Legalizing Marijuana Becomes a Constitutional Issue

Constitutional Daily:  “Comments from a GOP presidential contender and a federal judge have put the issue of states legalizing marijuana back on the constitutional front burner.  As many people know, four states and the District of Columbia have passed laws to make recreational pot use legal under certain circumstances. And 23 states and the federal district have legalized marijuana for medical use. . . . The conflict between state laws that allow limited marijuana use and the federal law that bars it, in theory, falls somewhere in the domain of the Constitution’s Supremacy Clause.”

By |2017-02-04T07:38:57-07:00April 25th, 2015|Stories & Articles|Comments Off on Legalizing Marijuana Becomes a Constitutional Issue

Colorado Celebrates Pot Lovers’ ‘High Holiday’

USA Today:  “The smell of marijuana hung heavy over the city this weekend as partiers celebrated the unofficial “420” pot holiday.  April 20 has long been an important date within the marijuana community, and Denver for several years has hosted a massive marijuana festival to mark the day. This year was no different — except that pot smokers were joined in the city by investment bankers, lawyers and angel investors looking to cash in on the newly legal and fast-growing industry.”

By |2015-04-20T19:19:02-07:00April 20th, 2015|Colorado News, Stories & Articles|Comments Off on Colorado Celebrates Pot Lovers’ ‘High Holiday’

Zoned Properties, Inc., Sues Duke Rodriguez for Fraud

On April 10, 2015, Zoned Properties, Inc., filed a lawsuit against Duke Rodriguez, Ultra Health, LLC, and Cumbre Investment, LLC.  These parties apparently like to litigate.  Since 2011 Duke has been a litigant in seven lawsuits filed in Maricopa County Superior Court.  This is the fifth time since March 5, 2014, that Zoned Properties, Inc., has been a party to a lawsuit filed in Maricopa County Superior Court.

Cumbre Investment, LLC, owned by Duke Rodriguez, is a major stockholder (12.18%) of Zoned Properties.  The Complaint contains a fraud count and the following allegations (paragraph numbers correspond to the paragraph numbers in the Complaint):

9.  This lawsuit concerns Defendants’ collective failure to deliver to Zoned Properties a 1,536 square foot modular building (the “Building”) that was to be built and permanently installed on vacant land located at 988 S. 182nd Place, Gilbert, Arizona 85296 (the “Property”) for use as a licensed medical marijuana dispensary.

15.  In or around January 2014, Rodriguez verbally represented to Zoned Properties, individually and on behalf of Ultra Health and Cumbre, that if Zoned Properties purchased the Property, Rodriguez, individually and on behalf of Ultra Health and Cumbre, would ensure that the Building would be sold to Zoned Properties, that the Building would be built and installed on the Property, and that the requisite authorizations to operate the Building as a licensed medical marijuana dispensary had been obtained.

21. . . . Ultra Health purportedly sold the Building to Zoned Properties for $675,000 – the same Building that cost $135,566.50.

24. In exchange for the consulting fee, Ultra Health agreed to “ensure the dispensary received its authorization to operate prior to August 6, 2014 pursuant to the terms and guidelines under the Arizona Medical Marijuana Act for the Gilbert E CHAA (the ‘Project’).”

27.  From February 2014 until November 2014, Rodriguez, in his individual capacity and on behalf of Ultra Health and Cumbre, repeatedly made verbal representations to Bryan McLaren, Chief Executive Officer of Zoned Properties (“McLaren”), that the Building was being constructed, that the installation of the Building was imminent, and that Rodriguez already had obtained the requisite authorizations to operate the Building as a licensed medical marijuana dispensary.

28.  In an article published by The Arizona Republic on June 20, 2014, Rodriguez is quoted as saying that “his company” had invested more than $1 million into developing the anticipated dispensary in Gilbert, and that the Building was “nearly complete and could be opened before the end of the year.”

31. . . . Pac-Van never constructed the Building and Cumbre never took ownership of the Building.

32.  Since Cumbre never took ownership of the Building, it had no ownership rights in the Building

34. . . . Ultra Health did not own the Building, or have any ownership interest in the Building, at the time that it purportedly sold the Building to Zoned Properties

35.  The Building still has not been constructed and the Property remains vacant.

36.  In sum, Rodriguez orchestrated a series of straw transactions that culminated with the purported sale to Zoned Properties of a Building that neither Cumbre nor Ultra Health has ever owned and that has never existed, for a grossly inflated price.

Duke Rodriguez & Cumbre Investment, LLC, Ask Gilbert for Special Use Permit

Zoned Properties’ Complaint contains a fraud count against Duke Rodriguez.  The text below might help Zoned Properties prove its case.

On June 4, 2014, Duke Rodriguez and Jeffrey Kaufman, as attorney for Zoned Properties, Inc., spoke to the Gilbert, Arizona, Planning Commission in an attempt to convince the Planning Commission not to revoke a conditional use permit issued by the Planning Commission to Ultra Health, LLC, to operate a medical marijuana dispensary at the Property.  The Minutes of the Meeting contain the following statements (references are to the speaker and the page number of the Minutes where the statement is located):

the Town was concerned whether the applicant supplied a valid dispensary registration certificate as required by code and the conditions of approval of the Use Permit. . . . Ms. Lorbeer said that she had handed out a response that staff received from the state showing that the certificate supplied by the applicant, Duke Rodriguez, to town staff on April 10, 2014 is not recognized by the state as valid  Catherine Lorbeer, Town of Gilbert Zoning Administrator, Minutes page 21.

