Marijuana litigants allege collusion, ask judge to derail proposed settlement

Las Vegas marijuana companies are asking a judge to issue a temporary restraining order to prevent the Nevada Department of Taxation from entering into a settlement with some litigants while cutting others out of the deal.  

Attorneys for THC Nevada, LLC and Herbal Choice, Inc. filed an ex parte motion Tuesday claiming the state and big players in the industry are attempting “to strong arm THC NV, HERBAL CHOICE and remaining Plaintiffs into a dismissal of their claims.”

A hearing is scheduled for Friday morning.

The motion alleges the restraining order is necessary to “prevent certain parties from colluding and attempting to enter into a stealth partial settlement to be ratified by the Nevada Tax Commission, to the detriment of THC NV, HERBAL CHOICE and others who have not been included in the settlement.”

The motion says the Tax Commission will vote on the settlement at its meeting Friday.  An item regarding the proposed settlement is on the Commission’s agenda.  

The Department of Taxation, which previously regulated the cannabis industry, is being sued by a number of applicants who allege the license selection process was flawed, resulting in the state issuing 61 licenses to just 17 applicants in 2018, many of whom received multiple licenses while others received none.  Judge Elizabeth Gonzalez is presiding over the trial, which is currently underway at the Las Vegas Convention Center because of concerns regarding Covid-19.  

“Plaintiffs are attempting to bypass any Motion for Good Faith Settlement to be filed with the Court, get their administrative approval and force this Court to submit to the Nevada Tax Commission’s approval of a bad faith, collusively procured partial settlement,” attorneys for THC NV and Herbal Choice wrote.

The motion says attorney William Kemp, who represents Planet 13, represented in court earlier this month a “possible global” settlement had been reached but has failed to provide details to the plaintiffs, and is “deliberately and intentionally omitting the above noted Plaintiffs from any discussions.”

“Since that time and on a daily basis throughout the course of this trial, counsel for certain parties have been huddling around the courtroom and cloistering outside in the hallways of the South Hall at the Las Vegas Convention Center, to strategically organize a secret settlement that is designed to purposely harm the remaining parties” because smaller plaintiffs “could not carry this trial and would be forced to take smaller nuisance fee type settlements” if the big players settle. 

AG spokeswoman Monica Moazez declined to comment specifically on the allegations.

“As is the case with any matter our office engages with, we seek to act in the best interest of the State,” she said in a statement.

Kemp did not immediately respond to requests for comment.