VISAJ UNITY, LLC D/B/A METRO CANNABIS, a Colorado Limited Liability Company
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1 DISTRICT COURT, ADAMS COUNTY, COLORADO 1100 Judicial Center Drive Brighton, CO Plaintiff: VISAJ UNITY, LLC D/B/A METRO CANNABIS, a Colorado Limited Liability Company v. COURT USE ONLY Defendants: CITY OF AURORA, a Municipality; THE AURORA MARIJUANA ENFORCEMENT DIVISION; and JASON BATCHELOR, in his official capacity as Aurora Director of Finance Attorneys for Plaintiff Robert T. Hoban, # C. Adam Foster, # th Street, Suite 900 Denver, CO (303) Fax: Case Number: Division COMPLAINT Plaintiff, VISAJ Unity, LLC d/b/a Metro Cannabis ( VISAJ ), by and through its attorneys, Hoban & Feola, LLC, respectfully submits its Complaint, stating as follows: I. PARTIES, JURISDICTION AND VENUE 1. Plaintiff VISAJ is a Colorado Limited Liability Company with a business address of E. Colfax Ave., Aurora, CO Defendant City of Aurora ( Aurora ) is a Colorado municipality with its principal administrative offices at E. Alameda Parkway, Aurora, CO Defendant Aurora Marijuana Enforcement Division ( AMED ) is a division of the 1
2 Aurora Finance Department charged with enforcing Aurora s Retail Marijuana Code ( the Code ) and AMED s own regulations. 4. Defendant Jason Batchelor is the Director of the Aurora Finance Department. Mr. Batchelor also acted as the hearing officer at the October 13, 2014 hearing that gave rise, in large part, to this Complaint. Mr. Batchelor is named as a defendant in his official capacity. 5. Venue is proper in this Court pursuant to C.R.C.P. 98(c) because VISAJ s principal place of business is in Adams County and Aurora is partially located in Adams County. II. GENERAL ALLEGATIONS 6. On May 12, 2014 the Aurora City Council approved Aurora s Retail Marijuana Establishments Ordinance ( Ordinance ), which went into effect on June 14, The Ordinance provided for issuance of up to four retail marijuana store licenses in each of Aurora s six city council wards, for a total of twenty- four retail marijuana store licenses throughout Aurora. 7. The Ordinance and Code established a points system to grade applications for licensure, with each applicant awarded between 0 and 41 points, and the top four applicants in each city council ward awarded a conditional license. 8. AMED created an extensive application packet requesting a broad range of information from applicants. The application packet included an Application Checklist detailing the criteria under which AMED would award points, and apportioning specific point values to specific criteria and topics pursuant to Code Applicants could earn up to ten possible points for their Business Plan and up to ten points for their Operating Plan. AMED represented to applicants that it would contract with three independent reviewers possessing specialized expertise to evaluate the Business and Operating plans. 10. Although Aurora and AMED represented to applicants and members of the public that licenses would be awarded based on an unbiased and comprehensive evaluation system, 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 result was that AMED failed to implement an objective and transparent process to award licenses to the most qualified applicants. 11. Upon information and belief, AMED instead manipulated the process to pick 2
3 winners and losers based on secret criteria that included seeking a certain geographic distribution of marijuana stores and favoring certain applicants that AMED officials liked more than others. 12. On or about June 9, 2014, VISAJ submitted a letter of intent to apply for a retail marijuana store license ( license ) 1 to AMED in compliance with AMED Regulation 202.3(b). And VISAJ requested a pre- application meeting with AMED on or about June 25, Members of VISAJ s ownership group and design team met with AMED officials during an informal meeting on or about June 23, 2014 to discuss the application process, and also met with AMED officials and other Aurora officials on July 14, 2014 at the preapplication meeting required by AMED Regulation 202.3(b). 14. Aurora officials mentioned more than once during these meetings that Aurora s ventilation and odor mitigation requirements for marijuana stores were modeled on requirements that the City of Boulder had implemented in order to prevent the odor of marijuana from being detectable outside of the licensed premises. 15. Aurora officials also stated that engineering drawings or details of the filtration plans were not required at the application stage, but instead such details would need to be submitted to the Building Department once the license was approved. This was consistent with Aurora s written pre- licensing overview package, which stated that Aurora would require [i]nstallation of an air scrubber or carbon filter air filtration systems or equivalent but did not require any specific equipment. (emphasis supplied). 16. VISAJ timely submitted its license application on July 31, VISAJ s entire application packet was over 400 pages long including attachments and met the submittal requirements of Regulation AMED informed VISAJ that its application packet was complete. AMED subsequently requested additional tax information from VISAJ, but did not request any other supplemental information. 18. On August 28, 2014 Aurora announced that it had awarded 21 total licenses for retail marijuana stores. VISAJ did not receive a license, and members of its ownership group requested a meeting with AMED to discuss why AMED denied VISAJ s application. 1 Aurora issued different classes of licenses for retail marijuana stores, cultivation facilities, infused product manufacturers and testing facilities. The case at bar concerns the procedure for issuance of marijuana store licenses only. 3
