Arizona Daily Sun: “The Arizona Supreme Court will decide whether lawmakers can make criminals of legal medical marijuana users who possess their drug on college and university campuses. In a brief order, the justices agreed to hear arguments by Attorney General Mark Brnovich that the Court of Appeals erred lasts year when it voided a 2012 law that made possession of the drug on campuses a crime.”
Tucson Weekly: “Navajo County Superior Court Judge Dale Nielson has declared extracts illegal. The basis for his stance concerns the definition of cannabis in Arizona state law. The state’s statutes define cannabis as “the resin extracted from” marijuana plants, and pot laws written more than 50 years ago classify cannabis as a narcotic. The 2010 Arizona Medical Marijuana Act, however, has no definition for cannabis, raising inconsistencies about what patients can buy from dispensaries. It does have language about mixtures and other preparations, but Nielson decided this only applies to the dried flower.”
Phoenix New Times: “A Navajo County judge’s recent ruling about medical-marijuana extracts could lead to popular dispensary products like vape cartridges and edibles being taken off the shelves. Don’t freak out: That’s a worst-case scenario. But it’s possible, if a higher court ultimately agrees with the judge and rules that “cannabis” is not covered by the Arizona Medical Marijuana Act.”
Tucson Weekly: “Earlier this month, the Arizona Supreme Court ruled in favor of the state’s medical marijuana industry by quashing a long-standing legal assault by Maricopa County Attorney Bill Montgomery. Montgomery constantly rails against imaginary dangers of marijuana, likely borne from knowing little to nothing about the plant, and based on flawed data. He was a major player in the fight against Proposition 205 along with Yavapai County Attorney Sheila Polk. Just to give you a taste of Montgomery’s perplexing perspective, he once argued in a debate with a medical marijuana advocate and lawyer that marijuana should be illegal because “that’s what God wants.”
Phoenix New Times: “The Arizona Supreme Court saved the state’s medical-marijuana law on Tuesday, slapping down the Maricopa County Attorney’s crusade to overturn it. Without comment, the high court denied a petition by County Attorney Bill Montgomery’s office to review a December state Court of Appeals ruling in White Mountain Health v. Maricopa County/Montgomery. That ends the state-level battle against the law.”
Phoenix New Times: “Arizona Attorney General Mark Brnovich asked the state Supreme Court on Thursday to review an appeals-court ruling that struck down a ban on medical marijuana on college campuses. In the 15-page petition for review, lawyers for the state claim that the Arizona Legislature had the right to alter the voter-enacted law with a new law signed by former Governor Jan Brewer in 2012. They want provisions of the 2012 law re-established so that college students with medical-marijuana cards can face felony arrest and prosecution for possessing any amount of marijuana.”
Tucson Weekly: “Arizona medical marijuana users lawyered up late last year to contest the state’s fees for certification. Those efforts burnt out in mid-May as a Maricopa County Superior Court Judge decided there was nothing she could do about the situation. The lawsuit arose when a caregiver claimed that the medical marijuana program under the state’s Department of Health Services collected more money that it needed to operate and the $150 annual fee for patients and the $200 fee for caregivers were unnecessarily burdensome.”
Tucson.com: “A judge has rebuffed efforts by medical marijuana users to force the state to reduce the fees it charges patients. Maricopa County Superior Court Judge Jo Lynn Gentry said she does not dispute that the Department of Health Services is collecting more from medical marijuana users than it needs to administer the program.”
Phoenix New Times: “Maricopa County Attorney Bill Montgomery launched a fresh appeal this week in a lawsuit he believes could overturn the state’s medical-marijuana law. This time, though, his office will be going it alone. Arizona Attorney General Mark Brnovich has chosen to side with Arizona voters. On Tuesday, Montgomery filed a petition to the Arizona Supreme Court in White Mountain Health Center v. Maricopa County, keeping up a fight he began in 2011.”