Mr. Kaufman stated that he represents Zone Properties which purchased the piece of property at issue . . . . Zone Properties entered into a partnership agreement with Ultra Health which is Duke Rodriguez’s company to participate in this venture and Mr. Rodriguez’s company has a contract with East Valley Patient Wellness Group. . . . Mr. Rodriguez’s company has a contract with East Valley Patient Wellness Group.  Jeffrey Kaufman, Minutes page 22.

he was the original applicant. . . . the facility is being built and $1 million has been invested. Duke Rodriguez, Minutes, page 23.

If you look in the original application for UP13-07, it was the applicant as being Duke Rodriguez and the company being Cumbree Investments. It also says that the applicant has the dispensary registration certificate for CHAA 77 in east Gilbert. . . . In the application, it says that Duke Rodriguez is the applicant and it also says that the applicant has the dispensary registration certificate for CHAA 77.  Dane Nielsen,  Minutes, page 23.

The town granted UP13-07 on the belief that the applicants were the holder of the registration certificate which was not true as provided by Arizona Department of Health Services. Arizona Department of Health Services also confirmed that the applicant provided a copy of a dispensary registration certificate that had a DBA that mentioned one of their entities, Ultra Health, but the Arizona Department of Health Services has returned that and marked it void.  Dane Nielsen, Minutes, page 23.

In March 2013 they met with a couple of agents with Stone Pass Realty. They referred the Sanchez’s to Duke Rodriguez to help them find a suitable location in Gilbert. When he found the location in question unbeknownst to the Sanchez’s he placed it in his own LLC. . . . Mr. Sanchez stated again that no contract was ever signed with any of them.  David Sanchez, Minutes, page 24.

Patricia Haugland, Gilbert Arizona, came forward. Ms. Haugland said that she was the owner of Stone Pass Real Estate and Dave and Kathy Sanchez did come to her office and asked if her company would be able to assist in locating a piece of property in the Town of Gilbert for the CHAA that they had the license for. At that time she and Duke Rodriguez had worked for the firm approximately 30 days and she in turn referred the Sanchez’s to Mr. Rodriguez to represent them solely as a real estate agent. What then occurred was that Mr. Rodriguez met with Dave and Kathy Sanchez, got information about their business and about the medical marijuana industry and then went and locked up the real estate that was available in the town knowing that there was no other real estate in town for the Sanchez’s to get approved by the city. After that occurred and Ms. Haugland found out all the information about what she believed to be fraudulent activity on the part of an agent that worked for her firm she immediately terminated Mr. Rodriguez’s license. Ms. Haugland said that she wanted everyone to understand what her position was in terms of how she saw it unfold as an owner and broker of the company and watching his activities as it is at a minimum unethical.  Patricia Haugland, Minutes, page 25.

Cumbree is the development company who agreed to develop the site.  Duke Rodriguez, Minutes, page 25.

Commissioner Cavenee asked Mr. Rodriguez if he had an executed contract giving him the right to use this license . . . . Commissioner Cavenee said that was not his question. His question was did he have a contract to use this license. Mr. Rodriguez said that he does have a contract.Commissioner Cavenee asked why he did not present that contract, wouldn’t that have been crucial. . . . Commissioner Cavenee said that it seems to him that the crux of the matter is who has the right to utilize this licenseand represent the Use Permit, and proof of that relationship would have been crucial. That seems obvious.  Commissioner Cavenee, Minutes, page 26.

Mr. Rodriguez said that this was not the only license that they have done like this. They have done this in other communities. This is how it works in Clifton; this is how it works in Safford.  Duke Rodriguez, Minutes, page 26.  Author’s Comment:  Neither Duke nor any of his affiliated entities got a dispensary in Clifton or Safford, but his company did enter into a lease for real property with the City of Clifton that provided that the tenant would operate a medical marijuana dispensary in the premises.

When he was then asked to supply the proof to staff because it is a condition of the approval and a requirement of the code, he provided one which is not valid.  Ms. Lorbeer, Minutes, page 28.  See Dispensary Certificate.

See the relevant documents attached to the Minutes:

  • April 25, 2014, letter from the Arizona Department of Health Services to Kathy Sanchez that states “Further, ADHS recognizes East Valley Patient Wellness Group, LLC, as the current and sole holder of the DRC for Community Health Analysis Area (CHAA) 77 ADHS can confirm that it does not recognize Cumbre Investments, LLC, Ultra Health, LLC, or any other entity as a holder of the DRC for CHAA 77.”
  • March , 2014, letter from the Arizona Department of Health Services to Kathy Sanchez that states “AZDHS can confirm that it does not recognize Ultra Health, LLC as a holder of this or any other dispensary registration certificate.”

To learn more about the litigious Zoned Properties read:

By |2019-06-14T08:27:52-07:00April 18th, 2015|AZ Marijuana Law Lawsuits, Stories & Articles, Zoned Properties & Duke Rodriguez|Comments Off on Zoned Properties, Inc., Sues Duke Rodriguez for Fraud

Zoned Properties’ Major Stockholders in Court Fight over Money & Control of Two Dispensaries

Take the following ingredients, stir the pot and you have a recipe for a big-time lawsuit:

  • $12,000,000 allegedly invested in or on behalf of Ultra Health, LLC, an Arizona LLC owned by Duke Rodriguez (51% membership interest + 40% of profits) and CA2 Capital, LLC (49% membership interest + 60% of profits).  CA2 Capital, LLC, is owned by Alan Abrams and Christopher Carra.
  • A fight for control of two Arizona medical marijuana dispensaries called Broken Arrow Herbal Center, Inc. and CJK, Inc. These non-profit corporations have dispensary registration certificates for Sahuarita (Ultra Health Green Valley) and Kingman (Ultra Health Kingman), respectively.
  • Disagreements among three major shareholders of Zoned Properties, Inc., a publicly traded company.  Zoned Properties, Inc., claims in its March 31, 2015, disclosure statement that it “focuses on properties within the medical marijuana industry.”  Zoned Properties’ major shareholders as of March 31, 2015, include Duke Rodriguez’ company Cumbre Investment, LLC, (2,251,552 shares – 12.18%), Alan Abrams (3,526,669 shares – 19.08%) and Christopher Carra (2,043,335 shares – 11.06%).

