throbber
Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.3 Page 1 of 41
`
`Jason M. Kerr (8222)
`Steven Garff (13707)
`PRICE, PARKINSON & KERR
`5742 W. Harold Gatty Drive
`Salt Lake City, UT 84116
`Telephone: (801) 517-7088
`E-mail: jasonkerr@ppktrial.com
` stevengarff@ppktrial.com
`
`
`
`
`Attorneys for JLPR, LLC
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
`
`
`
`v.
`
`Plaintiff
`
`
`JLPR, LLC, a Utah limited
`liability company;
`
`
`
`
`Utah Department of Agriculture and food,
`Utah Division of Purchasing, General
`Services, The State of Utah, Scott Ericson,
`Kerry Gibson, Kelly Pehrson, Andrew Rigby,
`Cody James, Natalie Callahan, Mellissa Ure,
`Brandy Grace, Christopher W. Hughes, Mark
`Anderson, Zac Christensen, Stephanie Casta,
`Standard Wellness Utah, LLC, and True
`North of Utah, LLC.
`
`
`COMPLAINT AND JURY DEMAND
`
`
`Case No. 2:21-cv-00436
`
`District Judge: Ted Stewart
`
`
`
`
`
`
`
`
`
`
`
`
`
`Defendants.
`
`Plaintiff JLPR, LLC (“JLPR” or “Plaintiff”) through the undersigned counsel, sues the
`
`Utah Department of Agriculture and Food (“DAF”), the Utah Division of Purchasing and
`
`General Services, the State of Utah, Scott Ericson, Kerry Gibson, Kelly Pehrson, Andrew Rigby,
`
`Cody James, Natalie Callahan, Mellissa Ure, Brandy Grace, Christopher W. Hughes, Mark
`
`
`
`1
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`

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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.4 Page 2 of 41
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`Anderson, Zac Christensen, Stephanie Casta, Standard Wellness Utah, LLC, and True North of
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`Utah, LLC.
`
`INTRODUCTION
`
`In 2018 Utah voters approved the Utah Medical Cannabis Act, AKA “Proposition 2.”
`
`The law, as later revised by the State Legislature, provided for “the cultivation, processing,
`
`medical recommendation, and patient use of medical cannabis” within the State of Utah.
`
`Unlike some states in which there are an unlimited number of cultivation licenses or a
`
`large number of cultivation licenses, the Utah Legislature chose to strictly limit the number of
`
`available licenses to ten (later changed to eight). This limitation has made these licenses
`
`extremely valuable. Indeed, on information and belief, at least one cultivation license recipient
`
`quickly turned around and sold its company for millions of dollars after obtaining a license.
`
`In June of 2019, the State of Utah opened up an application process for licenses to
`
`cultivate medical marijuana within the state of Utah (Solicitation #DB199063).
`
`Plaintiff JLPR timely applied for a license to cultivate medical cannabis in the state.
`
`However, due to a variety of improper conflicts of interest, scoring irregularities, scoring
`
`collusion among evaluators, alteration of evaluators’ scores to align with senior management’s
`
`favored companies, biases, failures to follow the law, and other failures of the DAF (as will be
`
`detailed more fully below), JLPR was not awarded a cultivation license.
`
`JLPR timely appealed the DAF’s denial of a Cultivator License to a DAF Protest Officer,
`
`who denied the protest, and then to the Procurement Board of the Utah Division of Purchasing
`
`and General Services who also denied JLPR’s appeal. The Procurement Board’s decision is
`
`extremely sparse. The entire discussion of the merits of the appeal consists of only two single
`
`short paragraphs and concludes, without support or discussion, that “JLPR failed to provide any
`
`
`
`2
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`

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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.5 Page 3 of 41
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`facts or evidence in support of its claims” and accepting the Protest Officer’s decision that he
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`“found no evidence of the evaluation committee violating the Utah Procurement Code or failing
`
`to follow a provision of the Solicitation in its proceedings.”
