AURORA | A lawsuit filed against Aurora’s marijuana enforcement division claims it “manipulated the process” when awarding limited recreational marijuana licenses to businesses back in August.
Metro Cannabis, a company denied two operating licenses in Aurora, claims the Aurora Marijuana Enforcement Division, or AMED, awarded licenses based on “secret criteria.”
According to the lawsuit, that criteria included “seeking certain geographic distribution of marijuana stores,” and using a “mystery reviewer” to manipulate the city’s points system in favor of certain stores.
In late August, AMED awarded 21 licenses to businesses using a points system that looked at industry experience, operating and security plans, and air filtration systems.
Under rules created by Aurora City Council, only four licenses could be given in each ward, and they were awarded to the highest-scoring applicants.
“The process was in fact conducted according to a set of unwritten rules that appear to have been made up and changed at the whim of AMED officials,” the lawsuit states. “The result was that AMED failed to implement an objective and transparent process to award licenses to the most qualified applicants.” The lawsuit was filed in Adams County District Court.
Stan Zislis, a co-owner of Metro Cannabis, said his business should have tied its score for a license. The lawsuit claims AMED rounded up instead of down when scoring an application submitted by Mountain States Group in Ward II. That additional point put Mountain States Group in the lead for the fourth license in the ward, and pushed Metro Cannabis to fifth place.
Under the city’s marijuana ordinance, if businesses receive a tie score for a license, one is chosen through a lottery.
AMED admitted to the mistake, according to documents obtained from an administrative appeals hearing held in October. One document states that Metro Cannabis would have been entitled to a lottery process with the correct score but explained there was “no lawful basis to revoke Mountain States Group’s license.”
Zislis added that the city not having any tie scores out of 55 applicants vying for 24 limited spots seemed too good to be true.
“You’ve got a dispensary at every interstate exit to ensure the highest revenue, and at all of the outliers for the city’s boundary, you have strategic locations,” he said. “The odds of that happening without human intervention are Powerball odds.”
City spokeswoman Julie Patterson said the city would not comment on the pending lawsuit.
Meanwhile, Zislis said he has spent over $100,000 continuing to lease the property in Ward II while the lawsuit goes to court.
“I want my license, and I want to be reimbursed for my costs,” he said. “The people asking us to be transparent and play by the rules are not playing by the rules themselves.”
Denver attorney Bob Hoban, who is representing Zislis, said city officials should be embarrassed about the holes in their licensing process.
“The city’s response that the other person was further along in the process, that we’re going to ignore there was a tie, that’s not fair or equitable,” Hoban said. “The government can’t do that. There has to be a meaningful appeals process.”
The lawsuit is also asking for the names of three people the city appointed to an independent panel to judge the applications.
Zislis said he believes there were only two people on the panel. AMED has refused to reveal the names of the panelists and Zislis has only received information, including financial contracts and grading criteria, for two of them.
The lawsuit claims the mystery panelist’s scores were often used to break ties with other businesses or bump certain businesses to the top of a list.
Out of 55 applicants, Metro Cannabis is the only one to sue the city over its licensing process.
University of Colorado law professor Richard Collins said it will be easy to prove the city’s actions were sloppy, but proving anything else could be challenging.
“At one end of the spectrum, the claim is one of insider skulduggery, that the city has deliberately excluded (Metro Cannabis) in favor of some inside people. If you can prove that, which is really corruption, then you’ve got a strong case on several legal grounds,” Collins said.
He said even if Aurora has made mistakes with its licensing process, cities are generally protected by Amendment 64, which grants them substantial power when it comes to marijuana regulation. Under the state law, municipalities can ban or refuse licensing businesses altogether.
“The structure for this lawsuit depends on the notion that the court has legal authority to order the city to cough up an additional license in favor of (Metro Cannabis). I think that’s a fair question,” Collins said.
This is not the first time Zislis has sued a city over its marijuana laws. In 2009, an Arapahoe County judge barred Centennial from shutting down CannaMart, a dispensary where Zislis is an owner.
Hoban served as an attorney for Zislis on that case as well.
By the time that case was decided, Zislis had closed shop and re-opened CannaMart in Littleton where it still operates today.
“We didn’t get to stay open in Centennial, but it benefited other people,” he said. “That case set a precedent for other dispensaries.”
so issue the licenses to both the tied businesses….problem solved
I’m not for any pot shops in Aurora, but since we will have them, it should be open to anyone. The process in aurora only allows for a few wealthy folks to start shops. It will be as corrupt as the taxi companies and the PUC.
Licenses were awarded to businesses with the best business models and highest quality facilities, among other things. I’m all for more licenses and more shops, but Metro Cannabis has always been a dump and isn’t run by professionals. No surprises here…
as FYI, Metro Cannabis is under new management.