The lawsuit filed in Maricopa County Superior Court on March 26, 2015, is CA2 Capital, LLC; Alan B. Abrams; Broken Arrow Herbal Center, Inc.; & CJK, Inc.;  vs. Duke Rodriguez, a/k/a Rueben Duke Montenegro Rodriguez; Stormwind Group, LLC; Cumbre Investment, LLC; CVUH, LLC; & Sold By Group, LLC.  The litigation is a fight over money and control of two Arizona medical marijuana dispensaries and Ultra Health, LLC.  Alan Abrams seeks court approval of his attempt to remove Duke Rodriguez as a manager of Ultra Health and a director and officer of Broken Arrow and CJK.

This is the sixth seventh (Duke was sued again after this case was filed) time since 2011 that Duke Rodriguez, Arizona’s would-be medical marijuana czar, has been a party in a Maricopa County Superior Court lawsuit.  The lawsuits are CV2011-095146, CV2013-055265, CV2014-003047, CV2014-005642, CV2014-007302, CV2015-003778 and CV2015-004225.  To learn about the seventh Duke Rodriguez lawsuit read “Zoned Properties, Inc., Sues Duke Rodriguez for Fraud.”

Summary of the Complaint

For those of you who don’t have the time to read the juicy allegations in the Complaint that are quoted below, here’s a short summary of the plaintiffs’ allegations:

  • CA2 Capital, LLC, invested $12 million in Ultra Health, LLC or on its behalf.
  • On information and belief, Rodriquez did not have substantial personal assets in the Summer of 2013.
  • Ultra Health, LLC, distributed a Prospectus that falsely claimed Ultra Health possessed three Arizona medical marijuana dispensary certificates.
  • Rodriguez made reassuring but false representations to Abrams at that time that Ultra Health could still obtain those three dispensary registration certificates through litigation with the non-profit companies which had actually been awarded the three certificates.
  • Abrams’ funds were indeed used to pay for litigation with the control persons of the non-profits which held the three dispensary registration certificates which Rodriguez had represented had been “awarded” to Ultra Health, funded the acquisition of control and management rights for two additional non-profit companies awarded dispensary registration certificates, and funded the acquisition of a large medical marijuana cultivation facility in Chino Valley, Arizona.  See “Ultra Health, LLC Sued Again: Now in 4 Lawsuits.”

Here are the court documents filed in the case as of April 1, 2015:

Plaintiffs’ Documents

Defendants’ Documents

Public Company Zoned Properties, Inc.

Alan Abrams, Christopher Carra and Cumbre Investments, LLC, (owned by Duke Rodriguez) are all shareholders of Zoned Properties, Inc., a publicly traded corporation (symbol ZDPYD) that claims to “focus on properties in the medical marijuana industry.”  See page 8 of ZPI’s April 15, 2014, Company Information & Disclosure Statement.  In 2014, Zoned Properties, Inc., was involved in three property purchase transactions with Ultra Health, LLC according to Note 3 of its 2014 annual report issued on March 31, 2015.  To learn more about Zoned Properties, Inc., read “Zoned Properties, Inc. Public Disclosures.”

Zoned Properties, Inc., had a market value of $926,315,200 on April 1, 2015, despite  a 2014, year end financial statement that disclosed:

  • $439,887         total revenue
  • ($1,483,840)   loss from operations
  • ($1,744,258)   net loss
  • $7,240,885      stockholder’s equity
  • $10,492,616    total assets

Zoned Properties, Inc.’s Total Cash Flow From Operating Activities for the years 2011 – 2014 was -$1,184,000.  Its total revenue for the same four year period was $439,887.

Adversaries Alan Abrams and Duke Rodriguez Acquire Control of Two Arizona Medical Marijuana Dispensaries

Broken Arrow Herbal Center, Inc. and CJK, Inc. are Arizona non-profit corporations that have licenses to operate Arizona medical marijuana dispensaries.  Alan Abrams and Duke Rodriguez gained control of these two corporations in 2014.  AZDHS regulation  R9-17-306.A states: “A dispensary may not transfer or assign the dispensary registration certificate.” Does change of control constitute a transfer of the dispensary license?

Duke Rodriguez claims that Alan Abrams was a founding stockholder of Zoned Properties, Inc.  See Exhibit 1 – Declaration of Duke Rodriguez.  As of March 31, 2015, Zoned Properties’ major stockholders were Alan Abrams (19.08%),  Christopher Carra (11.06%) and Cumbre Investment, LLC (12.18%), which is owned by Duke. What is the relationship, if any, between Zoned Properties, Inc., and the two dispensaries now controlled by major stockholders of Zoned Properties, Inc.?

The Players

Here’s a score card to help keep track of the players in this lawsuit:

Plaintiff Entities

  • CA2 Capital, LLC, is an Arizona limited liability company owned by Alan B. Abrams and Christopher Carra.
  • Broken Arrow Herbal Center, Inc., is an Arizona nonprofit corporation whose directors prior to March 26, 2015, were Duke Rodriguez, Alan Abrams and Bryan W. Hill.  Duke Rodriguez was the President before March 26, 2015.  This corporation owns and operates an Arizona medical marijuana dispensary in Sahuarita, Arizona, that leases its dispensary premises at 1732 W. Commerce Point Place, Sahuarita, AZ, from Green Valley Group, LLC, an LLC that is 100% owned by Zoned Properties, Inc.
  • CJK, Inc., is an Arizona nonprofit corporation whose directors prior to March 26, 2015, were Duke Rodriguez and Alan Abrams.  Duke Rodriguez was the President before March 26, 2015.  This corporation owns and operates an Arizona medical marijuana dispensary in Kingman, Arizona, that leases its dispensary premises at 2095 Northern Ave., Kingman, AZ, from Kingman Property Group, LLC, an LLC that is 100% owned by Zoned Properties, Inc.
  • MAC CAM, LLC, an Arizona limited liability company whose members are Alan Abrams, Christopher Carra and Marc Brannigan (former President and former majority stockholder of Zoned Properties, Inc.    As of April 15, 2014, MAC CAM, LLC, owned 700,000 shares of preferred stock, but its shares apparently have been redeemed.

