Lawsuit over pot-growing license in Kankakee continues as state seeks $2.2M bond; hearing set for next week

By Bethany Krajelis | Mar 10, 2015

The company challenging the licensing process behind Illinois' new medical marijuana program should have to pony up at least $2 million as bond, according to attorneys representing the defendants in the case.

At a hearing Tuesday, attorneys for the Illinois Department of Agriculture and Cresco Labs LLC asked Cook County Circuit Judge Kathleen Kennedy to make PM Rx LLC-- the plaintiff company that failed to win a pot growing permit-- post bond on the temporary restraining order (TRO) she entered last week that halted the issuance of the grow license for Illinois State Police District 21.

The state, which already appealed that ruling, claims PM Rx should have to pay $2.2 million, the amount it asserts the company will have to pay to get the license, while Cresco Labs suggests a $2 million bond, based on profits it contends it will lose as a result of the TRO, as well as being "behind the eight-ball" in comparison to other cultivation centers and construction-related costs.

Kennedy made it clear at Tuesday's hearing that she is determined to handle the case on an expedited basis, but also wants to provide the parties with enough time to respond to the bond issue, as well as other matters, including Cresco Lab's contention the TRO will expire 10 days after it was entered, or in this case on March 16.

In an attempt to do both, Kennedy set a strict briefing schedule, something that spurred quite a bit of back-and-forth between the attorneys and required a summary-of-sorts at the end to clear up confusion given the number of issues, parties and dates.

She told the state to put its oral request for bond on paper before the end of the week and gave PM Rx until Monday to respond to the state's forthcoming request, as well as the one Cresco Labs made in documents it said it filed Tuesday seeking intervene in the case and dissolve the TRO.

Cresco Labs noted that while its request to intervene is moot now that PM Rx filed an amended complaint adding it as a defendant like the judge ordered at last week's hearing, its others arguments for dissolution of the TRO remain relevant, as well as its alternative argument asking for the $2 million bond.

Kennedy gave Cresco Labs until the end of next Tuesday, March 17, to reply to PM Rx's response, and scheduled a hearing for the next day, March 18, to resolve the bond and 10-day issues. Once those are resolved, the judge said she would move on to the state's motions to reconsider and dismiss.

At last week's hearing, in addition to entering the TRO, Kennedy ordered the state to fork over applications for the cultivation license in District 21, which includes Kankakee and is the one at the heart of PM Rx's lawsuit.

In its initial lawsuit, PM Rx accused the state of failing to follow its own rules for reviewing and scoring applications for pot growing licenses and not conducting the required background checks before awarding Cresco Labs the District 21 permit.

The company, which unsuccessfully sought the license, claims Cresco’s lead cultivator and consultant Kayvon Khalatbari has publicly admitted his past history as a dealer and consumer of illicit drugs. It also argues that Cresco, which won two other permits to grow in other parts of the state, lacked the funding necessary to be awarded licenses in three total districts.

Even though Kennedy said the applications would only be able to be viewed by attorneys, the state argued that the medical marijuana program provides confidentiality to applicants seeking cultivation and distribution licenses.

The state wants her to reconsider that ruling and has appealed her TRO decision, something PM Rx's attorney noted could affect the briefing schedule set Tuesday if the appellate court ruling comes before the March 18 hearing and reverses Kennedy.

The state was represented by Alice E. Keane of the attorney general’s office during Tuesday’s hearing, when Chicago attorney John N. Rooks of Fisher Kanaris argued on behalf of PM Rx. Cresco Labs was represented by Steven Levy of Goldberg Kohn.

Gov. Bruce Rauner’s administration last month announced the winners of 18 licenses to grow marijuana and 52 permits to sell it under the state’s medical marijuana program, a job Pat Quinn left on the governor’s desk after losing the election to the Republican businessman.

After PM Rx filed its lawsuit, Rauner’s office issued the following statement:

“We understood and acknowledged that the process the Quinn administration applied would likely expose the State to significant and costly litigation. We believe the steps we took to fix the errors in the Quinn selection process reduce, but cannot entirely eliminate, the risk of litigation. We will fully participate in any judicial review of the selection process and comply with any orders issued by a court as it relates to this particular applicant or any other applicant that seeks judicial review.”

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