4 19. VISAJ s counsel, Robert T. Hoban, Esq. and VISAJ owners Stanislav Zislis, Igor Kaminer and Vice President of Finance Aleksander Murakhovskiy met with AMED members Kim Kreimeyer and Wade Jensen on September 10, 2014 to discuss AMED s process for evaluating license applications. 20. VISAJ applied for a license in City Council Ward 2 because its leased premises at E. Colfax Ave. were located within that ward. VISAJ was awarded 34 total points by Aurora s evaluators. The next highest scoring applicant in Ward 2 was Mountain States Group I LLC ( MSG ), who received a score of At the September 10, 2014 meeting VISAJ also learned that it would have tied for the highest score of all applicants in Ward 2 had it been awarded three points for its response to Item # 17, which asked what steps the applicant would take to prevent the odor of marijuana from being detected outside of the licensed premises. 22. But VISAJ received zero points for its response to Item # 17 despite the fact that it provided a far more detailed response to the question than most applicants who were awarded the full three points. 23. At the September 10, 2014 meeting VISAJ s attorney asked Mr. Jensen and Ms. Kreimeyer if VISAJ could appeal denial of its application and Ms. Kreimeyer denied than an appeal process existed. 24. Following the meeting with Ms. Kreimeyer and Mr. Jensen from AMED, VISAJ requested copies of winning applicants applications and its own application on September 10, 2014 pursuant to the Colorado Open Records Act ( CORA ) in order to attempt to understand why its application was denied. 25. On September 16, 2014 VISAJ timely appealed denial of its license application pursuant to AMED regulations and On or about October 1, 2014 AMED produced approximately 3,000 pages of documents in response to VISAJ s September 10, 2014 document request. 27. VISAJ went to hearing on October 13, Mr. Batchelor acted as the hearing officer. 28. AMED should have appointed a truly neutral hearing officer, as opposed to Mr. Batchelor. A high level of public interest and media coverage accompanied Aurora s implementation of its marijuana licensure system. As the Finance Director, Mr. Batchelor had a vested interest in issuing a decision that minimized any mistakes or irregularities in the licensure process implemented by his subordinate department, 4
5 AMED. Thus, Defendants stacked the deck against VISAJ from the outset of the appeal process. 29. On October 13, 2014 VISAJ submitted another CORA request to AMED following the licensure hearing. VISAJ requested copies of documentation pertaining to all financial transactions between AMED and the independent reviewers. 30. VISAJ s presentation of evidence and argument at the October 13, 2014 hearing, and in its post- hearing Brief, demonstrated that AMED committed serious errors in the licensure process. VISAJ now brings this lawsuit because AMED has refused to correct these errors or to reverse its denial of VISAJ s application a. AMED Unreasonably Refused to Correct its Obvious Math Error 31. AMED committed an obvious math error in calculating competing applicant MSG s score. MSG obtained an average score of 7.44 points from the three independent reviewers rating its Operating Plan. But rather than rounding the score down to 7, AMED rounded the score up to 8 points. Applying the correct rounding rule results in MSG obtaining a total score of 34, which in turn results in a tie for fourth place between MSG and VISAJ. 32. In other instances Aurora employed the proper mathematical rule of rounding scores below.5 points downward. For instance, in Ward 1, applicant Blue Dot Botanicals received an average score of 7.44 points on its operating plan. In that instance, Aurora correctly rounded Blue Dot s score down to 7 points. 33. Code 6-309(c) directed AMED to select a winner at random in the event that two or more applicants tied for licensure in a given ward. AMED had previously stated that the tiebreaker process would involve a public lottery system. 34. In his written denial of VISAJ s appeal Mr. Batchelor wrote: I find that the score of [MSG] was incorrectly rounded up, however, at best this would have entitled VISAJ to a drawing for the final license. The license has already been awarded to [MSG]. There is no lawful basis to revoke [MSG s] license. (emphasis supplied). 35. AMED s refusal to implement the tiebreaker process that Code 6-309(c) mandates in order to correct its own obvious math error or to simply award an additional license to VISAJ- - rendered the appellate process set forth in AMED Regulation 803 meaningless, and provides additional evidence of AMED s intent to improperly award licenses to its preferred applicants. 36. Mathematical analysis of AMED s scoring of all applications reveals that it is highly unlikely that there would not have been any tie for licensure in any ward. Upon 5
