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CHICAGO -- A suburban Chicago marijuana dispensary is in court against an Arizona-based chain of marijuana outlets, alleging the chain agreed to buy the dispensary but invalidated the deal by looking to obtain more dispensary licenses than it can legally hold in Illinois.
Elevele LLC and one of its members, Andrew Hunt, filed a request July 24 for declaratory judgment in U.S. District Court for the Northern District of Illinois. Elevele wants a judge to rule its agreement to be sold to Harvest Enterprises, is no longer in force.
Elevele has run a medical marijuana dispensary in Highland Park since 2016. Harvest, which is based in Tempe, Arizona, operates more than one dozen dispensaries in several states, none of which are in Illinois, according to the suit.
On March 25, Elevele and Harvest signed a deal for Harvest to buy Elevele. The agreement contained a stipulation the purchase would not conflict with or breach any law, but if it did, the deal could be scrapped by June 23.
Elevele said that between March 25 and June 23, Harvest repeatedly said it had contractual rights to buy several other dispensaries in the Chicago suburbs, which would, including Elevele, bring the number of medical marijuana licenses held by Harvest to more than five. However, Illinois law says a single entity can only carry five licenses. As a consequence, Elevele is contending its sale to Harvest would run up against this law.
Elevele contacted Harvest after June 23 to say it was terminating the deal, but Harvest said it had done nothing to justify termination and argued that Elevele must still sell to Harvest, according to Elevele.
In addition, Harvest has not taken action to resolve the potential license issue with the Illinois Department of Financial and Professional Regulation, which oversees licenses, Elevele alleged.
Further, the Recreation Cannabis Act, which takes effect Jan. 1, permits a medical dispensary like Elevele to acquire a second outlet but this option is clouded, in Elevele’s view.
“By creating a condition of uncertainty regarding the purchase agreement, Harvest has threatened the economic interest that Elevele retains under the Recreational Cannabis Act to acquire a secondary site and thus increase its goodwill and enterprise value,” Elevele alleged.
Elevele said it wants to establish a second location and can only do so if the arrangement with Harvest is aborted. However, Harvest wants to preserve the contract, so a judge needs to let Elevele back out, Elevele said.
As a portent of what could lay in store in Illinois, Elevele noted that Harvest has allegedly run into trouble in Pennsylvania.
Authorities in Pennsylvania alleged in April that Harvest engaged in “blatant misrepresentation.” Specifically, authorities pointed to a Harvest news release that reported the company had seven Pennsylvania licenses, when that state only allows five per holder, according to Elevele.
Elevele alleged Harvest got around Pennsylvania’s limit by acquiring licenses through different corporate names. Pennsylvania officials are investigating, according to Elevele.
Elevele observed Harvest allegedly has an “apparent strategy of entering into contracts to acquire more licenses than it legally can hold.”
The Elevele case is assigned to District Judge Thomas Durkin.
Elevele and Hunt are represented by attorneys from the firm of Clingen, Callow & McLean of Lisle.