As of February 11, 2017, four companies that applied for Arizona medical marijuana dispensary licenses during the 2016 application period and whose applications were rejected have sued the Arizona Department of Health Services. Each plaintiff alleges that its application designated a location for its medical marijuana dispensary that complied will all requirements of applicable local zoning ordinances, but the Arizona Department of Health Services awarded licenses to applicants whose dispensary addresses did not meet all applicable zoning ordinances.
The GAM Enterprises, LLC, BAB Holdings, LLC & 3 SL Family, LLC Lawsuit
On December 28, 2016, GAM Enterprises, LLC, BAB Holdings, LLC & 3 SL Family, LLC sued DHS. GAM Enterprises, LLC’s sole member is Genifer Murray. BAB Holdings, LLC’s sole member is Ingrid Joiya Warrick. The members and managers of 3 SL Family, LLC, are Larry C. Leverett and Yolanda Denise Leverett.
GAM Enterprises, LLC, applied for a dispensary license in CHAA 58 in South Scottsdale. The complaint alleges that DHS awarded the dispensary license to an applicant whose dispensary will be located at 6710 E. Camelback Road, Scottsdale, Arizona.
BAB Holdings, LLC, applied for a dispensary license in CHAA 40 in north Scottsdale. The complaint alleges that DHS awarded the dispensary license to an applicant whose dispensary will be located at 14405 N. Scottsdale Road, Scottsdale, Arizona.
3 SL Family, LLC, applied for a dispensary license in CHAA 78 in Ahwatukee. The complaint alleges that DHS awarded the dispensary license to an applicant whose dispensary will be located at 10835 S. 48th Street, Phoenix, Arizona. The complaint alleges that the location failed to satisfy the zoning requirements of applicable law and that DHS should have rejected the application for that location.
The complaint asks the court to order that the licenses awarded by DHS with respect to CHAAs 40, 58 and 78 be revoked and issued to an applicant whose application complied with all requirements.
The Premium Leaf, Inc., Lawsuit
On January 27, 2017, Premium Leaf, Inc., filed its complaint against DHS. Premium Leaf, Inc., is an Arizona nonprofit corporation whose directors are Laurence David Turner, Douglas W. Turner and Adam S. Turner.
Premium Leaf applied for a dispensary license in CHAA 70 for a site located at 98 N. Power Road, Mesa, Arizona. Premium Leaf claims that its location is the only location in CHAA 70 that satisfied all zoning requirements and therefor DHS improperly awarded the license to an applicant that should have been disqualified.k The plaintiff asks the court to issue a permanent injunction that revokes the license DHS granted for CHAA 70 and award it to Premium Leaf.
CBS 5 TV’s Story on the GAM Enterprises, LLC vs. Arizona Department of Health Services
GAM Enterprises, LLC vs. Arizona Department of Health Services Complaintgam-enterprises
Premium Leaf, Inc. s. Arizona Department of Health Services Complaint
County Attorney Bill Montgomery Continues His Failing Crusade Against Arizona’s Medical Marijuana Law
Phoenix New Times: “On Wednesday, the same day the Arizona Court of Appeals released its ruling against Montgomery, the county, and the state of Arizona, Montgomery held a press conference in which he distorted the findings of a new survey about youth marijuana use and claimed they showed a need to “reform” the voter-approved, 2010 Arizona Medical Marijuana Act (AMMA). Montgomery appears emboldened by last month’s defeat of Proposition 205, the only one of five marijuana-legalization ballot measures in the nation voters rejected this election season. Yet while he believes taxpayers should continue to fund his attack on the medical program, state Attorney General Mark Brnovich apparently doesn’t feel the same enthusiasm.
Your West Valley: “Local officials cannot use federal laws outlawing marijuana to refuse to provide necessary zoning for dispensaries, the state Court of Appeals ruled Tuesday. In their unanimous decision, the judges acknowledged the federal Controlled Substances Act makes the possession and sale of marijuana a felony. And they noted that the zoning sought by White Mountain Health Center was specifically to be able sell the drug from a shop in an unincorporated area of Sun City.”
