Company that sued Costa Mesa over cannabis process, with permit in hand, drops case
A cannabis retailer that sued Costa Mesa over its application process got the green light this week to open a dispensary on 17th Street and has agreed to pay the city’s legal fees as part of a legal settlement.
RD x Catalyst-Costa Mesa claimed in an August 2021 complaint members of the City Council defied the mandates of Measure Q — a 2016 ballot measure legalizing retail cannabis sales — when they allowed City Manager Lori Ann Farrell Harrison to determine how permits would be reviewed and granted.
When the process was rolled out, cannabis companies already conducting legal businesses in the fields of manufacturing, testing and distribution in an industrial “Green Zone” were allowed to submit applications ahead of most new enterprises.
City officials planned to process applications in groups of 15 and, when Green Zone businesses filled the first 15 slots, Catalyst sought a restraining order to halt the process pending a determination in the case.
A judge denied the request, allowing the city to continue reviewing applicants and scheduling public hearings before the Costa Mesa Planning Commission for retail cannabis conditional use permits.
On Monday, Catalyst Chief Executive Elliot Lewis appeared before commissioners with plans for a retail dispensary occupying two units of a commercial building at 170 E. 17th St., currently leased by Coast Sewing & Vacuum Center.
The new business is anticipated to serve from 175 to 300 customers per day and gross more than $2.5 million in 2023, generating $179,630 in tax revenue for the city.
Lewis described how his team planned to hire unionized employees, restripe the site’s legal nonconforming parking lot, plant six new trees and build a sidewalk along nearby Fullerton Avenue, in addition to tackling significant interior work within the two units.
He said having a dispensary in the commercial building would not only drive up foot traffic to surrounding businesses but add a level of security that could help with vagrancy issues observed on the site.
A lawsuit filed Tuesday claims the Costa Mesa City Council defied the intent of Measure Q when it allowed the city manager to unilaterally create rules for processing retail cannabis permit applications.
Catalyst, along with Dietrich Jewell, who co-owns the property, jointly contributed $40,000 to Coast Sewing & Vacuum Center owner Andrew Ramirez to assist with relocation after 20 years on the site and provided him a break on rent and a full return of his security deposit. Ramirez and other tenants wrote letters of support for the dispensary.
“We made sure the tenant who was moving out was taken care of, as well as some of the people who had issues with the project — we have addressed them and solved them all,” Lewis told commissioners. “It really is important for us that, if there are any issues, we address them immediately. The buck stops with us.”
The panel approved the project in a 4-2 vote (Chair Byron de Arakal was absent). Commissioners Jimmy Vivar and Adam Ereth voted against granting the permit.
While Ereth offered no comment on his vote Thursday, Vivar explained at Monday’s meeting more could have been done to retain the existing business, one tenet of the city’s general plan.
“While I do appreciate the support that’s going to be given to the small business there, this didn’t have to happen,” he said. “The pandemic has ravaged the small business industry, and gentrification and big business is another difficulty that, unfortunately, small businesses are also having to face.”
Proprietors looking to open a dispensary in Costa Mesa seek a restraining order against the city’s retail cannabis application process, claiming it was crafted to favor a select few.
Meanwhile, both city officials and Catalyst attorney and co-owner Damian Martin confirmed this week the legal dispute will soon be dismissed.
City Atty. Kimberly Hall Barlow explained Tuesday the pre-application status given to Green Zone cannabis companies may have been a head start but was not an assurance they would retain priority status throughout the many levels of review.
Therefore, other applicants lower in the queue, whose documents were more complete, may have surpassed the Green Zone candidates.
“Once [Catalyst] understood the process, based on our regulations they agreed to stay the case, so the city wouldn’t have to spend any money defending it and we could process the application in accordance with our rules,” she said.
Under the settlement, Catalyst has agreed to pay the city’s legal fees, an amount Barlow placed in the ballpark of $26,000.
Martin agreed the application process was clarified during talks with city’s legal team.
“Catalyst-Costa Mesa will pay the city its attorneys’ fees in dealing with/addressing our lawsuit — to make amends for the inconvenience that we do recognize and appreciate we caused,” he wrote in an email Thursday. “[Our] goal here was never to disrupt the city’s cannabis dispensary approval process, but to merely get a fair shake.”
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