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Proposed settlement could end massive dispute over Nevada marijuana licenses, but some say they’re wrongly excluded

Michelle Rindels
Michelle Rindels
MarijuanaState Government
Customer at The Source dispensary

A major legal battle between the state and a long list of marijuana businesses that were not granted dispensary licenses in 2018 could finally be nearing its end with a partial settlement that would reshuffle some of the licenses.

The proposed settlement, which was announced in court on Wednesday and circulated among the parties, involves 17 marijuana business entities and the Nevada Department of Taxation, which regulated the industry until this summer. The Nevada Tax Commission is scheduled to take action on the settlement Friday afternoon, but a hearing on an effort to stop it — brought by plaintiffs who say they were edged out of the deal — set for Friday morning.

A series of lawsuits dating back more than a year and a half accused the state of unfair practices in deciding in 2018 who should receive coveted and strictly limited licenses to expand the number of retail locations of their business. The plaintiffs argued that top Nevada marijuana regulators — including former Department of Taxation employee Jorge Pupo, who has since left — showed favoritism and offered advice to certain applicants that put their application scores above the competition.

There were 127 applicants in the 2018 application round, but only 17 received one or more of the 61 additional dispensary licenses handed out, including one entity that received 11.

A trial that had been delayed because of the pandemic is ongoing in Clark County and had to be moved to the Las Vegas Convention Center to allow for social distancing among the multiplicitous participants.

Beyond the shuffling of the licenses, the settlement would also see plaintiffs agree to drop their lawsuits. The state agrees to expedite transfers of ownerships and inspections of completed projects for settling parties, and extend by 14 months a deadline by which license winners must have their dispensaries constructed and inspected.

The Cannabis Compliance Board, a new regulatory agency that is assuming oversight of the industry from the Nevada Department of Taxation, agrees to recommend an industry-funded study to its advisory commission that will make recommendations on deterring black market sales, protecting minors, changes to local fees and taxes on marijuana businesses and whether caps on the number of licenses should be changed.

But other plaintiffs that were not included in the settlement, including THC NV (doing business as Canna Vibe) and Herbal Choice, have filed a request for a restraining order to block the settlement, saying a partial settlement would gut their chances of succeeding at a future major trial and also leave them without the benefits of the agreement. They say they were purposely excluded so the gains would be divided among a smaller group.

“It has been and continues to be said settling Plaintiffs’ position that if a majority of Plaintiffs settle, than the smaller Plaintiffs could not carry this trial and would be forced to take smaller nuisance fee type settlements,” the filing says.

Summary of proposed transfers

Plaintiffs listed on the settlement include LivFree Wellness (doing business as The Dispensary in Reno), MM Development Company (Planet 13), Nevada Wellness Center, Qualcan, Lone Mountain Partners (Zenleaf), Nevada Organic Remedies (The Source), Greenmart of Nevada (Health for Life), Helping Hands Wellness Center, CPCM Holdings, Cheyenne Medical and Commerce Park Medical (Thrive). 

It also includes a group known as the “ETW plaintiffs,” which includes ETW Management Company (Gassers), Global Harmony (Top Notch), Just Quality (Panaca Cannabis / Hush), Libra Wellness Center, Rombough Real Estate (Mother Herb) and Zion Gardens.

Lone Mountain, which was issued 11 licenses in 2018 but was enjoined from moving forward with them after a judge determined background checks were not performed on all owners, agrees to give away:

  • 1 Las Vegas license to Qualcan
  • 1 Reno license, 1 Lincoln County license, 1 Esmeralda County license, 1 Eureka County license to the “ETW plaintiffs” group
  • 1 Douglas County to Thrive
  • Also giving Lander, Mineral and White Pine licenses to be distributed to a global settlement, if one involving all parties is reached.

Helping Hands, which was awarded three licenses but also subject to the injunctions, is giving away:

  • 1 license in unincorporated Clark County to LivFree Wellness

Nevada Organic Remedies, which was awarded seven licenses in 2018 but also subject to the injunction, is giving away:

  • 1 license in unincorporated Clark County to MM Development Company
  • 1 license in Carson City to Qualcan

Greenmart, which was awarded four licenses but also subject to the injunction, is giving away:

  • 1 license in unincorporated Clark County to Nevada Wellness Center

Thrive is giving away:

  • 1 Henderson license to ETW

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