A lawsuit filed against Baldwin Park seeks to break the monopoly the city created when it approved a sole distribution business to serve all local marijuana cultivation and manufacture businesses.
In December, the City Council granted Rukli an exclusive agreement to transport cannabis in the city. In a 3-2 vote earlier this month, the council amended the approvals for all 15 of the city’s marijuana businesses, including Rukli’s.
The complaint, filed in March by lawyer Bradley Pierce on behalf of resident Oscar Cereceres and Dusko Dan Meic, who also had applied to operate a marijuana distribution business in Baldwin Park but was rejected, seeks to have the city’s agreement with Rukli frozen or nullified.
Baldwin Park CEO Shannon Yauchzee declined to comment last week and instead directed questions from this publication to City Attorney Robert Tafoya, who did not respond to requests for comment.
Although the city has approved Rukli to operate, the state Bureau of Cannabis Control needs to sign off on the deal and is certain to overrule it because the agreement represents an illegal monopoly, forcing all marijuana cultivators and manufacturers in Baldwin Park to transport their products through Rukli, according to the lawsuit.
It all adds up to a colossal financial bust, the lawsuit said.
Don’t miss our reviews of strains, edibles, topicals, tinctures, vape oils and other cannabis products.
“The city will not obtain any revenues from distribution operations, despite numerous businesses willing to pay the high fees accompanying a license and development agreement,” the lawsuit read. “This will also decrease revenues of other cannabis-related businesses, as they will not be able to distribute their product.”
At the April 18 council meeting, Councilwoman Susan Rubio postulated that the city is hedging the future success of all of its local marijuana businesses on a shaky bet.
“My understanding is that the state deems contracts in perpetuity and exclusives illegal, so by approving this, we risk that the state not give Rukli a permit,” Rubio said at the time. “The 14 other companies here may fail as a result.”
The lawsuit also takes issue with the way the businesses were approved, specifically that the city Planning Commission didn’t review any of the 15 development agreements, including Rukli’s, before the City Council approved their preliminary versions in December.
When pressed at the April 18 council meeting to opine whether Rukli represents a monopoly, Tafoya hedged.
“I would not use the word monopoly, but we are forcing 14 other companies to use this company,” Tafoya said at the meeting.
Check out our updated map showing shops licensed to sell recreational cannabis in California.
In what Pierce described as a potential admission the city had operated improperly in December, the Planning Commission reviewed the revised development agreements both 2 1/2 weeks ago and again in a special meeting just before the April 18 City Council meeting.
The revision the council made earlier this month capped the life of Rukli’s agreement with the city. Previously, it was to endure in perpetuity; the latest tweak sunsets it after 49 years. The other 14 marijuana business development agreements with the city have five-year terms.
The lawsuit references a $4,400 donation Councilwoman Monica Garcia received for her state Senate campaign from Rukli CEO Sharone Bershatski as evidence of collusion between the council and the distributor.
“Just because you do business in the city doesn’t mean you can’t give money to an elected official,” Pierce acknowledged in a phone interview Wednesday. “But it would be better practice for the elected to say that they’re a big supporter of theirs and that they shouldn’t vote on that.”
Pierce said he intends to amend his claim against the city in the coming weeks to accommodate for the recent changes in Rukli’s development agreement.
To subscribe to The Cannifornian’s email newsletter, click here.
To subscribe to The Cannifornian’s email newsletter, click here.