`
`The Panel simply ignored the evidence and facts provided by JLPR.
`
`The Panel’s decision is especially troubling in light of the clear conflicts of interest that
`
`existed among multiple panel members, which will be detailed below.
`
`After this denial, JLPR and its attorneys sought documents from the DAF through a
`
`GRAMA request. The DAF challenged this GRAMA request, providing some documents while
`
`withholding others. JLPR appealed this refusal and, after a formal settlement conference before
`
`the State Department of Records in which the DAF agreed to provide some additional
`
`documents, JLPR agreed to dismiss the remainder of this GRAMA appeal.
`
`The documents which JLPR obtained through its GRAMA request and other
`
`investigations JLPR has undertaken further show widespread bias, conflicts, errors, failures to
`
`follow the law, and other problems with the evaluation process.
`
`On November 17, 2020 the Office of the State Auditor published an audit of the DAF,
`
`including of the evaluation process used to select cannabis grower licenses (the “Audit” or
`
`“Report”). The stated purpose of this Audit was in response and to “asses the validity” of
`
`allegations that the Department failed to comply with the law, as have been raised by JLPR in its
`
`formal protest and appeal and this Complaint, as well as in the news media and elsewhere.
`
`The State Auditor’s Office “reviewed the scoring from the evaluation process used to
`
`award cannabis grower licenses for propriety and compliance with Utah Code” and “performed a
`
`statistical analysis designed to identify groupings among evaluation committee member scores.”
`
`
`
`3
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`

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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.6 Page 4 of 41
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`This Audit found “Concerns Regarding UDAF Administration,” and “weaknesses in
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`UDAF’s control environment” which the Auditor concluded “resulted in… Concerns regarding
`
`bid selection [and] Undisclosed conflicts of interest.”
`
`The Audit also noted “concerns about certain factors and conditions that call into
`
`question the independence of the process” of the evaluation.
`
`The official Audit of DAF records details serious problems with the cannabis cultivation
`
`license evaluation scoring under the headers “Significant Score Correlation Could Indicate Lack
`
`of Scoring Independence” and “Significant Modifications to Scores Aligned with Senior
`
`Management Preferences.”
`
`The conflicts of interest, scoring problems, and failures to follow the law uncovered by
`
`the Audit during the evaluation process for cannabis cultivation licenses were so severe that the
`
`State Auditor’s Office issued a formal recommendation that the UDAF “[r]eassess the licenses
`
`awarded.”
`
`This Audit confirmed and further detailed many of the serious problems with the license
`
`selection process and further demonstrates that JLPR was unlawfully denied a cultivation
`
`license.
`
`PARTIES
`
`1. Plaintiff JLPR, LLC is a Utah Limited Liability Company with its principle place
`
`of business in the State of Utah.
`
`2. Defendant the Utah Department of Agriculture is an agency of the State of Utah.
`
`3. Defendant the Utah Division of Purchasing and General Services is an agency of
`
`the Sate of Utah.
`
`4. Defendant the State of Utah is a state government.
`
`
`
`4
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.7 Page 5 of 41
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`5. Defendant Scott Ericson is an individual residing in the state of Utah who was
`
`at one time the Deputy Commissioner of the Department of Agriculture. Mr.
`
`Ericson conspired with the other Defendants, including state officials, to deprive
`
`JLPR of its federally protected rights.
`
`6. Defendant Kerry Gibson is an individual residing in the state of Utah who was
`
`at all relevant times the Department Commissioner of the DAF. He is sued in
`
`his individual capacity.
`
`7. Defendant Kelly Pehrson is an individual residing in the state of Utah who was at
`
`all relevant times a DAF Evaluation Committee member for Solicitation
`
`#DB199063. He is sued in his individual capacity.
`
`8. Defendant Andrew Rigby is an individual residing in the state of Utah who was at
`
`all relevant times a DAF Evaluation Committee member and chair for Solicitation
`
`#DB199063. He is sued in his individual capacity.