6 information and belief, AMED officials manipulated scores in order to avoid a tiebreaker scenario. b. AMED s Mystery Reviewer Improperly Manipulated Scores 37. As noted above, applicants Business and Operating Plans were scored by three reviewers. AMED repeatedly represented to applicants and the general public that each of the three reviewers would be independent of AMED and possess specialized skill, training and experience in evaluating the applicants Business and Operating plans. 38. AMED has refused to disclose the reviewers identities despite VISAJ s repeated requests that it do so. 39. Analysis of the scores that the three reviewers awarded to all applicants shows that Reviewer #1 and Reviewer #2 issued very similar scores to each applicant. 40. In contrast, Reviewer #3 s scores depart radically from the other two reviewers. 41. If Reviewer #3 s scores are excluded, VISAJ would be placed in a three- way tie for the fourth license in Ward 2, even without VISAJ receiving an additional three points for Item # In response to VISAJ s CORA request, AMED provided scoring notes for Reviewers #1 and #2 commenting on VISAJ s Operating Plan and Business Plan. 43. AMED officials first stated that AMED could not provide Reviewer #3 s notes along with the other reviewers notes because Reviewer #3 made notes directly on a hard copy of VISAJ s Business Plan and Operating Plan. 44. But at the October 13, 2014 hearing, AMED Manager Ms. Peterson changed AMED s position and testified that AMED could not provide notes for Reviewer #3 because Reviewer #3 did not make any written notes or comments of any kind. Ms. Peterson again refused to disclose Reviewer #3 s identity. 45. In its October 13, 2014 CORA request VISAJ requested records of all payments to the three reviewers. Aurora produced documents showing that it paid $16, to Reviewer #1 and $16, to Reviewer #2. Aurora did not produce any documents showing any payments to Reviewer #3. Aurora also produced contracts with Reviewer # 1 and Reviewer #2, which specifically required the reviewers to submit narratives explaining their rationale in grading the Business and Operating Plans. Aurora produced no contract with Reviewer #3. 6
7 46. The terms of the reviewer contracts that Aurora produced contradicted Ms. Peterson and Mr. Batchelor s later statements that the reviewers were not required to retain any written notes. 47. Additionally, Mr. Batchelor wrote in his decision denying the appeal that at the October 13, 2014 hearing, [t]here was no testimony about the instructions given to reviewers or whether they were required to write explanatory notes. 48. Mr. Batchelor s finding contradicted Ms. Peterson s hearing testimony that Reviewer #3 took no notes. And Ms. Peterson s testimony in turn contradicted the terms of Aurora s contracts with Reviewers # 1 and 2, as well as Mr. Jensen and Ms. Kreimeyer s September 10, 2014 statements that Reviewer #3 took notes directly on VISAJ s Business Plan and Operating Plan. 49. These statements, combined with Aurora s delays in providing requested documents, evidence a concerted effort by Aurora to deny VISAJ genuine insight into Aurora s decision- making process. If Aurora had implemented an objective and consistent evaluation process for licenses it would not have needed to go to such great lengths to attempt to prevent VISAJ from gathering relevant facts and documents in support if its appeal. 50. Upon information and belief, Aurora did not pay Reviewer #3 because the individual who entered scores under the guise of Reviewer #3 was not actually an independent reviewer. Rather, this individual, or group of individuals, improperly manipulated scores in order to favor certain applicants over others, to ensure a preferred geographic distribution of licensed marijuana stores and to avoid having to hold a public lottery. c. VISAJ Should Have Received Three Points for its Response to Item # As noted above, AMED awarded either three points or zero points for an applicant s response to Item #17, which stated: Does the facility have a proper ventilation system (proposed or installed) that will filter out the odor of marijuana so that the odor cannot be detected by a person at the exterior of the building? [ ] Yes [ ] No If yes, briefly state what you have or plan to have installed. 52. In response, VISAJ provided a description of stores that it currently operates that meet the requirements of AMED Regulation 503.2, which requires that no marijuana 7