Today’s News Herald: “Claiming the state is hoarding funds, two medical marijuana users want a judge to reduce the annual charge for the legally required registration cards. In legal papers filed here, the attorney for Yolanda Daniels and Lisa Becker points out the Department of Health Services collected $2.6 million more in fees last year from patients, caregivers and dispensaries than it actually took to run the program. And Sean Berberian noted the balance in the account as of the end of 2015 was nearly $11.5 million.”
Arizona’s medical marijuana law says that Arizona doctors who certify a patient as eligible to obtain a medical marijuana card have immunity as a result of the certification. Dr. Robert Gear examined a police informant, but did not review the patient’s records for the prior year as required by Arizona’s medical marijuana law. The doctor signed a medical marijuana certification for the police informant in which he certified he had reviewed the records.
The doctor was charged and defended the charge on the basis that Arizona’s medical marijuana law gave him immunity from prosecution. On May 6, 2016, the Arizona Supreme Court ruled that the law does not give the doctor immunity.
The Albuquerque Journal wrote two stories about medical marijuana in New Mexico and former Arizona medical marijuana bad boy Duke Rodriguez. The stories are:
Here are some quotes from the first story:
“Duke Rodriguez, the principal of Ultra Health, also expresses pride in the facility, where he grows 450 marijuana plants at a time, the maximum allowed under state Department of Health regulations. But Ultra Health is not one of the state’s 35 licensed nonprofit producers authorized by the New Mexico Department of Health to grow and sell medical marijuana. . . . Ultra Health is unusual, if not unique, among the state’s marijuana producers in that it is not a New Mexico-based entity. Ultra Health is a limited liability corporation based in Scottsdale, Arizona”
Quotes from the second story:
“Duke Rodriguez, principal of Ultra Health LLC, first became involved in the medical cannabis industry around 2013 in Arizona. He purchased the 11-acre marijuana-growing facility in Bernalillo in August 2014 on behalf of an Arizona corporation called Zoned Properties Inc. . . .
Ultra Health became the sole owner of the Bernalillo property as a result of a settlement reached in a lawsuit filed last year.
In March 2015, Zoned Properties filed suit in Arizona Superior Court against Rodriguez and Ultra Health in a dispute over business interests in Gilbert, Ariz., according to public records filed by the company.
In a settlement reached in July, Zoned Properties transferred ownership of the $2.7 million Bernalillo property to Rodriguez and Ultra Health, a company disclosure statement said.
Under the settlement, Rodriguez transferred ownership of a 48-acre property and growing facility in Chino Valley, Ariz., to Zoned Properties. Rodriguez also relinquished his ownership stake in Zoned Properties.
Zoned Properties, Inc., published a quarterly consolidated financial statement for the nine months ending 1, 2015 that sheds light on Duke’s statements about his settlement with Zoned Properties, Inc.
On January 29, 2014, the Company entered into a purchase and consulting agreement (the “Ultra Agreement”) with Ultra Health, LLC., a related party due to common ownership and investments made by beneficial stockholders of the Company (“Ultra Health”), pursuant to which the Company was to acquire a 1,536 square foot modular building to be delivered and erected on the purchased land for total cash payments of $675,000. Subsequent to the purchase of this land and building, these real estate assets were transferred to Gilbert Property, LLC, a wholly-owned subsidiary of the Company. In connection with the 1,536 square foot modular building discussed above, on April 10, 2015, the Company became a party to a certain case pending in the Superior Court of the State of Arizona in and for Maricopa County, Arizona styled, Zoned Properties, Inc. v. Duke Rodriguez, Ultra Health, LLC and Cumbre Investment, LLC (“The Defendants”), Case No. CV-2015-004225, wherein the Company alleges, among other things, that the Defendants, alone or in collusion with one another, breached a certain contract for the construction of the Gilbert building, and made material misrepresentations or had negligently misrepresented certain material elements upon which the Company relied, in purchasing the land upon which that building was to be constructed, which the Defendants failed to perform. The Company reviews it rental properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on this review, on December 31, 2014, the Company determined that the Gilbert building carrying value of $675,000 was not recoverable and recorded an impairment loss – related party of $675,000. On July 9, 2015 and effective August 1, 2015, the Company entered into a settlement agreement with the Defendants that, among other things, settles the pending claims and grants mutual general releases. . . .