`
`9. Defendant Cody James is an individual residing in the state of Utah who was at
`
`all relevant times a DAF Evaluation Committee member for Solicitation
`
`#DB199063. He is sued in his individual capacity.
`
`10. Defendant Natalie Callahan is an individual residing in the state of Utah who was
`
`at all relevant times a DAF Evaluation Committee member for Solicitation
`
`#DB199063. She is sued in her individual capacity.
`
`11. Defendant Mellissa Ure is an individual residing in the state of Utah who was at
`
`all relevant times a DAF Evaluation Committee member for Solicitation
`
`#DB199063. She is sued in her individual capacity.
`
`
`
`5
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.8 Page 6 of 41
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`12. Defendant Brandy Grace is an individual residing in the state of Utah who was at
`
`all relevant times a DAF Evaluation Committee member for Solicitation
`
`#DB199063. She is sued in her individual capacity.
`
`13. Defendant Christopher W. Hughes is an individual residing in the state of Utah
`
`who was at all relevant times a Protest Officer of Defendant DAF. He is sued in
`
`his individual capacity.
`
`14. Defendant Mark Anderson is an individual residing in the state of Utah who was
`
`at all relevant times a Procurement Policy Board member of Defendant Utah
`
`Division of Purchasing and General Services. He is sued in his individual
`
`capacity.
`
`15. Defendant Zac Christensen is an individual residing in the state of Utah who was
`
`at all relevant times a Procurement Policy Board member of Defendant Utah
`
`Division of Purchasing and General Services. He is sued in his individual
`
`capacity.
`
`16. Defendant Stephanie Casta is an individual residing in the state of Utah who was
`
`at all relevant times a Procurement Policy Board member of Defendant Utah
`
`Division of Purchasing and General Services. She is sued in her individual
`
`capacity.
`
`17. Defendant Standard Wellness Utah, LLC (“Standard Wellness”) is a limited
`
`liability company doing business in the state of Utah with its principle place of
`
`business located in Gibsonburg Ohio. Standard Wellness conspired with the other
`
`Defendants, including state officials, to deprive JLPR of its federally protected
`
`rights.
`
`
`
`6
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.9 Page 7 of 41
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`18. Defendant True North of Utah, LLC (“True North”) is a limited liability company
`
`doing business in the state of Utah with its principle place of business located in
`
`Corinne Utah. True North conspired with the other Defendants, including state
`
`officials, to deprive JLPR of its federally protected rights.
`
`19. With respect to all facts and violations alleged in this complaint, each of
`
`Defendants acted under color of state law and conspired with other Defendants to
`
`deprive JLPR of its constitutional rights.
`
` JURISDICTION AND VENUE
`
`20. This Court has jurisdiction pursuant to 28 U.S.C. 1331 and 28 U.S.C. 1367 as
`
`Plaintiff brings federal claims arising under the United States Constitution. This
`
`Court also has jurisdiction under 28 U.S.C. § 1343(a)(3) and (4) over this civil
`
`action commenced to (i) redress the deprivation of a right or privilege secured by
`
`an Act of Congress providing for equal rights of all citizens, and (ii) to secure
`
`equitable relief under an Act of Congress providing for the protection of civil
`
`rights.
`
`21. The Court also has jurisdiction over this matter under 42 U.S.C. 1983 and 1985,
`
`as the Defendants and each of them conspired and acted under the color of law to
`
`deprive Plaintiff of its federally protected constitutional rights.
`
`22. This Court has supplemental jurisdiction of Plaintiff’s state law claims.
`
`23. Venue is proper under 28 U.S.C. § 1391(b)(2) because the events giving rise to
`
`these claims occurred in this district, the Plaintiff resides in this district and the
`
`State and agency Defendants maintain their offices in this district.
`
`24. Venue is also proper as specifically authorized by Utah Code 63G-7-502.