8 odors be detectable outside of the licensed premises. Because AMED officials had repeatedly stated that the Aurora regulation was modeled after Boulder s regulation, VISAJ explained that its ownership group operated a store in Boulder and would use the same design- build team that designed and installed the HVAC system at its Boulder premises. 53. Moreover, members of VISAJ s design- build team- - including Roger Blank, P.E., general contractor Bryan Williams and architect Glen Palmer- - attended the July 14, 2014 pre- application meeting to ensure compliance with Item # 17, among other things. AMED officials told these professionals that plans or a detailed description of the proposed air filtration system were unnecessary at the application stage and that these details should be submitted to the Building Department following conditional licensure. 54. Aurora s Application Checklist noted that up to three points could be awarded if [p]rior to opening, the building contains air filtration systems that filter out marijuana odor pursuant to Code 6-309(b)(6). 55. VISAJ made it clear that it would be able to meet this requirement by noting that it would be using the same design- build team that had installed ventilation systems that meet Aurora s standards at various other marijuana businesses managed by VISAJ s ownership group. 56. In addition to requiring a written Business Plan and a written Operating Plan, Aurora also permitted applicants to submit a written Security Plan. VISAJ was one of only eighteen out of 55 applicants that received the full two points for its narrative Security Plan. 57. In contrast, VISAJ was one of only seven out of 55 total applicants that received zero points for its response to Item # It made no sense for Aurora to award more points for respondents who used certain catchphrases in response to Item # 17 than it awarded to applicants who provided a detailed narrative Security Plan. 59. Steve Clark, building inspection supervisor and AMED member, testified at the October 13, 2014 hearing that he had sole responsibility for awarding points in response to Item # 17, and that he awarded the points on an all or nothing basis. 60. Mr. Clark stated he had inspected marijuana facilities in Boulder and that he and other AMED members were familiar with Boulder s requirement and modeled Regulation after Boulder s regulation. But he also testified that it was insufficient for VISAJ to state that it was currently operating facilities that meet 8
9 Boulder s regulation and would use the same design- build team that VISAJ used for its Boulder facility in order to receive three points for Item # Mr. Clark testified that he is not an HVAC expert and that he essentially received no guidance from AMED on how to score Item #17. Rather, Mr. Clark unilaterally decided to award points only to applicants who used some combination of the catchphrases carbon filter, air scrubber, or negative pressure. 62. Mr. Clark initially testified that he would not consider portions of the application outside of Item #17 to award points, but then admitted that he awarded points to another applicant based on a ventilation plan that the applicant submitted as an attachment to the application. He also testified that no standards existed to guide his decision. 63. VISAJ s attorney noted that both Reviewer #1 and Reviewer #2 provided very favorable written comments in response to VISAJ s statements regarding odor mitigation in its Operating Plan. Mr. Clark responded that he did not review the applicants Operating or Business plans. 64. Aurora abused its discretion by failing to provide Mr. Clark with any criteria for scoring Item # 17. And Mr. Clark abused his discretion by ignoring the fact that he should have awarded three points to VISAJ for describing a system that would employ the equivalent of some combination of carbon filters, air scrubbers and negative pressure. 65. Significantly, Mr. Clark later expressed his view that there s a lot of people out there that were are more qualified than your client. That s that is definitely the case. If Mr. Clark correctly testified that he did not review other portions of the applicants applications he would have had no way of knowing which applicants were the most qualified. 66. If Mr. Clark had awarded VISAJ three points for its response to Item #17 VISAJ would have tied for the highest score in Ward 2 with 37 points. And VISAJ s Business Plan and Operating Plan received some of the highest scores of any applicants in any ward. 67. Upon information and belief, Mr. Clark declined to award three points to VISAJ for its response to Item #17 because he had improperly concluded that other applicants were better qualified based on his own subjective criteria. 68. Moreover, conflicts between the Code, AMED Regulations and written application materials made the City s criteria for evaluating Item #17 unnecessarily vague and confusing. 9
