State hit with second lawsuit over pot-growing license awarded to Cresco Labs

By Bethany Krajelis | Mar 12, 2015

Another company that lost out to Cresco Labs for a permit to legally grow pot in Illinois has filed a lawsuit.

On Wednesday in Cook County Circuit Court, White Oak Growers LLC sued Philip Nelson, acting director of the Illinois Department of Agriculture, and Cresco Labs LLC, a company that won a trio of cultivation licenses under the state's new medical marijuana program.

And like the lawsuit PM Rx LLC filed last month and recently amended to include Cresco Labs as a defendant, White Oak Growers' complaint accuses the state of failing to its own rules for reviewing and scoring applications for cultivation and distribution licenses, as well not conducting the required background and financial checks.

Both suits stem from the Feb. 2 announcement Gov. Bruce Rauner's office made regarding the winners of 18 grow licenses and 52 distribution permits. His office only announced the winners of 18 grow licenses even though 22 were available because there no applicants in one district and three others are expected "to be awarded upon further review."

Rauner's office stressed it had accepted the recommendations of former Gov. Pat Quinn's administration and after PM Rx filed suit, said it "understood and acknowledged that the process the Quinn administration applied would likely expose the State to significant and costly litigation."

Cresco Labs won cultivation permits for Illinois State Police Districts 5, 9 and 21, which respectively include the communities of Joliet, Springfield and Kankakee.

Given that the program only allows for one cultivation license to be awarded in each of the state's 22 police districts in which a permit is sought, there was some competition via an application process conducted by the Department of Agriculture.

PM Rx's suit deals with the District 21 license and White Oak Growers' recently-filed complaint focuses on the District 5 license. Both claim the state failed to follow its own rules for scoring and reviewing applicants when it announced Cresco Labs as the winner.

Among other claims, White Oak Growers contends the department changed the scores for the security part of the application review to pass-fail instead of assigning a numeric value, "essentially nullifying the significance of of an exemplary security plan like Plaintiff's."

White Oak Growers further alleges, "Upon information and belief, [it] received the highest level of zoning approval out of all of the applications submitted for State Police District 5" and that Cresco Labs didn't have the required zoning permits when it applied.

In addition, White Oak Growers, like PM Rx, claims the state failed to conduct a background check, noting that Cresco Labs' lead cultivator and consultant Kayvon Khalatbari has publicly admitted his past history as a dealer and consumer of illicit drugs.

Also like PM Rx, White Oak Growers contends Cresco Labs didn't have the $2 million needed in order to be awarded the permit as required.

White Oak Growers wants a judge to enter a temporary restraining order to prevent the state from issuing the District 5 license, a request that the judge hearing PM Rx's lawsuit granted in that matter earlier this month.

At a hearing earlier this week, the judge in the PM Rx suit scheduled a hearing for Wednesday to address motions from the state and PM Rx to make Cresco Labs post bond and Cresco Labs' contention the temporary restraining order expires 10-days after its issuance.

White Oak Growers is being represented by attorneys at Fisher Kanaris, the same Chicago law firm representing PM Rx.

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Illinois Department of Agriculture Illinois State Police

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