`
`
`
`7
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.10 Page 8 of 41
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`FACTUAL BACKGROUND
`
`25. In November of 2018 Utah voters approved the Utah Medical Cannabis Act
`
`(AKA Proposition 2).
`
`26. On November 30, 2018, Governor Gary Herbert formally called for a special
`
`session for the Utah State Legislature to make changes to Proposition 2 and on
`
`December 3, 2018, the Legislature passed, and the Governor signed, House Bill
`
`3001 (the Utah Medical Cannabis Act) into law. This bill provided for “the
`
`cultivation, processing, medical recommendation, and patient use of medical
`
`cannabis” within the State of Utah.
`
`27. In June of 2019, the State of Utah opened up an application process for licenses to
`
`cultivate medical marijuana within the state of Utah (Solicitation #DB199063).
`
`28. The law at the time provided for up to ten licenses for facilities to cultivate
`
`medical marijuana within the state.1
`
`29. The limitation on the number of licenses renders them extremely valuable.
`
`Indeed, shortly after acquiring its cultivation license, successful applicant Tryke
`
`was sold to Cresco Labs, a Chicago based company. On information and belief,
`
`this sale was in millions of dollars.
`
`30. Discrepancies between successful applicant Harvest of Utah’s Ownership
`
`Disclosure Form in its Application and a subsequent press release by the
`
`
`1 After JLPR was improperly denied a license and after JPLPR filed an appeal with the Utah
`Court of Appeals (and at the urging of the DAF), the State Legislature amended House Bill
`3001when the Utah Senate passed SB1002 on September 16, 2019 to provide for only up to 8
`cultivation licenses and to deny the right to an appeal of any license denial.
`
`
`
`8
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.11 Page 9 of 41
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`company, indicate that it was not truthful about its actual ownership in its
`
`application.
`
`31. JLPR’s four owners at that time collectively had over 150 years of successful
`
`business experience. This experience includes owning, operating, and managing
`
`scientifically intensive and heavily regulated businesses, including: a large brine
`
`shrimp operation on the Great Salt Lake for the last twenty-five years; large scale
`
`ranching, restaurant and hospitality businesses in Utah; Hemp CBD formulation
`
`and marketing with specialists in Colorado and other states; and operating a Utah
`
`based railroad. JLPR’s owners have significant experience in soil, land, water,
`
`and wildlife habitat remediation. They also have experience in health
`
`management, greenhouses, gardens, pasture food, and medicine production.
`
`32. JLPR and its owners have significant earned capital. JLPR can fully self-finance
`
`all cannabis operations including land and other resources necessary to cultivate
`
`medical cannabis without relying on third-parties. JLPR also has access to world
`
`class experts, including world-renown soil experts, engineers, greenhouse
`
`designers, experienced growers of various medical cannabis strains, scientists,
`
`doctors and many other top experts. JLPR can provide the best locations and
`
`capital support for state-of-the-art facilities. JLPR has access to the best strains of
`
`cannabis to treat the specific medicinal needs of Utahns while creating the most
`
`positive impact on land and all people involved from production to consumption.
`
`33. With this wealth of knowledge and resources, JLPR was and is perfectly suited
`
`for Utah’s medical cannabis needs.
`
`34. JLPR timely applied for a Medical Cannabis Cultivator License from DAF.
`
`
`
`9
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`

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`35. The DAF Evaluation Committee determined that JLPR’s application met the
`
`mandatory requirements for a full review in the technical criteria evaluation stage.
`
`36. However, due to significant problems and flaws with the review process, DAF did
`
`not select JLPR for a license.
`
`37. The eight companies who were awarded licenses were: Dragonfly Greenhouse,
`
`Harvest of Utah, Oakbridge Greenhouses, Standard Wellness Utah, True North of
`
`Utah, Tryke Companies Utah, Wholesome Ag., and Zion Cultivars.
`
`38. A comparison of JLPR’s qualifications with those of the successful applicants
`
`demonstrates that JLPR was and is more qualified and should have been selected
`
`over some of the successful applicants.
