Key Points: Lawsuit accuses Gov. Hobbs’ chief of staff of helping Trulieve get a late marijuana license Plaintiffs say the deal violates Arizona law and the state’s Gift Clause State defends the move as legal, plans to file a motion to dismiss Arizona Wellness Center Springerville, LLC and its owner, Mason Cave, have filed a lawsuit against state public health department officials, the governor and her chief of staff, accusing them of improperly issuing a dual-use marijuana license after the statutory deadline to Arizona’s largest cannabis retailer. Arizona Wellness Center claims in its April 13 complaint that the late stage issuance of a license violates state statutes, the Gift Clause of the Arizona Constitution and prior court orders. The company and Cave, claim Gov. Katie Hobbs’ chief of staff Chad Campbell coordinated with a lobbyist for the marijuana retailer Trulieve to grant a dual license to one of its subsidiaries, Sherri Dunn, LLC, despite past court orders finding it unlawful to grant a license after the deadline set in statute.  Christian Slater The governor’s office called the lawsuit “little more than sour grapes,” given the plaintiffs’ own failure to secure the same license. The state plans to file a motion to dismiss the lawsuit and “expects to prevail,” Christian Slater, spokesman for the governor, said in a statement. As part of the measure legalizing adult-use cannabis in 2020, the Department of Health Services was granted authority to issue dual establishment licenses, or licenses allowing for both medical and adult-use marijuana sales to early applicants, defined as either existing medical marijuana businesses in good standing or an applicant seeking to operate a dispensary in a county with fewer than two medical dispensaries.  Per statute, the Department of Health Services could only accept applications for marijuana establishment licenses from early applicants between Jan. 19, 2021, and March 9, 2021.  An applicant must have a Dispensary Registration Certificate to obtain a license as an existing medical marijuana dispensary. Sherri Dunn, LLC, first applied for a certificate in 2016 to operate in La Paz County, alongside three other applicants.  The department did not award a registration certificate to any of the three applicants, as there was an existing dispensary in La Paz County. One of the applicants, Saguaro Healing, then sued the department over the decision after the single dispensary in La Paz moved outside county lines.  The case was appealed to the Arizona Supreme Court where the justices found the Department of Health Services had violated state law by denying a certificate to qualified applicants from a county without a dispensary.  Although Sherri Dunn, LLC, never joined the suit, the final disposition resulted in a certificate issued to the business in December 2021. The company then applied for an establishment license on Jan. 3, 2022.  The Department of Health Services accepted the application and its attached $25,000 application fee but denied the license because it was submitted outside the statutory window.  The company appealed the decision to the Office of Administrative Hearings and then to Maricopa County Superior Court, arguing that it should have initially received its certificate in 2016, rather than in 2021.  Both the agency and court found no provision in the law providing an exception to the January to March 2021 window.  The legal battle then escalated to the Arizona Court of Appeals, but before either party could file, the Department of Health Services changed course and entered a settlement agreement awarding an establishment license to Sherri Dunn, LLC, which was to be issued within 10 days.  Months before the settlement, in September 2023, Wendy Briggs, a lobbyist with Veridus, employed by Trulieve, texted Campbell to request a meeting to discuss “Trulieve’s dual licensure issue," with a date later set for October, according to text exchanges and emails filed with the lawsuit.  Briggs asked if there was any way to accelerate the time frame, the complaint says, noting that Campbell replied, “I’ll try but things are a bit crazy right now. Would it help to meet with policy staff sooner?”  Briggs’ response, according to the complaint, was that the issue would take Campbell to handle rather than policy staff. After meeting in October, Briggs and Campbell allegedly exchanged emails about the specifics of Sherri Dunn, LLC’s case. Later, in November, the suit says, text messages revealed that Campbell told Briggs he would be “taking a look internally” regarding the licensing issue.  Then, on February 2, Briggs allegedly sent another text message. “Just wanted to thank you on Trulieve. You are pretty awesome,” Briggs allegedly wrote.  Nearly two weeks later, the health department and Sherri Dunn, LLC entered into a settlement agreement.  Arizona Wellness Center Springerville and Cave claim the settlement came about via improper influence from the governor’s office.  The suit does not name Sherri Dunn, LLC, Trulieve, Wendy Briggs or any lobbyist from Veridus as a defendant, but instead goes after the governor’s office and the Department of Health Services for prompting a settlement contrary to prior court orders.  Matt Benson, director at Veridus, declined to comment.  Slater, the governor’s spokesman, said Sherri Dunn, LLC and Arizona Wellness Springerville had contacted the administration regarding their marijuana licenses, and both had the Department of Health Services independently assess their decisions.  “Every day, constituents and stakeholders reach out to the administration with matters they have in front of the state of Arizona. And every day, the administration addresses those issues in accordance with the law and without special favor,” Slater said.  The two businesses had distinct sets of circumstances. Like Trulieve, Arizona Wellness and Cave sued the department to secure dual licensure after their application was denied, and they, too, saw the legal bid rejected by the court.  A Maricopa County Superior Court judge found the company had “manufactured” its application for a dual license, failed to secure proper zoning in its intended location and did not open a dispensary in the required timeframe.  Judge Susanna Pineda wrote Arizona Wellness Springerville, LLC,  “cannot, even under the most favorable interpretation of the facts, become a Dual Licensee as a matter of law.” The case is currently on appeal.  In Trulieve’s case, Slater said the Department of Health ultimately decided to settle, given the state Supreme Court’s prior decision in the Saguaro Healing case, which held that Sherri Dunn, LLC would have received a certificate in 2016. The Department of Health Services determined that had it not been for the error, the company would have applied on time and been awarded a dual establishment license.  “ADHS chose to settle the matter to avoid a long, costly court battle it was likely to lose at the Arizona Supreme Court based on the unique facts of the case and the Saguaro Healing decision,” Slater said.  “The simple truth — one Mr. Cave can’t seem to accept — is that he and his entity were not similarly situated to Trulieve.”  The plaintiffs also claim a violation of the Gift Clause, a provision in the Arizona Constitution prohibiting the state from making gifts to private parties. The two-pronged test for a Gift Clause violation requires the court to assess whether the expenditure serves a public purpose, followed by an evaluation of whether the value received by the public outweighs the expense.  Ross Myer, attorney for the plaintiffs, argues that the issuance of a marijuana license does not serve a public purpose. In assessing value, he claims the estimated $10 million value of the license awarded to Sherri Dunn, LLC outweighs the value to the public — that is, the $25,000 application fee submitted to the Department of Health Services.  Slater rebutted the allegation again, claiming there was no gift.  “Just as any other business could have, Trulieve followed the rules, paid the same application fee as all other applicants, and was granted a license for doing so after settlement proceedings with ADHS,” Slater said.