California Marijuana Notebook: L.A.’s licensing logjam & mounting lawsuits for MJ businesses

(This is a regular column that delves into the complicated issues surrounding California’s immense cannabis market from the vantage point of Marijuana Business Daily Senior Reporter John Schroyer. Based in Sacramento, he’s been writing about the cannabis industry since joining MJBizDaily in 2014.)

As the marijuana market in the Golden State grows and matures, business owners are facing dueling challenges:

  • MJ entrepreneurs are finding it’s particularly tough to obtain a business permit in Los Angeles.
  • Lawsuits involving trademarks and proprietary business information are popping around the state.

L.A. stuck in neutral?

Los Angeles has long been touted as among the biggest municipal markets in the world for the cannabis industry.

However, it remains in a “hurry-up-and-wait” mode, which is frustrating hundreds of businesses waiting to tap the city’s potential for commercial marijuana rollouts.

In short, MJ business owners are facing a licensing quagmire.

The city issued permits for 169 retailers, but zero for growers, distributors, edibles makers, testing labs or other types of plant-touching businesses.

According to the L.A. Department of Cannabis Regulation (DCR), the city received nearly 600 applications for business permits for its second round of licensing – which opened in August and closed Sept. 13.

The licensing involves businesses that qualify under L.A.’s social equity program and are part of the existing MJ supply chain.

Of those, 334 paid application fees and are being processed. Also, 11 testing labs were “granted temporary approval,” a DCR spokeswoman wrote in an email to MJBizDaily.

But to date, no Phase 2 licenses have been issued, according to an email from Jason Killeen, a DCR assistant executive director.

“We are working very closely with the State to ensure that our Phase 2 applicants have an opportunity to apply for a temporary license before the end of the year,” Killeen wrote to MJBizDaily.

Here’s why the timing of the temporary licensing is important:

  • Temporary cannabis business licenses from the state won’t be available to new industry entrants after Dec. 31. And the three state agencies that grant permits are warning potential applicants they may not get a temporary license if their applications are turned in after Dec. 1.
  • Why the warning? The agencies report they may not have enough time to process applications to issue temporary licenses before the end-of-the-year deadline.
  • This is important because local authorization is still required for any state license. Consequently, any of the hopeful L.A. marijuana business owners that don’t have a city permit before 2019 could be forced to apply for a full annual state permit instead of a temporary state license.

Applying for a full annual license, however, is far more complicated.

“Applying for a temp license is like filling out a sandwich form, but the annual license is like applying for college,” said Terra Carver, executive director of the Humboldt County Growers Alliance.

Moreover, the city will be launching a third round of licensing.

It will involve “general” applicants – basically everyone else that doesn’t yet have a permit and doesn’t qualify for a social equity license.

There’s no word on when that may begin. But it won’t be easy to get such a permit.

Lawsuits abound

More lawsuits involving business competitors are emerging as the California cannabis industry grows.

There’s the ongoing litigation between L.A. consultancies SIVA Enterprises and Cirrata Ventures.

More recently, longtime Humboldt County cannabis businessman Craig Nejedly filed suit on Nov. 2 against Santa Rosa-based CannaCraft.

Nejedly runs Talking Trees Farms, a licensed grow, and a hemp clothing line, Satori Movement. He alleges in his civil lawsuit that CannaCraft infringed on his trademark of the word “Satori” by debuting an edibles line bearing the same name.

CannaCraft executives did not immediately respond to a request for comment. (CannaCraft also controls at least two other cannabis businesses, according to its website: Care By Design, which specializes in CBD tinctures, and AbsoluteXtracts, a concentrate and vape cartridge maker.)

The suit asks the U.S. District Court in Northern California to bar CannaCraft from using the name “Satori” and related trademarks in the future. It’s seeking monetary damages.

What the Satori lawsuit drives home, once more, is how dicey legal issues will proliferate for marijuana businesses.

It’s no longer a game for rulebreakers. Rather, it’s a highly regulated industry that will be governed by the courts and lawmakers – not rebel entrepreneurs who invent their own business rules.

(Click here to read the previous installment of this ongoing column.)

John Schroyer can be reached at [email protected]

8 comments on “California Marijuana Notebook: L.A.’s licensing logjam & mounting lawsuits for MJ businesses
  1. Pat on

    “Rather, it’s a highly regulated industry that will be governed by the courts and lawmakers – not rebel entrepreneurs who invent their own business rules.”

    It’s an industry that is regulated in a HIGHLY CORRUPTED fashion, as was the formation and current implementation of the “law.” The courts and the few scrupulous law makers out there need to re-examine the law and regulatory framework first, before making something that’s already bad, worse. Those legal entities ( courts/law makers ) that had nothing to do with the putting together of the “law” will quickly realize that they’ll be standing on quicksand when attempting to deal with this b.s.

    Reply
  2. Chris Hickok on

    Many of the 169 licensed retailers were also granted licenses for cultivation, distribution, and non-volatile manufacturers .

    Reply
  3. Sean Maddocks on

    Your article states the Los Angeles’ phase 3 general licensing, “will involve “general” applicants – basically everyone else that doesn’t yet have a permit and doesn’t qualify for a social equity license.”

    Just wanted to clarify that Phase 3 will also include Social Equity Applicants who will be given a 2:1 licensing priority for retail licenses in the City and a 1:1 priority for all other license types.

    Reply
  4. Old Timer on

    “As the marijuana market …grows and matures,…”
    Really? Matures? Are we even close?
    I guess it’s just a cliché opening.

    Reply

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