`
`39. JLPR timely filed a formal protest of the application process and the decision on
`
`July 26, 2019. Five days later, on July 31, 2019 the DAF’s Protest Officer,
`
`Christopher W. Hughes, dismissed each issue raised by JLPR in the formal
`
`protest. JLPR appealed the decision to the Procurement Policy Board of
`
`Defendant the Utah Division of Purchasing and General Services. The
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`Procurement Policy Board, consisting of Mark Anderson, Zack Christensen, and
`
`Stephanie Casta, sustained the Protest Officer’s decision, without a hearing on
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`September 11, 2019.
`
`40. JLPR has appealed this decision to the Utah Court of Appeals, pursuant to the
`
`operative statute, which was in effect at the time of the decision and filing of the
`
`appeal. This appeal is was denied on May 13, 2021.
`
`
`
`10
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`

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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.13 Page 11 of 41
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`41. As will be detailed below the corruption and other problems in the selection and
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`agency appeal process were a gross violation of JLPR’s due process and equal
`
`protection rights.
`
`A. The Former Deputy Commissioner of the DAF Illegally Controlled and
`Influenced the Selection Process to Favor at Least One Applicant at JLPR’s
`Expense.
`
`42. Until May 2019, Scott Ericson was Deputy Commissioner of the Department of
`
`Agriculture. In that role, Mr. Erickson spent years developing the State’s
`
`regulatory framework for medical cannabis. He wrote the rules, regulations, and
`
`application guidelines. He even wrote the evaluation forms used by the
`
`evaluators and the assigned relative weights to each of the criteria used by the
`
`evaluators.
`
`43. Mr. Ericson knew all of the evaluators. He was involved in selecting them
`
`personally to be on the evaluation team. During his time at the department, he
`
`supervised many of the evaluators, hired some of them, and personally worked
`
`with all of the evaluators.
`
`44. While working for the department of Agriculture, Mr. Ericson traveled across the
`
`country meeting with various cannabis growers and state officials. One of the
`
`companies that he became acquainted with was Standard Wellness of Ohio.
`
`While Mr. Ericson was still Deputy Commissioner, he introduced Standard
`
`Wellness of Ohio to the Commissioners of Box Elder County in order to acquire
`
`land for cannabis cultivation.
`
`
`
`11
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`

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`45. Standard purchased the land before Mr. Ericson wrote their application and before
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`it was publicly known that out of state companies would be allowed to apply for
`
`cultivation licenses.
`
`46. Mr. Ericson formed his consulting company, Utah CBD Pros, while still
`
`employed by Department of Agriculture.
`
`47. At some point, either before or immediately after Mr. Ericson left the department,
`
`Standard Wellness hired Mr. Ericson to help it secure a cultivation license. Mr.
`
`Ericson left the Department at the end May of 2019. Yet somehow, he was able
`
`to complete a winning application of hundreds of pages for Standard Wellness by
`
`July 1st.
`
`48. During the application process, Mr. Ericson emailed evaluator Cody James, an
`
`employee of the Department who Mr. Ericson was involved in selecting as an
`
`evaluator. In that email Mr. Ericson informed Mr. James that Mr. Ericson was
`
`working on behalf of Standard Wellness. Therefore, at least one evaluator knew
`
`that Mr. Ericson was working for Standard Wellness.
`
`49. Despite the fact that Mr. Ericson was hired as a consultant and even had direct
`
`communication with the evaluation committee on behalf of Standard Wellness,
`
`Mr. Ericson’s name is not mentioned among the consultants in Standard
`
`Wellness’s application.
`
`50. On information and belief, Mr. Ericson continues to work with Standard
`
`Wellness.
`
`51. Mr. Ericson’s application for Standard Wellness was successful.
`
`
`
`12
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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.15 Page 13 of 41
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`52. On information and belief, Standard Wellness’s application was successful, as
`
`were those several of the other selected applicants, due to score collusion and
`
`adjustments made by DAF evaluators and management. This scheme to collude
`
`on scores and adjust scores to align with senior DAF management to select
`
`favored applicants will be detailed more fully below.