Defendant Entities

  • Stormwind Group, LLC, is an Arizona limited liability company owned by Duke Rodriguez.
  • Cumbre Investment, LLC is an Arizona limited liability company owned by Duke Rodriguez.
  • CVUH, LLC, is an Arizona limited liability company owned by Ultra Health, LLC, and managed by Duke Rodriguez.
  • Sold By Group, LLC, is an Arizona limited liability company owned and managed by Duke Rodriguez.

Allegations Stated in the Complaint

Here are some of the more interesting allegations made in the 45 page Complaint (paragraph numbers are the paragraph numbers in the Complaint):

1.  Plaintiff CA2 Capital, LLC . . . (“CA2”) . . . has provided and . . . nearly $12,000,000.00 . . . in financing for an entity known as Ultra Health, LLC, . . . (“Ultra Health”).

5.  Defendant Duke Rodriguez . . .

[is] the former Manager of Ultra Health, who has been removed as Manager of Ultra Health and is succeeded in that role by the current Manager of Ultra Health, plaintiff Alan B. Abrams.

14.  Plaintiffs have invested nearly $12,000,000.00 . . . in Ultra Health or on its behalf, by directly financing and arranging for financing which has occurred in that amount to date, essentially all of the funding by, for and behalf of that entity.

35.  On information and belief, Rodriquez did not have substantial personal assets in the Summer of 2013.

39.  In the Summer of 2013, Rodriguez caused to be produced and distributed a written investment prospectus which he used to solicit investment in Ultra Health (the “Ultra Health Prospectus“), entitled “Financial and Market Analysis & Recommendations on Entering the Arizona Medical Marijuana Market”.

41.  The Ultra Health Prospectus contained numerous false and misleading statements.

42. Ultra Health, LLC (UH) was awarded three dispensary certificates: Duncan/Morenci (No. 83), Graham County (no. 84), and Gilbert E (No. 77). With these certificates, UH has the right to acquire, possess, cultivate, manufacture, deliver, transfer, supply, sell, and dispense medical marijuana to qualifying patients and designated caregivers.

44.  Ultra Health was, in fact, “awarded” zero dispensary registration certificates.

Author’s Comment:  This allegation states a fact.  See “Arizona Dept. of Health Services Confirms Ultra Health, LLC Lacks a License for a Medical Marijuana Dispensary.”  See also the letter from the Arizona Department of Health Services, submitted to the judge on March 14, 2014, that contains the statement “AZDHS can confirm that it does not recognize Ultra Health, LLC as a holder of this or any other dispensary registration certificate.”

47.  The Ultra Health Prospectus also represented . . . that Ultra Health “has made a capital call of $300,000 to its partners to be used as start-up capital.” Ultra Health Prospectus, p. 23.

49.  The statement which Rodriguez caused to be made in the Ultra Health Prospectus that a $300,000 capital call has been “made” on Ultra Health’s “partners” was false, on information and belief.

51.  Rodriguez provided the Ultra Health Prospectus to Abrams and Christopher Carra as part of an investment presentation he made to them, and which he referenced in numerous related discussions in which he repeatedly but falsely represented to Abrams and Carra that Ultra Health “was awarded three dispensary certificates“.

52.  As a result of the false representations Rodriguez made in the Ultra Health Prospectus, and his identical, false oral representations, Rodriguez successfully convinced Abrams and Carra became investors in Ultra Health through an entity named MACCAM, LLC, an Arizona a limited liability company (“MACCAM”).

53.  MACCAM later transferred its investment in Ultra Health to CA2 with the knowledge and consent of Ultra Health.

54.  Abrams made substantial payments and incurred substantial out of pocket costs in making the initial investments encouraged by Rodriguez, which roughly total around one-half of Abrams’ total investment of nearly $12,000,000.00 . . . .

57. He later learned that Ultra Health in fact had not been awarded three dispensary registration certificates, but instead had been awarded zero dispensary registration certificates.

60.  Rodriguez made reassuring but false representations to Abrams at that time that Ultra Health could still obtain those three dispensary registration certificates through litigation with the non-profit companies which had actually been awarded the three certificates.

Author’s Comment: This is a troubling allegation.  See “Zoned Properties, Inc. & Duke Rodriguez Lawsuits.”  This article starts “Holistic Patient Wellness Group, LLC, East Valley Patient Wellness Group, LLC, and Natural Remedy Patient Center, LLC (all clients of mine) hold Dispensary Registration Certificates issued by the Arizona Department of Health Services.  These companies were involved in lawsuits with Duke Rodriguez, Zoned Properties, Inc. (aka ZDPYD), Ultra Health, LLC, and Cumbre Investment, LLC.”

67.  Abrams’ funds were indeed used to pay for litigation with the control persons of the non-profits which held the three dispensary registration certificates which Rodriguez had represented had been “awarded” to Ultra Health, funded the acquisition of control and management rights for two additional non-profit companies awarded dispensary registration certificates, and funded the acquisition of a large medical marijuana cultivation facility in Chino Valley, Arizona and related real estate and water rights.

