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Cannabis Company Sues State Of Nevada For Being Denied Dispensary Licenses

|Includes: Planet 13 Holdings Inc. (PLNHF)
Summary

MM Development Company Inc., which goes by the name Planet 13 Holdings filed the lawsuit after being denied all six of its applications for license for six different jurisdictions.

The cannabis company filed a lawsuit that asks the court to void the decision.

Planet 13 says it ranked fourth highest in Clark County in 2015 during an application period for medial marijuana license, and has only added more diversity to its leadership team.

Planet 13 added they believe it is improper for the department to issue more than one lice3nse for a recreational marijuana store to individual applicants within a single jurisdiction.

MM Development Inc., which goes by the name Planet 13 holdings, was denied potentially lucrative dispensary licenses from Nevada has filed a lawsuit that asks the court to void the decision.

The lawsuit filed earlier last week in Clark County District Court appears to be the first legal pushback against the Nevada Department of Taxation since the agency awarded more than 60 new conditional dispensary licenses a few weeks ago. Planet 13 and Medizin is headed by a former Henderson mayor Bob Groesbeck and city councilman Larry Scheffler, filed the lawsuit after being denied on all six of its applications for a license for six different jurisdictions.

“The Department’s flawed interpretation of the provisions of [state laws and regulations], and refusal to issue ‘conditional’ licenses in accordance with the law constitute and cause continuing and irreparable harm to Plaintiff with no adequate remedy at law,” the lawsuit reads. “The purpose of this refusal was and is to unreasonably interfere with Plaintiff’s business and causing Plaintiff to suffer irreparable harm.”

Planet 13 is a vertically integrated marijuana company with plans to expand its newly opened Las Vegas-area dispensary to a massive 112,000 square feet; owners hoped to someday include a coffee shop, a tasting room for marijuana-infused alcohol and a consumption lounge.

The company says that it ranked fourth highest in Clark County in 2015 during an application period for a medical marijuana license, and has only added more diversity to its leadership team since then, something that should add more points to the application. MM Development Company said some companies that did win licenses this time scored ranked below them in 2015, and added that they believe it is improper for the department to issue more than one license for a recreational marijuana store to individual applicants within a single jurisdiction.

Nevada officials did not release the names or scores of those who won any of the conditional licenses, citing confidentiality provisions in state marijuana regulations. Transparency advocates have said the secrecy provisions are a misapplication of old rules meant to protect medical marijuana patients and serve no valid purpose now.

Taxation department spokeswoman Stephanie Klapstein said the agency has scheduled several score reviews in January for applicants who want an explanation on why they did or did not win a license, but she said she could not speak publicly about the specifics of any applicant’s score.

“Our process was to score and rank applications by jurisdiction, and if there were (for example) five licenses available in a jurisdiction, the five applicants who scored the highest (and thus ranked as the top five) were awarded the licenses,” she said.

Although the state is not releasing names, press releases and public statements from license winners show several companies captured large numbers of conditional licenses while many others received zero. For example, Essence Cannabis Dispensary (affiliated with Armen Yemenidjian, son of Tropicana casino CEO Alex Yemenidjian, and Las Vegas Sun publisher Brian Greenspun) received eight licenses. Green Growth Brands (affiliated with Nevada Dispensary Association President Andrew Jolley) said it received seven. And Taproot Holdings (headed by former Nevada Dispensary Association President Shane Terry) told KSNV it received seven.

Critics say they worry that the concentration of licenses will create an oligopoly situation in which the market is controlled by only a few large companies and that small cultivation and production companies that again missed out on storefront licenses will be reduced under the arrangement.

The Las Vegas Medical Marijuana Association said it wanted to see a larger number of applicants winning the licenses.

“As a state, we need to increase the diversity of ownership,” the association said in a statement. “It’s good for the industry and the state.”

Since the lawsuit is pending and the outcome is unknown to be in favour of Planet 13 Holdings, this may have a positive outlook for Planet 13 investors.

Disclosure: I am/we are long PLNHF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.