`
`53. As promised, Standard Wellness paid Mr. Ericson approximately $100,000.00 as
`
`a success fee.
`
`B. The Solicitation Process was, Rushed, Requirements were Changed During the
`Process to Favor Certain Candidates, and the Process was Biased and
`Anticompetitive.
`
`54. The Utah Department of Agriculture allowed less than a month (from the June 5th
`
`public hearing to the July 1st Deadline) for qualified applicants to gather,
`
`assemble, prepare, and present documents and information and to answer
`
`technical questions in a complete application that would fairly represent the
`
`qualifications of the applicants.
`
`55. This process did not involve interviews, phone calls, or other methods whereby
`
`the evaluation committee or the conducting procurement unity could fairly and
`
`competently evaluate the applicants.
`
`56. With an adequate amount of time, JLPR would have been able to demonstrate that
`
`it was more qualified and would have received perfect or near perfect scores on
`
`each of the criteria. JLPR did not receive fair and proper communication and was
`
`denied the ability to dialogue with the application administration.
`
`57. JLPR was not given the opportunity to meet with anyone in advance or during the
`
`application and evaluation process in order to ask questions and receive assistance
`
`
`
`13
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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.16 Page 14 of 41
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`about how to clearly present their qualifications, despite the fact that these
`
`opportunities were afforded to many of the awarded licensees.
`
`58. For example, documents obtained by JLPR through its GRAMA request
`
`demonstrate that least one applicant was told that the department would not
`
`require companies to post the $250,000.00 bond that was required by the
`
`Solicitation and which JLPR posted.
`
`59. Likewise, some of the applicants did not have land to grow on, even though its
`
`was required, but the Department decided to be flexible on that requirement.
`
`60. The lack of proper vetting and transparency, including the lack of interviews,
`
`meetings, and financial reviews, which should have been part of a meaningful
`
`selection process, significantly diminished and disabled JLPR and the State's
`
`ability to properly select licensees.
`
`61. Likewise, the sudden change allowing ownership by foreign companies created
`
`confusion among the applicants.
`
`62. At the beginning of the application process, all applicants were required to be
`
`residents of the State of Utah. JLPR was carefully structured, and its application
`
`was specifically prepared to account for the in-state ownership requirement.
`
`63. On June 30th, at the very end of the process, the Department of Agriculture
`
`suddenly changed this requirement without adequate notice to the in state
`
`applicants, and without allowing time for applicants to revise their applications or
`
`adapt to the change. Indeed, the change was not publicly announced until around
`
`July 11th. This is notwithstanding the fact that evaluators were discussing how to
`
`remove the residency requirement as early as May 17, 2019.
`
`
`
`14
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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.17 Page 15 of 41
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`64. The applicants were confused as to who they could or could not include as owners
`
`or participants in the companies or consultants for their companies. This
`
`confusion and change created an advantage for out of state companies who were
`
`not forced to limit their owners and experience to residents of Utah, who by virtue
`
`of the law would necessarily have less experience in cultivating cannabis. This
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`disadvantage rendered the process anticompetitive and disadvantaged and
`
`discriminated against Utah residents.
`
`65. With an adequate amount of time to adapt its application to the Department’s
`
`change in this rule, JLPR could have also included experienced out of state parties
`
`in its application to meet, or more likely, exceed the experience of the out of state
`
`applicants.
`
`66. Of the 80+ applicants, roughly 73 had only in-state owners and roughly 8
`
`included out-of-state owners. Yet, of the 8 applicants awarded medical cannabis
`
`cultivation establishment permit, only 4 of the 73 (5%) in-state applicants
`
`received a license, while 4 of the 8 (50%) out-of-state applicants received a
`
`license.
`
`67. A bias toward out-of-state applicants is obvious on the face of the selection.