68.  The aggregate investment of CA2 in Ultra Health today is nearly $12,000,000.00 . . . substantially all of which consists of funds invested by Abrams in or for Ultra Health through MACCAM and CA2. A true and correct compilation of documents summarizing much of the plaintiffs’ monies invested as alleged herein is attached hereto as Exhibit 4.

69.  Rodriguez represented to Abrams that he (Rodriguez) had invested $1,000,000.00 of his own money in Ultra Health which, on information and belief, was untrue.

72.g.  Rodriguez has placed himself in a position of substantial ownership of Ultra Health’s cultivation facility in Chino Valley and has not transferred ownership of that property and facility to Ultra Health

72.l.  [Rodriguez] has not caused the preparation of audits for either of the two nonprofit dispensary companies managed by Ultra Health, nor has he properly accounted for financial transactions between Ultra Health and those entities

73.  Rodriguez’s conduct alleged herein constitutes acts or omissions in breach of the OA [Operating Agreement] and or which constitute fraud, gross negligence, willful misconduct and or breach of fiduciary duty to Ultra Health and or plaintiffs

74.  . . . Rodriguez convinced Abrams and CA2 to make substantial payments for and on behalf of Ultra Health to entities controlled by Rodriguez, which entities were supposed to convey their assets into Ultra Health and or for the benefit of CA2 and Abrams, but Rodriguez has failed or refused to cause those transfers to occur.

75.  Specifically the following entities have received transfers from Abrams and/or CA2 directly of monies intended to be used to acquire assets for Ultra Health, which were supposed to have been ultimately conveyed to and for the benefit of Ultra Health, but with respect to which, today, substantial monies, and assets purchased with those monies, remain m the possession, custody and control of the entities and not Ultra Health: Cumbre; Stormwind; CVUH; Sold By Group.

Plaintiffs’ Claims for Relief

The plaintiffs’ Complaint asks for the following twelve claims for relief:

1.  First Claim for Relief:  The court issue a declaratory judgment that: (i) Rodriguez has been removed, effective as of March 26, 2015, as the Manager of Ultra Health, and (ii) Rodriguez is not entitled to any indemnity under the OA on grounds that his wrongful conduct as alleged herein constitutes acts or omissions in breach of the OA, constituted fraud, gross negligence willful misconduct and or breach of fiduciary duty to Ultra Health and or plaintiffs.

2.  Second Claim for Relief:  The court issue temporary and preliminary injunctive relief that Rodriguez was removed as a manager of Ultra Health.

3.  Third Claim for Relief:  CA2 and Abrams request for Uniform Fraudulent Transfer Act (“UFTA”) injunctive relief and will file a motion for appointment of a Special Master pursuant to Rule 53(a), Ariz. R. Civ. P.  Plaintiffs seek a UFTA injunction on a temporary and preliminary basis against Rodriguez, Stormwind, Cumbre, Sold By Group and CVUH.

4.  Fourth Claim for Relief:  CA2 seeks damages and specific performance.

5.  Fifth Claim for Relief:  CA2 seeks damages for breach of fiduciary duty.

6.  Sixth Claim for Relief: CA2 and Abrams seek damages for violations of the Arizona Consumer Fraud Act.

7.  Seventh Claim for Relief:  CA2 and Abrams seek any and all applicable restitutionary remedies from Rodriguez, Stormwind, Cumbre, Sold By Group and CVUH with respect to any monies or assets, if  any, not otherwise covered by the investment contract, the OA, including without limitation disgorgement.

8.  Eighth Claim for Relief:  Broken Arrow seeks two declaratory judgments against Rodriguez, first for his removal from the board of directors and second for a determination that he is not entitled to indemnification from the corporation.

9.  Ninth Claim for Relief:  Plaintiff Broken Arrow seeks temporary and preliminary injunctive relief that Rodriguez was removed as an officer and director.

10.  Tenth Claim for Relief:  CJK seeks two declaratory judgments against Rodriguez, first for his removal from the board of directors and second for a determination that he is not entitled to indemnification from the corporation.

11.  Eleventh Claim for Relief:  CJK seeks temporary and preliminary injunctive relief that Rodriguez was removed as an officer and director.

12.  Twelfth Claim for Relief:  CA2 and Abrams seek punitive damages.

Defendants’ Response to the Complaint

The defendants filed an Opposition to Application for Temporary Restraining Order in which they generally deny all of the allegations made in the Complaint.  A hearing was held on the plaintiffs’ application for a temporary restraining order and the court denied the application.  The following are interesting statements in the Opposition to Application for Temporary Restraining Order (paragraph numbers are from the Opposition):

II. Having passed through the difficult start-up period, CA2 Capital and Mr. Abrams are attempting a coup that would oust Mr. Rodriguez from the company he founded to take control over the operations.

II.B. Messrs. Abrams and Carra arc founding shareholders of an entity known as Zoned Properties, Inc. . . . Upon information and belief virtually all of the properties Zoned Properties holds are properties operated by Ultra Health, with one critical exception – the Chino Valley Property.  The Chino Valley Property would be a great additional asset for Zoned Properties, Inc. to acquire and then lease-back to Ultra Health. Unfortunately, however, Ultra Health retains ownership and control over the Chino Valley Property through its wholly owned subsidiary CVUH, LLC and it is not in Ultra Health’s best interest to sell the property to Zoned Properties under an exorbitant lease-back scenario. The only group this would benefit is the Zoned Properties, Inc. shareholders – Abrams and Carra aka CA2 Capital, LLC.  [Author’s Comment:  Duke Rodriguez’ company Cumbre Investments, LLC, owns 12.18% of Zoned Properties.]

II.B.  [Mr. Carra] has experience selling and promoting penny stocks, such as Zoned Properties, Inc. (OTC: ZDPY). In fact, Mr. Carra entered into a Letter of Consent with FINRA and paid a fine arising from FINRA’s allegations that he used multiple names or “handles” on internet message boards to promote certain stocks.  Attached here as Exhibit 2.