Zoned Properties, Inc. v. Duke Rodriguez, Ultra Health, LLC and Cumbre Investment, LLC On April 10, 2015, the Company became a party to a certain case pending in the Superior Court of the State of Arizona in and for Maricopa County, Arizona styled, Zoned Properties, Inc. v. Duke Rodriguez, Ultra Health, LLC and Cumbre Investment, LLC (“The Defendants”), Case No. CV-2015-004225, wherein the Company alleges, among other things, that the Defendants, alone or in collusion with one another, breached a certain contract for the construction of the Gilbert building, and had made material misrepresentations or had negligently misrepresented certain material elements upon which the Company relied in purchasing the land upon which that building was to be constructed, which the Defendants failed to deliver (See Note 3). On June 8, 2015, the Company filed a motion to dismiss the counterclaim. The motion to dismiss has been fully-briefed and was set for oral argument on August 7, 2015. On July 9, 2015 and effective August 1, 2015, the Company entered into a settlement agreement with the Defendants that, among other things, settles the pending claims and grants mutual general releases. Under the terms of the settlement:
1. On August 1, 2015, the Company transferred title to its Bernalillo, New Mexico property to Defendants. At June 30, 2015 and December 31, 2014, the carrying value of this property was $2,719,658 and $2,737,863, respectively. In connection with such property, the Company forfeited quarterly straight-lined rental revenue of approximately of $287,000 through September 2024. For the six months ended June 30, 2015, rental revenues from this property amounted to $120,000. The Company did not have rental revenue from this property in the comparable 2014 periods.
2. The Defendants returned 2,496,054 shares of common stock to the Company and the Company cancelled such shares. On the Settlement Date, such shares were valued at $1,406,603 or $0.5635 per common share which represents the cost of the treasury shares purchased and retired.
3. The Defendants effectuated the transfer of four parcels of property in Chino Valley, Arizona to the Company which consists of approximately 48 Acres of land and the Company acquired an additional parcel in Chino Valley for $200,000 in cash. Based on an independent appraisal, on the Settlement Date, the fair value of property obtained, consisting of land, buildings and improvements, amounted to approximately $1,528,000.
4. The Company shall obtain water rights associated with property in Chino Valley, Arizona.
In connection with the settlement, on the Settlement Date, the Company did not record any settlement gain or loss.
Zone Properties’ financial statement contains some interesting line items for a publicly traded company:
- $297,695 revenue excluding revenue from related parties
- $1,011,008 professional fees
- $(976,579) loss from operations
- $(1,145,170) net loss
Associated Press: “The Arizona Supreme Court ruled Friday that medical marijuana cardholders don’t have immunity from prosecution under a state DUI law that prohibits drivers from having in their bodies any amount of marijuana or its chemical compound that causes impairment. But the state high court’s unanimous decision Friday also said cardholders can try to show in court that they didn’t have enough of the marijuana compound THC in their systems to be impaired.”
The U.S. Tax Court in an October 22, 2015, memorandum decision called Canna Care, Inc., vs. Commissioner ruled that a California medical marijuana dispensary owed back federal income taxes of $229,473, $304,090, and $339,604 for 2006, 2007, and 2008, respectively. The IRS used Internal Revenue Code Section 280E to disallow deductions that would be otherwise have been deductible if Canna Care’s businesses did not involve “trafficing” in a controlled substance.
Section 280E states:
Phoenix New Times: “The blunt realities of the state’s medical-marijuana industry are exposed in a remarkable ruling on a lawsuit between business partners that features allegations ranging from a ‘lack of financial controls’ to a shady seed deal in a parking lot. The lawsuit’s between the two partners of Uncle Herbs of Payson, one of the state’s notable licensed medical-marijuana dispensaries. Andrew Provencio . . . and partner Tiffany Young have been engaged in a vicious civil war since late December over a company worth millions. Now, following Superior Court Judge Randall Warner’s ruling, Young has been found in contempt and has one week to turn over nearly $50,000 in funds allegedly spent on ultra-high-quality cannabis seeds in a transaction that occurred in a parking lot.”
