CA Appeals Court: “Chula Vista failed to follow own cannabis permitting rules”

The San Diego Union Tribune writes

Ruling directs city to rescind its denial and reprocess applications

An appeals court ruled Tuesday that Chula Vista violated its own laws when it rejected a marijuana company’s application and it ordered the city to reprocess the application.

The decision by the state Fourth District Court of Appeal directs Chula Vista to rescind its denial of Caligrown’s three applications for storefront retail business licenses, and to reprocess them in compliance with the city’s cannabis ordinance.

“I have great faith in our legal system and I’m grateful that our process works because I’m not a big, huge multinational corporation. I’m a small entrepreneur,” said Laura Wilkinson Sinton, CEO of Caligrown. “I look forward to working with the city to try and resolve this.”

In a statement Wednesday, City Attorney Glen Googins said his office “has just received the opinion and is currently evaluating it. We will be advising City Council and senior staff in due course regarding its impacts and recommended next steps.”

In 2018, Chula Vista established a rigorous two-phase permitting process with thorough vetting and criminal background checks. Its ordinance allows up to eight dispensaries to open with a maximum of two storefronts in each of the city’s four council districts. To date, five dispensaries have permitted storefronts in the South County city, said Googins.

Caligrown submitted three applications to open dispensaries in Districts 1, 3 and 4. In January 2020, the company was notified that it did not qualify for the second phase because it failed to rank high enough on the merit-based scoring. HdL Consulting Services, contracted by the city to handle the review process, had deducted points from the applications because of “poor formatting and disorganization,” despite the business following the city’s directions.

The company appealed the rejection and then-City Manager Gary Halbert ruled in July 2020 that their applications should be rescored because “the scoring should be based solely on the city-established criteria around the applicant’s qualifications and ability to operate a top-quality retail cannabis establishment, rather than application form,” read his report.

HdL only rescored one of four evaluation categories, leaving Caligrown with insufficient points to advance in the permitting process. The company then sued Chula Vista in 2020 over claims that HdL failed to follow the city’s own regulations and unfairly declined the business’ application.

The lawsuit asked a San Diego Superior Court judge to order the city to stop issuing licenses to dispensaries and to re-evaluate dispensary applications, including the business’ submission. In January 2021, the court denied the motion without explanation. Caligrown filed an appeal.

On Tuesday, the appellate court reversed the lower court’s denial and said Chula Vista “acted in an arbitrary and capricious manner” in re-scoring the company’s applications.

“The city plainly did not follow its own mandatory procedures,” read the court’s opinion. “As a result, (Caligrown) was wrongly precluded from staying in the running to obtain a Phase Two application slot under the procedures set forth in the cannabis regulations.”

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