The Maryland Cannabis Administration will hold social equity cannabis license lotteries Friday, June 28, for Talbot and Calvert counties after a pair of lawsuits challenging the state’s application process were dropped.
On March 14, the MCA held social equity lottery draws and selected 174 applicants for various business licenses. But the MCA agreed to put the lotteries for Talbot and Calvert counties on hold because of litigation and a preliminary injunction request filed by seven entities going by the name KG Wellness.
KG Wellness #1, #2, #3, #5, #6 and #8 sued the MCA on March 19 claiming a computation error of their financial information in their applications was immaterial, therefore, their applications should not have been denied for the lotteries in those two counties.
This lawsuit followed one filed in February by KG Wellness #4, which challenged the denial of their application because of communication errors they alleged the MCA committed.
All of the stores were represented by the same attorneys, used the same business address, and appeared to be backed by the same consultant.
“Several of the individuals named in the applications share an email domain name ending in ‘@kanagrove.com’ (Ex. A, ¶ 10 ), a company that is ‘working with investors and entrepreneurs who are seeking to purchase licensed and fully compliant cannabis facilities,’” stated the Maryland Attorney General’s response to the preliminary injunction filed in KG Wellness #1, et. al., which quoted Toronto-based Kana Grove’s website.
In the lawsuit with six plaintiffs, the same financial information — including anticipated startup costs for the first year and $10 million in first-year revenue — was provided for each. They also had the same computational error for the anticipated first-year pre-tax profit that amounted to a 2.48% difference. Four of them sought dispensary licenses in Calvert County, and two applied for Talbot County.
They claimed the “immaterial” error should not have disqualified them for the lottery. But Andrew Garrison, chief of the office of policy and affairs for the MCA, said in a sworn affidavit that the application rules were clear.
He said a document published Nov. 1, 2023, describing the evaluation process and criteria explained the administration would be examining whether “the applicant has accurately calculated the total costs of their proposed business by adding each line item of the worksheet.”
The rules also said the application would fail if, “the individual line items did not accurately equate to the total assumed pre-tax profits projected.”
On May 29, Judge Robert J. Thompson for the Circuit Court for Anne Arundel County denied the motion for a preliminary injunction.
The plaintiffs in KG Wellness #1, et. al., voluntarily dismissed the complaint on June 12. The KG Wellness #4 case was voluntarily dismissed May 24.
KG Wellness attorney Stuart Cherry of Rifkin Weiner Livingston in Baltimore did not respond to an email seeking comment.
26 additional cannabis business applicants to be drawn
Upon the resolution of litigation, three standard dispensary applicants will be selected in Calvert County and two in Talbot County, the MCA announced on its website.
Additionally, the MCA will select 26 more applications for standard and micro dispensary, grower and processor licenses in regional areas throughout the state “to award the maximum number of licenses for the first round,” as authorized under the Cannabis Reform Act.
“This is due to the strong interest and engagement in the first round of social equity licenses, and to give more individuals the opportunity to operate a cannabis business in the state,” the MCA stated.
The lotteries will be held beginning at 9:30 a.m. EDT, Friday, June 28, and may be viewed on the MCA website.
