The owner and employees of two cannabis distribution businesses who voluntarily surrendered their licenses claim they should be allowed to engage in “business dealings,” controverting a public warning Colorado cannabis regulators issued in July.
Au Hai Hau, Dang Hai Hau, Thanh Hau, and Thanh Hau’s company Rosemary Distribution are awaiting a ruling for a preliminary injunction in Colorado District Court, County of Denver, prohibiting the Department of Revenue’s Marijuana Enforcement Division (MED) from enforcing the bulletin, according to Law360, which reported on an Oct. 28 court hearing.
On July 8, Colorado MED warned cannabis businesses to not work with the Haus, who had surrendered their licenses pursuant to a Jan. 21 stipulation order. The MED accused the Haus and their licensed businesses, Ware Hause in Denver and South Platte Distributors in Moffat, of numerous violations related to tracking and testing. The Haus did not admit to or deny any of the violations, and an investigation remains ongoing.
MED said it considered the licenses revoked, which means other licensed businesses should not do business with them.
“Before engaging in a marijuana transaction with unknown parties, Licensees must exercise reasonable care to confirm that they are not conducting marijuana transactions with an unlicensed person, a person prohibited from holding a marijuana license pursuant to section 44-10-307, or a person otherwise restricted from holding an interest in a marijuana license, in violation of C.R.S. 44-10-309 (4),” the bulletin said.
The Haus filed suit five weeks later on Aug. 12 claiming the bulletin was a “quasi-judicial act,” and the Haus were denied their due process rights. The lawsuit names the MED and Heidi Humphreys, executive director and CEO of the Department of Revenue, as defendants.
The Haus claim the January stipulation order did not prohibit the Haus from holding a license in the future, and, “Critically, the SAO does not prohibit the Haus, individually or through an interest in a business entity, from holding an indirect financial interest in a licensed operator.”
Ware Hause licensing deal with Rocky Mountain Distributors
The MED originally served the Haus with an Order of Summary Suspension in August 2024, and a hearing was scheduled for late November last year.
Before that hearing, around Nov. 4, Rosemary Distribution entered into a licensing and supply agreement with Rocky Mountain Distributors in Denver, according to the Haus’ complaint.
The deal included the intellectual property of the brand name Ware Hause, as well as the standard operating procedures, equipment and personnel to manufacture Ware Hause products. Rosemary employees, which include Au Hai Hau and Dang Hai Hau, contacted dispensaries to market Ware Hause products.
Rocky Mountain Distributors is not a plaintiff but is named as an interested party in the lawsuit. It’s two manufacturer/processor licenses for 1135 S. Jason St. were suspended effective Sept. 22, according to the CRB Monitor database.
Department of Revenue spokeswoman Heather Draper said the department doesn’t comment on pending litigation or ongoing investigations.
Preliminary injunction hearing held
Colorado District Court Judge Christopher J. Baumann held a hearing for the preliminary injunction on Oct. 28.
The state alleged the Haus were continuing to sell Ware Hause products through Rosemary Distribution and Rocky Mountain Distributors, according to Law360. The Haus’ attorney, Keenan M. Jones of Frantz Ward, said the Haus were operating an ancillary business that did not require a cannabis license.
Jones asked the court to enjoin the MED from relying on or enforcing the bulletin and to lift any administrative holds that are “predicated on the unproven accusation in the bulletin,” according to Law360.
“’This is about the boundaries of government power and the process on which an entire regulated market depends,’ Jones said to the court Tuesday. ‘Dispensaries can’t sell [Ware Hause] products, and continued holds on those products is based solely on the unproven allegation in the bulletin,’” Law360 reported.
Reed W. Morgan of the Colorado Attorney General’s Office said the Haus received due process through the administrative hearing process and the requests for the injunction are “an extraordinary remedy” and “vague,” reported Law360. He also said the bulletin isn’t a new rule and accurately conveys the division’s findings.
“I’m not aware of an effort to rely on or enforce the bulletin,” Morgan said, according to Law360.
Jones did not return requests for comment.
