Besieged by attorneys who say their clients were shut out of a settlement offered by the state to some plaintiffs in a lawsuit against the Department of Taxation, the Tax Commission agreed to approve the agreement contingent upon the approval of the Cannabis Compliance Board, which assumed regulation of the industry on July 1.
The board is the creation of Gov. Steve Sisolak and state lawmakers and is designed to mirror gaming regulation in Nevada.
In a letter to the Tax Commission, CCB Executive Director Tyler Klimas said the board has “reviewed the requirements set forth in the agreement, including those that bind the CCB, and are committed to executing those obligations stated therein.”
Attorney Amy Sugden, who alleges her client was shut out of the settlement, says the CCB’s endorsement “evidences the lack of true independence that was much needed in this industry and that Governor Sisolak wanted.”
On Friday, Judge Elizabeth Gonzalez, who is presiding over the massive trial in the case, rejected a motion to derail the proposed settlement.
The lawsuit stems from a licensing round conducted by the DOT in 2018. Of the 127 applicants who applied, only 17 won the 61 licenses up for grabs. Plaintiffs alleged favoritism on the part of officials from the Department of Taxation, the second state agency to have jurisdiction over the industry.
“The settlement before you does not bring fairness to this process,” said David Goldwater, a partner in Inyo Fine Cannabis, a Las Vegas dispensary. “It exacerbates the inequity caused by the unfair process.”
Goldwater said the agreement is a “litigation strategy” that does not settle the case for the state. He also called out Tax Commission Chairman James DeVold for suggesting the settlement was offered to all plaintiffs.
“We were never contacted. We were never offered the settlement by Mr. DeVold or Mr. (Steve) Shevorski,” he said of the commission chairman and Attorney General’s representative.
Goldwater said plaintiffs who are in the settlement scored much lower in the state’s scoring process than plaintiffs who are not.
“This settlement does not adhere to Nevada’s merit-based system,” he said, adding the parties “arrogantly assume they have the right to decide who gets a license based on no objective criteria whatsoever.”
Goldwater and others who are not a part of the settlement say it impedes the ability to resolve the litigation by leaving no reasonable alternative for relief.
“Any strategic settlement that gives award to the larger companies is a threat to smaller companies, the public and the industry as a whole,” Goldwater said.
Participants in the settlement say it will allow them to finally open locations that have been held up by the litigation, create jobs and tax revenue. Brandon Wiegand of the Source says he feels the state’s ranking in 2018 was fair but says he’s willing to compromise in order to open. The Source received seven licenses in that round while a number of applicants received none.
Commissioner George Kelesis opposed the Commission’s approval of the settlement absent action by the Cannabis Compliance Board.
“I think we’re putting the cart before the horse, procedurally,” he said.
“I know this is not a perfect agreement and I get that,” Chairman DeVold said.
In the end, the Tax Commission punted, voting to approve the agreement contingent upon approval from the Cannabis Compliance Board.