The dispensary license is actually held by Desert Medical Campus, Inc., an Arizona for profit corporation (“DMC”) that was administratively dissolved by the Arizona Corporation Commission on 9/23/15. The lawsuit is between DMC’s shareholders.
The principals of DMC formed a lot of entities, but failed to operate them independent of DMC. As a result, the court disregarded the separate existence of the entities and found the assets and liabilities of the entities are assets and liabilities of DMC. Here’s some interesting statements found in the Judge’s ruling dated September 16, 2015:
“The court finds that A & T Management was operated as a part of DMC and not as a separate entity. Therefore, all assets and liabilities of A & T Management were and are assets of DMC subject to the receivership. . . .
the court finds that the finances and operations of Uncle Herb’s Gift Shop were not kept separate from that of DMC. Therefore, all assets and liabilities of Uncle Herb’s Gift Shop were and are assets of DMC subject to the receivership. . . .
The court therefore concludes that Uncle Herb’s Kitchen is a part of DMC. All assets and liabilities of Uncle Herb’s Kitchen were and are assets of DMC subject to the receivership. . . .
The Receiver therefore properly assumed control over the assets of M & T Management. . . .
Golden Tomatoes, though nominally owned by Mr. Provencio’s cousin as a straw man, was part of DMC. All of its assets are subject to the receivership. . . .
The preliminary injunction prohibited either Mr. Provencio or Ms. Young from acting in any way on behalf of DMC or causing DMC to do anything except with the other’s written consent. . . .
Between March 24 and April 6, Ms. Young took $47,274.46 in cash out of DMC. . . .
Ms. Young testified that the purpose of the cash withdrawal was to purchase marijuana seeds. She testified that she had an agreement with a seller to purchase those seeds. . . .
Ms. Young did not know the seller’s name. But she testified that she trusted the seller because she knew the person who referred her to that seller. . . .
Ms. Young testified that she exchanged the cash for marijuana seeds from the seller in a parking lot. . . .
On or about April 4, 2015, Ms. Young caused DMC to sell approximately $169,000 worth of products to ‘Harvest of Tempe’
Arizona Daily Star: “A judge has rejected efforts by a marijuana advocacy group to quash limits set by the Department of Health Services on how and when patients with post-traumatic stress disorder can legally use the drug. In a ruling Wednesday, Maricopa County Superior Court Judge Crane McClennen said there was ‘substantial evidence’ to support the restrictions imposed last year by Will Humble, who was state health chief at the time. And McClennen said adopting the views of the Arizona Cannabis Nurses Association that the restrictions are inappropriate would amount to requiring him to substitute his own judgment for that of the health chief, something he legally cannot do.”
ABC15.com: “The Arizona Supreme Court recently agreed to review an appeals court decision that decided drivers who have medical marijuana cards can be prosecuted for driving under the influence if they’re found to have marijuana in their system. In two cases, defendants who had medical marijuana cards argued they should be able to use their medical marijuana cards as defense like other prescription drugs are used. But, the District One appeals court disagreed. The court ruled the medical marijuana law doesn’t provide immunity for patients because it’s not prescribed by a doctor, it’s recommended.”
Riddell Williams: “Given the disconnect between federal law and that of an increasing number of states, marijuana-related businesses and their landlords, vendors, and lenders are confronted with dicey legal issues. The availability of bankruptcy relief is one of the latest. A bankruptcy court was recently asked to decide whether it could (or should) enter an involuntary order of relief against a medical marijuana dispensary management entity, even though the debtor-entity’s business activities are illegal under federal law. In re Medpoint Management, LLC, 528 B.R. 178, 182 (Bankr. D. Az.). The court answered in the negative, consistent with earlier cases barring bankruptcy relief for debtors engaged in the marijuana business or in leasing to marijuana businesses. . . . Under Arenas, individual debtors engaged in the marijuana business should be aware that the bankruptcy discharge is probably not available to them. Debtors who simply lease space to marijuana businesses can expect to be barred from obtaining relief under the Bankruptcy Code under Rent-Rite. Under Medpoint, anyone considering extending loans or trade credit to marijuana businesses should proceed with the utmost caution and cannot count on seeking a remedy in bankruptcy court if a marijuana business fails to pay.