Stay tuned.  This case should get very interesting.

By |2019-06-14T08:29:17-07:00April 18th, 2015|AZ Marijuana Law Lawsuits, Zoned Properties & Duke Rodriguez|Comments Off on Zoned Properties’ Major Stockholders in Court Fight over Money & Control of Two Dispensaries

Arizona Ballot Initiative Seeks Legalization of Recreational Pot

Reuters:  The Marijuana Policy Project “introduced a ballot initiative Friday to legalize recreational marijuana. If its backers collect enough signatures to support the idea, it could land in the voters’ hands next year. . . . Arizona voters can anticipate being courted by both marijuana advocates and their opponents over the coming year, as the state becomes one of the latest battlegrounds in the debate over the legalization of recreational weed. Supporters submitted a ballot initiative to legalize recreational marijuana in Arizona Friday. If they collect 150,642 signatures of registered voters before June of next year, the question of whether to permit pot to be smoked in private residences will be put to the state’s voters in 2016.

By |2017-02-04T07:38:57-07:00April 18th, 2015|Stories & Articles|Comments Off on Arizona Ballot Initiative Seeks Legalization of Recreational Pot

Marijuana Industry’s IRS Battle

Fortune: “Legalized marijuana sales are spreading across the U.S., but the industry’s businesses are facing steep federal tax bills thanks to a wrinkle in the tax code dating back to the 1980’s. . . . In 1982, Congress enacted Section 280E of the federal Tax Code to prevent drug traffickers from being able to claim business expenses related to illicit dealings on their federal tax returns. . . . many marijuana business owners end up paying effective tax rates of anywhere from 40% to 70%

By |2015-04-16T06:45:45-07:00April 16th, 2015|Stories & Articles, Tax Issues|Comments Off on Marijuana Industry’s IRS Battle

ASU Student with Medical Marijuana Card Charged with Possession on Campus

Fox10Phoenix.com:  “An Arizona State University student has a valid Arizona Medical Marijuana Card, but now he’s facing a criminal conviction for using his legal, medical marijuana on campus.  He’s fighting the conviction and says he shouldn’t have been treated differently than any other medical marijuana patient, just because he lives on campus.  Andre Maestas has been using marijuana to relieve his back pain for several years.”

FOX 10 News | fox10phoenix.com

By |2017-02-12T07:40:49-07:00April 16th, 2015|Legal Issues, Marijuana Crimes, Stories & Articles, Video|Comments Off on ASU Student with Medical Marijuana Card Charged with Possession on Campus

Yuri Downing, Arizona Medical Marijuana Dispensary Entrepreneur

Mr. Yuri Downing made news recently when the U.S. Bankruptcy Court issued an opinion on April 6, 2015, in a case called “In re Medpoint Management, LLC.”  The case involved creditors of Medpoint Management, LLC, who filed an involuntary bankruptcy petition in which they asked the bankruptcy court to liquidate Medpoint Management, LLC, under Chapter 7 of the bankruptcy law.  The court dismissed the petition because the creditors had “unclean hands” because they entered into contracts that involved marijuana.

Medpoint Management, LLC, is owned by two members, Ask Nice Twice, LLC (“ANT”), and Here Is Now, LLC (“HIN”).  ANT is the manager of Medpoint.  Yuri Downing (“Downing”) is the 100% owner of both ANT and HIN, and is Medpoint’s statutory agent.

Medpoint become involved in the management of Arizona Nature’s Wellness, an Arizona nonprofit corporation (“ANW”), that owned and operated an Arizona medical marijuana dispensary.  Medpoint formerly managed ANW’s marijuana business, business relationships and cultivation operations. Medpoint purchased all of the membership interests in Tier Management, LLC, an Arizona LLC (“Tier”).  On January 2, 2013, Tier entered into a Cultivation and Dispensary Services Agreement with ANW.  Infinite Bloom, LLC, owned by Medpoint Management, LLC, had 70 employees and provided services on behalf of ANW.

At some point in time ANW ceased to be managed by Medpoint and entered into contracts for dispensary and cultivation management services with Bloom Master Fund I, LLC, which is managed by L. Edward Judice and Eagle Valley Holdings, LLC (no LLC formed or registered to do business in Arizona under this name).  The statutory agent for Bloom Master Fund I, LLC, is Q Business Consulting, LLC, owned by L. Edward Judice.

The bankruptcy court said “Medpoint owns the “Bloom” name and trademark (“IP”) under which ANW sells its marijuana products.”  There is a federal trademark for “Bloom Dispensary,” but the U.S. Patent Trademark Office says the mark is owned by Bloom IP Industries LLC, an Arizona LLC located at 14 S. 41st Place Phoenix AZ 85034.  However, there is no Arizona LLC called Bloom IP Industries LLC, nor has there ever been an Arizona LLC with that name.  Bloom IP Industries, LLC, a Delaware LLC, owns a federal trademark for “Bloom.”  The address for the Delaware Bloom IP Industries, LLC, is 4400 N. Scottsdale Road, Suite 288, Scottsdale AZ 85251.  The tradename “Bloom Dispensary” is registered with the Arizona Secretary of State and owned by Medpoint Management, LLC, whose address is 4400 N. Scottsdale Road, Suite 288, Scottsdale AZ 85251.

The creditors in the In re Medpoint Management, LLC case are:

  • Michael Danzer who sold Tier to Medpoint for $100,000 down and two payments of $150,000.  Medpoint did not pay any of the $300,000.
  • Michael Danzer who entered into a consulting agreement with Medpoint under which Medpoint was to pay Michael $5,000/month.  Medpoint did not make a single payment.
  • Jason Jensen entered into a consulting agreement with Medpoint.  Medpoint did not make a single payment.
  • Robert Brown loaned Medpoint $100,000, but Medpoint defaulted on repaying the loan.
  • 7511 IRA Investments, LLC, loaned Medpoint $400,000, but Medpoint defaulted on repaying the loan.

