuccessful, altering the locks on the property with out CJ World’s consent or information and with out a court docket order.
In its trial temporary, CJ World surmised that the owner:
. . . appearing in live performance with DNC pursuant to a signed lease settlement and evidenced by written correspondence, disadvantaged CJ World of the flexibility to acquire approval from Metropolis to domesticate hashish on the property beneath a newly enacted regulatory framework, then tried to evict CJ World on the premise that it was working unlawfully.
Ouch. CJ World inevitably needed to ask the DCR to re-locate its operations. Upon its profitable re-location, it will definitely acquired non permanent approval as a Part II applicant at its new spot.
Educating the Court docket on hashish
In full disclosure, I used to be employed by CJ World’s counsel as an professional on this case. My job was to coach the jury about Measure M, L.A.’s licensing phases (particularly, Part II), and the standing of enforcement towards hashish operators again in 2018. It’s most likely one of many first occasions that an professional has taken the stand in open court docket and been admitted to explain L.A.’s licensing regime for Part I and Part II (Measure M wasn’t even a regulation till March 2017).
What’s nice right here is that courts and juries are going to study increasingly about hashish legal guidelines and guidelines as hashish litigation will increase. I used to be blissful to have had the expertise, and happier nonetheless to have been part of a profitable effort.
CJ World prevails at trial
Recall that the events sued one another on this consolidated matter. Whereas CJ World had a laundry listing of claims towards the owner, the owner claimed that CJ World breached its lease by failing to pay hire within the month of September 2019.
The jury discovered that CJ World breached its lease for failure to pay September hire, and it awarded the owner $17,500, however $0 for different damages claimed by the owner. Concerning CJ World’s claims, the jury discovered that the owner and its officers dedicated fraud, breach of written contract, breach of the implied covenant of fine religion and honest dealing, breach of the implied covenant of quiet enjoyment, wrongful eviction, and trespass to chattels. Concerning damages, the jury awarded CJ World the next:
- Misplaced crops: $ 20,250.00
- Misplaced earnings: $ 337,609.00
- Emotional Misery: $ 30,000.00
What’s subsequent for hashish litigation?
Indisputably, extra hashish litigation is on the horizon. Hashish operators are not afraid of vindicating their rights in open court docket (state court docket, anyway) given the way in which political winds are blowing. And state courts are inclined to listen to these circumstances given legalization on the state stage. In consequence, I’m assured that we’ll see extra plaintiffs like CJ World emerge in L.A. and past.