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.”
- Dispensary Certificate voided by the Arizona Department of Health Services.
To learn more about the litigious Zoned Properties read:
- Zoned Properties’ Major Stockholders in Court Fight over Money & Control of Two Dispensaries
- Ultra Health, LLC Sued Again: Now in 4 Lawsuits
- Zoned Properties, Inc. & Duke Rodriguez Lawsuits
- Zoned Properties, Inc. Public Disclosures
- Two Men Cease to be Directors of Zoned Properties, Inc.
- Medical Marijuana Dispensary Dispute
- Ultra Health, LLC, vs. Healing Healthcare, Inc., & Scan4Health, LLC
- Ultra Health Threatens to Sue Florence
- AZ Dept. of Health Services Confirms Ultra Health, LLC Lacks a License for a Medical Marijuana Dispensary
- Zoned Properties, Inc. Acquires Real Estate for Key Arizona Medical Marijuana Dispensary
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:
- Exhibit 1 – the Ultra Health, LLC, Prospectus
- Exhibit 2 – Removal of Duke Rodriguez as Manager of Ultra Health, LLC
- Exhibit 3 – Ultra Health, LLC, Operating Agreement
- Exhibit 4 – Financial Records
- Exhibit 5 – Broken Arrow Herbal Center Bylaws.
- Opposition to Application for Temporary Restraining Order – Defendants’ response to the Complaint
- Exhibit 1 – Declaration of Duke Rodriguez
- Exhibit 2 – Christopher Carra’s FINRA Letter of Consent
- Exhibit B – Joint Venture Agreement between Ultra Health, LLC & MACCAM, LLC
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.?
Here’s a score card to help keep track of the players in this lawsuit:
- 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.
- 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 . . .
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.”
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.”
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.”
East Valley Tribune: “Doctors who recommend marijuana to patients can’t be charged with crimes even if they did not follow the procedures required by law, the Arizona Court of Appeals ruled Thursday. The judges acknowledged that Robert Gear, a Phoenix naturopath with offices in several communities, had been charged with recommending the drug to a patient without having access to 12 months of her medical records. That is a requirement under the law. Gear was indicted on charges of forgery and fraudulent schemes after saying on a form required by the Department of Health Services that he had, in fact, seen those records.”
On October 21, 2014, the Second Division of the Arizona Court of Appeals issued an opinion in the case of Darrah vs. McClennen that answers the question”
“whether Arizona’s Medical Marijuana Act (“AMMA”) prohibits the State from prosecuting an authorized marijuana user for driving under the influence (“DUI”) pursuant to Arizona Revised Statutes (“A.R.S.”) section 28-1381(A)(3), which criminalizes driving while there is any prohibited drug or its metabolite in a person’s body. . . . we conclude that the AMMA does not give an authorized medical marijuana user immunity from prosecution.”
Yourwestvalley.com: “State health officials are facing a new legal challenge over a provision in the voter-approved Medical Marijuana Act that bars those who live within 25 miles of a dispensary from growing their own plants. The lawsuit filed in Maricopa County Superior Court contends giving some the right to grow but not to others is a violation of the Equal Protection Clause of the U.S. Constitution. Billy B. Hayes, who is not at attorney but filed the legal papers on behalf of himself and others, also contends the system gives dispensary operators a monopoly in violation of state constitutional provisions.”
Arizona Public Media: “An advocacy group is appealing terms set by the state Department of Health Services on post-traumatic stress disorder patients seeking medical marijuana for treatment. . . . . Tucson Lawyer Ken Sobel, who represents the Arizona Cannabis Nurses Association, argued Humble had no authority to add those rules, and he filed an appeal to those conditions this week to the Maricopa County Superior Court on behalf of the AZCNA.”