Yuri Downing, the man who controls Medpoint Management, LLC, made headlines in the early 2000s in Arizona.  Here are some interesting statements found in an article about Yuri Downing in the East Valley Tribune called “A man’s bizarre odyssey to infamy.”

“Yuri Downing was looking for some fast money on a cool March evening this year as he drove the dark, narrow road through Indian farmlands just east of Scottsdale. . . . Then Downing saw patrol lights flashing in the rearview mirror of his white Mercedes. He knew he was in trouble.

A loaded pistol was wrapped in a towel on the passenger-side floorboard. In the trunk, mixed in with piles of clothes, were hundreds of contraband documents, including stolen utility bills and fake Mexican identification cards. The IDs featured Downing’s photo and a variety of different names. . . .

By July 2004, he had been indicted on six felony counts and ordered to repay his share of the money.  Six months later, Downing pleaded guilty to one of the charges against him.”

By |2019-06-18T19:55:52-07:00April 15th, 2015|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off on Yuri Downing, Arizona Medical Marijuana Dispensary Entrepreneur

Tax Day is an Unhappy Day for Marijuana Industry

McClatchyDC:  “For owners of marijuana businesses, April 15 is one big downer.  While most business owners rush to meet the federal tax deadline and cash in on a plethora of deductions, pot store owners and growers complain that they can’t write off a single expense, even if they have state licenses.  They want the law changed, saying it’s discriminatory and outdated as more states move to legalize marijuana.”

By |2019-06-14T08:28:50-07:00April 15th, 2015|Stories & Articles, Tax Issues|Comments Off on Tax Day is an Unhappy Day for Marijuana Industry

Arizona Paving the Way for Medical Marijuana Patients’ Rights

Huffington Post:  “Last week, in a pair of unanimous decisions, the Arizona Supreme Court ruled that prosecutors and courts cannot ban qualified patients on parole or probation from using medical marijuana. This is one example where Arizona leads the nation in protecting patients who use medical marijuana. . . . The Republican-led state, intentionally or not, is paving the way for better patient protections.”

By |2015-04-16T06:49:41-07:00April 15th, 2015|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off on Arizona Paving the Way for Medical Marijuana Patients’ Rights

Top Pols Vexed by Marijuana Income Taxes

Portland Tribune:  “This week, Rep. Earl Blumenauer (D-Ore.) and Sen. Ron Wyden (D-Ore.) will introduce bicameral legislation to reconcile state marijuana laws and federal tax law — particularly Section 280E.  The sensible-sounding Small Business Tax Equity Act would allow marijuana businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.  Currently, legitimate sellers of medical marijuana cannot declare such common items as rent, utilities and professional services (accounting) as expenses on their federal tax forms. They end up in a 70- to 90-percent tax bracket, instead of the more usual 20 percent for small businesses that the U.S. Small Business Administration estimates.”

By |2015-04-14T19:46:24-07:00April 14th, 2015|Stories & Articles, Tax Issues|Comments Off on Top Pols Vexed by Marijuana Income Taxes

Uber For Weed Startup Raises $10 Million

readability.com:  “There’s an Uber for everything nowadays, so why not an Uber for weedEaze, a startup that enables medical marijuana patients to order cannabis products online and have those goodies delivered to their homes, today is announcing $10 million in Series A round funding . . . . The new funds come on top of $1.5 million in seed funding the company had raised last year. The cash will be used to help the company expand availability of its platform into new markets beyond just the San Francisco Bay Area, where it was founded.”

By |2015-04-14T19:42:49-07:00April 14th, 2015|Stories & Articles|Comments Off on Uber For Weed Startup Raises $10 Million

Arizona Pot Legalization Groups Fighting over Text of Initiative

Arizona Daily Star: “For years, supporters of legalizing marijuana for recreational use have been looking to 2016 as the year they would take their initiative to Arizona voters and win.  Now they are split in a way that endangers the prospects for legalization.  The division is pitting many of Arizona medical-marijuana dispensary owners against the Marijuana Policy Project, a national organization that is responsible for its industry’s existence, having drafted our state’s 2010 medical-marijuana law and funded the campaign. . . . On March 29, the national policy project’s executive director, Rob Kampia, threatened in an email to ruin the dispensary business of Phoenix-area physician Gina Berman, who is leading the breakaway group.  ‘If you file a competing initiative with the Secretary of State anyway, we will specifically launch a series of actions to harm your business . . . . I’m already budgeting $10,000 . . . to pay people . . . to distribute literature outside of your front door, and the literature will not portray you in a kind way. We will not target any other dispensaries; we will only target you.'”

By |2015-04-13T08:04:41-07:00April 13th, 2015|AZ Legislation, Stories & Articles|Comments Off on Arizona Pot Legalization Groups Fighting over Text of Initiative

Bill to be Introduced in Congress to Amend Section 280E

eNews Park Forest:  “Representative Earl Blumenauer (D-OR-03) and Senator Ron Wyden (D-OR) announced plans to introduce bicameral legislation next week that would reconcile state marijuana laws and federal tax law. The Small Business Tax Equity Act, which was introduced last Congress by Congressman Blumenauer, would create an exception to Internal Revenue Code Section 280E to allow marijuana businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.”

Here’s the text of Congressman Blumenauer’s and Senator Wyden’s press release:

The Small Business Tax Equity Act of 2015

Congressman Earl Blumenauer ■ Third District of Oregon ■ www.blumenauer.house.gov
Senator Ron Wyden ■ Oregon ■ www.wyden.senate.gov

Background : Currently, the federal tax code prohibits anyone who sells Schedule I or Schedule II substances from deducting their business expenses from their taxes. Congress added this prohibition in 1982 after a drug dealer claimed his yacht and weapon purchases as legitimate business expenses.