10 69. Mr. Clark s decision to award three points to Applicants who parroted certain catchphrases in Response to Item #17 and his decision to ignore VISAJ s superior response constitute an abuse of discretion. Similarly, AMED abused its discretion by providing carte blanche to Mr. Clark to award all or nothing points based on his own personal criteria. III. CLAIMS First Claim For Relief (CRCP 106(a)(4)) 70. VISAJ incorporates Paragraphs 1 through 68 above as though fully set forth herein. 71. Defendants abused their discretion and exceeded their jurisdiction by, among other things, refusing award VISAJ an additional license or implement Aurora s tiebreaker system after VISAJ successfully proved that AMED had committed a mathematical scoring error, refusing to award VISAJ three points in response to Item # 17, improperly considering the scores of mystery reviewer #3, refusing to reveal the identity of Reviewer #3 and awarding licenses according to a pliable set of criteria based upon the preferences of AMED officials rather than the Code and AMED s written regulations. 72. VISAJ respectfully asks this Court to direct AMED to award VISAJ a license. SECOND CLAIM FOR RELIEF (Violation of Substantive and Procedural Due Process) 73. VISAJ incorporates Paragraphs 1 through 71 above as though fully set forth herein. 74. Defendants violated VISAJ s state and federal rights to due process and equal protection of the law by failing to implement a fair and transparent process for evaluating applications, failing to provide a meaningful administrative review process, failing to provide requested documents prior to hearing, impermissibly departing from Defendants own written criteria for evaluating applications and failing to take any action to grant VISAJ a license after VISAJ demonstrated that the licensure process was fundamentally flawed and riddled with errors. 75. Defendants actions constituted a violation of due process under Article II 25 of the Colorado Constitution and the Fifth and Fourteenth Amendments of the U.S. Constitution. 10
11 76. Defendants acted under the color of state law to deprive VISAJ of its federal civil rights in violation of 42 U.S.C VISAJ requests an award of its reasonable attorney fees pursuant to 42 U.S.C Defendants violations of the rights to due process and equal protection under the laws resulted in damages to be proven at trial. THIRD CLAIM FOR RELIEF (CRCP 57 Declaratory Judgment) 79. VISAJ incorporates Paragraphs 1 through 77 above as though fully set forth herein. 80. Despite the fact that Mr. Batchelor acknowledged that AMED committed a clear mathematical error, he held that VISAJ was entitled to no relief. VISAJ asks this Court to hold that the ability to appeal AMED s decision necessarily included the right to compel AMED to reverse its decision if AMED committed an error. 81. VISAJ also asks this Court to hold that Aurora has not shown a compelling need nor legal basis for refusing to disclose the identity of the independent reviewers or to provide additional documents and details regarding the independent review process, and that Aurora s refusal to provide such details violates Colorado s Open Records and Open Meetings laws. See, e.g., C.R.S ( It is declared to be a matter of statewide concern and the policy of this state that the formation of public policy is public business and may not be conducted in secret. ); C.R.S ( It is declared to be the public policy of this state that all public records shall be open for inspection by any person at reasonable times, except as otherwise specifically provided by law. ) 82. VISAJ respectfully asks this Court to interpret the parties rights under the Aurora Code and to hold that the Aurora Code permits, and in fact requires, that VISAJ be granted a license under the circumstances present in this case; and to require AMED to issue a license to VISAJ, or provide other appropriate relief consistent with that holding. 2 Undersigned counsel directs this Court to the Court of Appeals recent decision in Young v. Larimer County Sheriff s Office, 2014 COA 119 (Colo. Ct. App. Sept. 11, 2014) (no claim under 42 U.S.C where sheriff s office wrongfully destroyed plaintiff s marijuana plants). Undersigned counsel respectfully contends that Young is legally and factually distinguishable from the case at bar and that VISAJ has a viable claim under 42 U.S.C under the circumstances present in this case. 11
12 IV. REQUEST FOR RELIEF WHEREFORE, VISAJ requests the following relief: A. A finding that Defendants abused their discretion and exceeded their jurisdiction in denying VISAJ s license application. B. An order directing AMED to issue a license to VISAJ forthwith. C. A determination of the parties rights related to the license application and appeal process pursuant to CRCP 57. D. An award of VISAJ s damages as determined at trial, together with pre- and post- judgment interest, costs and expert witness fees. E. An award of VISAJ s reasonable attorneys fees incurred herein as provided by law. F. That VISAJ be granted such other relief as the Court deems proper. VISAJ demands a trial by jury. Dated: November 25, Respectfully submitted by: Hoban & Feola, LLC /s/ C. Adam Foster (original signature on file) Plaintiff s Address: E. Colfax Ave. Aurora, CO
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