The mayor of Newport and several other entities sued the Arkansas Medical Marijuana Commission, the Alcoholic Beverage Control and one of the state's five operational medical marijuana cultivators this week over the grower's decision to relocate its facility.
The suit, filed Monday in Jackson County, alleges fraud, conspiracy and breach of contract in the sale and transfer of Natural State Wellness Enterprises Cultivation as well as a location change, which were both approved by the Medical Marijuana Commission in November.
Regina Thurman, the new owner and one of the defendants in the lawsuit, changed the cultivation company's name to Good Day Farm and is developing its new growing facility in Pine Bluff.
Good Day Farm took over the cultivation license four days after submitting the application to the commission and two days before the company was incorporated. Court documents allege that Good Day Farm "represented itself as a legal entity ... before the [commission] when it knew or should have known that it was not a legal entity."
David Couch, the plaintiffs' attorney, said he found it "shady" that the commission approved the transferred license.
"The corporation they gave the license to didn't even exist on that day," Couch said. "They gave a license to Casper the Ghost."
Couch, a Little Rock lawyer and a medical marijuana advocate, is representing the lawsuit's four plaintiffs: Newport Mayor David Stewart, Newport Economic Development Commission Director Jon Chadwell, the Northeast Arkansas Charitable Foundation and the Newport-Jackson County Industrial Development Bond Board. Couch drafted Amendment 98 to the state Constitution, the initiative that voters approved in November 2016 to legalize medical marijuana.
Couch said the plaintiffs were unaware of the cultivator's plans to move to Jefferson County until after the commission's decision.
"The community has an investment in that facility, and before you go and move it somewhere else, the community that has the investment [should] have the opportunity to be heard," Couch said.
Chadwell approached the commission in March, requesting that it overturn the approval of the sale and transfer of the cultivation facility. Scott Hardin, spokesman for the Department of Finance and Administration, said the commission's legal counsel believed the dispute "was a private matter" and would be better resolved through litigation.
Hardin said he could not comment on pending litigation in which the Medical Marijuana Commission is a defendant, but he said the commission has not yet had to revoke a cultivator's license, though it has that power in cases of egregious rules violations. He also said the commission had met all the legal requirements for advertising the commission's agenda and public meeting in November.
Natural State Wellness had to choose between Jackson and Jefferson counties when it was awarded a cultivation license in 2018. The city of Newport made concessions, including selling the plot of land for the cultivation facility for $20, instead of the market value of more than $870,000, to convince Natural State Wellness to locate there.
One condition of the license in Newport was that the cultivator would provide 10% of its profits to the Northeast Arkansas Charitable Foundation. The sale of the license generated more than $20 million, so the suit alleges that Good Day Farm owes the foundation $2 million.
"The city gave them these incentives to locate there, and before they got up and running, they sold out and transferred to Pine Bluff, which is a head-scratcher," Couch said. "The motive to move to Jefferson County is puzzling."
The suit asks for a writ of mandamus, or a formal order from the circuit court, requiring Alcoholic Beverage Control to investigate Good Day Farm's behavior in November and "see what sanctions if any are appropriate for [its] misconduct," Couch said.
The Medical Marijuana Commission awards licenses for dispensaries and cultivators, while Alcoholic Beverage Control oversees regulation of medical-marijuana businesses.
The suit also requests financial damages for the plaintiffs -- 10% of the facility's profits in perpetuity -- if Good Day Farm opens in Pine Bluff. This request will go away if the facility stays in Newport, Couch said.
Little Rock attorney Alex Gray presented the commission with the request for the sale and transfer of the cultivator on Nov. 10, and he is listed as the incorporator of Good Day Farm, according to court documents.
Gray in a Tuesday text to the Arkansas Democrat-Gazette said he had not yet reviewed the plaintiffs' complaint and could not comment on it but will "vigorously defend" the lawsuit.
"I believe in the integrity of the manner in which Good Day Farm obtained both the license and the approval of the relocation of the cultivation facility to Pine Bluff," Gray said.
The Medical Marijuana Commission has issued licenses to eight cultivators throughout the state, and five are operational. The remaining three are slated to begin operations this year.
They will supply a total of 38 licensed dispensaries, 32 of which were open as of Tuesday. The state issued its first medical marijuana growing permits in July 2018 after several legal delays, and the first dispensary opened in May 2019.