Marijuana is a Schedule I substance , and therefore , even businesses operating in compliance with state law are not allowed to deduct the common expenses of running a small business , like rent, most utilities and payroll . They cannot claim the Work Opportunity Tax Credit if they hire a veteran, and they are limited in lawful deduction s relating to construction or operation costs if they want to remodel a building for their retail operations.

Legalization of Medical Marijuana

  • Twenty – three states, the District of Columbia and Guam have passed laws allowing for the legal use of medical marijuana. A n additional 12 states have passed laws allowing the use of low – THC forms of marijuana to treat certain medical conditions.
  • There are over one million legal medical marijuana patients across the country , and in many states, medical marijuana is sold through dispensaries . These dispensaries provide safe, legal facilities for patients who have a recommendation from a physician.

Legalization of Adult Use of Marijuana

  • In Colorado, Washington, Oregon, Alaska and the District of Columbia, voters passed measures allowing for the legal adult use of marijuana.
  • Businesses in Colorado and Washington – from the production to retail side of the industry – are already up and running in compliance with state law.

Fairness to these Legal Businesses

  • Because marijuana businesses are not allowed to deduct their expenses, this means that in certain circumstances, legal marijuana businesses can pay federal income tax rates at nearly 90 percent, while the U.S. Small Business Administration estimates that many small businesses pay an effective rate of around 20 percent.
  • All businesses should pay their fair share of taxes, but not being able to deduct expenses creates a disproportionate burden that can put small marijuana dispensaries out of business and will keep many good actors from entering the industry in the first place, forcing the industry underground.
  • Barring the marijuana industry from operating like a normal industry just incentivizes criminal activity and tax evasion.

What the Bill Does:  The Small Business Tax Equity Act of 2015 creates an exception to Internal Revenue Code section 280E to allow businesses operating in compliance with state law to take deductions associated with the sale of marijuana like any other legal business.

This Legislation is Supported By: Americans for Tax Reform, the National Cannabis Industry Association, Drug Policy Alliance, Marijuana Policy Project, Americans for Safe Access, NORML

For further information about the Small  Business Tax Equity Act, please contact:
Stephanie Phillips in Congressman Blumenauer’s office at (202) 225-­4811
Charlie Pope with the Senate Finance Committee at (202) 224-­4515

By |2017-02-12T07:40:49-07:00April 9th, 2015|Stories & Articles, Tax Issues|Comments Off on Bill to be Introduced in Congress to Amend Section 280E

Arizona Supreme Court Rules Parolees Can Get Medical Marijuana

Jurist:  “he Arizona Supreme Court ruled Tuesday in two separate decisions that courts cannot prohibit parolees from using medical marijuana when used for medical purposes under the Arizona Medical Marijuana Act (AMMA). The AMMA was passed by the legislature in 2010, and both plaintiffs obtained registry identification cards because of medical conditions for which doctors prescribed marijuana treatment.”

The cases are Arizona v. Ferrell and Reed-Kaliher v. Hoggatt.

By |2015-04-09T19:11:30-07:00April 9th, 2015|AZ Marijuana Law Lawsuits, Stories & Articles|Comments Off on Arizona Supreme Court Rules Parolees Can Get Medical Marijuana

Dispensaries Shake Up Chances for Marijuana Legalization in Arizona in 2016

Phoenix New Times:  “The chances of a successful marijuana-legalization initiative in Arizona for 2016 appear to have diminished due to fighting among two competing political groups.  As we reported on March 27, the Marijuana Policy Project of Arizona was surprised by the sudden launch of a competing 2016 campaign by their chairperson, Dr. Gina Berman.  A leaked online survey shows that a coalition of Arizona medical-marijuana dispensaries are backing Berman’s group.”

By |2017-02-04T07:38:58-07:00April 8th, 2015|Stories & Articles|Comments Off on Dispensaries Shake Up Chances for Marijuana Legalization in Arizona in 2016

Arizona Medical Marijuana Dispensaries

The table below contains the names of the entities that hold Arizona medical marijuana dispensary registration certificates, aka dispensary licenses, and their addresses and phone numbers as of January 1, 2015.  To get more information about a dispensary, search the name of the dispensary in the Arizona Corporation Commission’s database.

[ws_table id=”1″]

By |2019-06-14T08:24:56-07:00April 4th, 2015|Stories & Articles|Comments Off on Arizona Medical Marijuana Dispensaries

Arizona Studying Safer Labeling of Edible Marijuana

Arizona Republic:  “Medical marijuana cardholders in Arizona could see changes in the way edible products are labeled.  The state created a $58,000 contract with the Coconino County Public Health Services District focused on studying how to strengthen the packing, labeling and storage of edible products. A survey was distributed to patients at dispensaries across the state to gauge their level of education about medical marijuana and how they use it.”

By |2017-10-07T09:56:02-07:00April 4th, 2015|Stories & Articles|Comments Off on Arizona Studying Safer Labeling of Edible Marijuana

Pot Legalization Guy Says Support Our AZ Plan- or Else

Arizona Republic:  “The guy who’s heading up an effort to throw open Arizona’s doors to recreational marijuana is sounding like he might need to light up a little more often.  On Sunday, Rob Kampia, executive director of the Washington D.C.-based Marijuana Policy Project, fired off a threatening email to an Arizona doctor who hopes to put a more incremental measure on the 2016 ballot.”

By |2015-04-02T19:23:53-07:00April 2nd, 2015|AZ Legislation, Stories & Articles|Comments Off on Pot Legalization Guy Says Support Our AZ Plan- or Else