`
`68. Furthermore, the fact that the change allowing companies owned by out of state
`
`owners was not publicly announced until around July 11th—10 days after the
`
`applications were due—means that these out of state applicants must have been
`
`given some sort of advanced notice about the rule change. This is especially
`
`likely considering the speed with which many of the out of state applicants were
`
`able to compile applications and conduct the necessary background checks, etc. It
`
`
`
`15
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`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.18 Page 16 of 41
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`would be almost impossible—not to mention, pointless—to have completed all
`
`this work otherwise. This is rendered all the more likely, in light of the conflicts
`
`of interest between DAF evaluators and management, which will be discussed
`
`below.
`
`69. Successful applicant Standard Wellness of Ohio had already met with Deputy
`
`Commissioner Ericson and the Commissioners of Box Elder County to acquire
`
`land for cannabis cultivation before the announcement. Indeed, Standard
`
`purchased the land before the change to allow out of state applicants was even
`
`announced, which is further evidence that out of state companies had been “tipped
`
`off” about the change allowing out of state companies before it was made.
`
`70. The selection process, wherein six evaluators, were expected to review and
`
`analyze more than 80 applications, most around or in excess of 100 pages, within
`
`a two-week period, was rushed and incomplete. This resulted in the Evaluators
`
`being forced to use shortcut disqualifiers to quickly select the favored applicants.
`
`71. Furthermore, all of the evaluators were Department of Agriculture employees and
`
`hand-picked by the Department heads and there is no indication that the
`
`evaluation team was particularly qualified for the task.
`
`72. With this rushed two-week review of 80 complicated, lengthy applications, the
`
`selection process was almost guaranteed to be error filled. The application
`
`process was antithetical to the notion of vetting and selecting the most qualified
`
`applicants, rather than those with political connections. The rushed evaluation
`
`period meant that the applicants were not adequately and properly evaluated.
`
`
`
`16
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.19 Page 17 of 41
`
`73. These flaws also rendered the selection process anti-competitive. Because
`
`candidates were not given adequate time to present representative and complete
`
`applications and were not given the opportunity to adapt to the last-minute
`
`ownership change the competition was not fair or objective.
`
`74. The rushed process also led to several clear errors that can be seen in inconsistent
`
`scoring, unfairly weighted criteria, and disqualification minimums, including
`
`scoring practices that directly violated the governing statute. The Department of
`
`Agriculture did not follow the statutory procedure. Instead, they set minimum
`
`arbitrary scores which the applicants must achieve for sections relating to the
`
`business plan and operating plan. This is contrary to the statute.
`
`C. The DAF Failed to Correctly Apply the Scoring Criteria and Made Errors Made
`in the Evaluation Process.
`
`75. The operative statute provides that an applicant is “eligible for a license under this
`
`section if the applicant submits to the department” an application that includes the
`
`listed information and complies with the listed criteria, including submitting a
`
`business plan and operating plan that comply with requirements of Section 4-41a-
`
`204 and Section 4-41a-406.2 See Utah Code Ann. § 4-41a-201 (2)(b)(iii)
`
`(effective December 3, 2018 to September 22, 2019).
`
`76. In the event that there were more qualified applicants than the available permits,
`
`the statute provided that:
`
`
`2 As the Procurement Board noted, JLPR’s application was determined by the DAF Evaluation
`Committee to meet the mandatory requirements to move on to the technical criteria evaluation
`stage.
`
`
`
`17
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.20 Page 18 of 41
`
`
`
`
`
`(3) If there are more qualified applicants than the number of available licenses for
`cannabis cultivation facilities under Subsections (1) and (2), the department shall
`evaluate the applicants and award the limited number of licenses described in
`Subsections (1) and (2) to the applicants that best demonstrate:
`(a) experience with establishing and successfully operating a business that
`involves:
`
`(i) complying with a regulatory environment;
`
`
`(ii) tracking inventory; and
`
`
`(iii) training, evaluating, and monitoring employees;
`
`(b) an operating plan that will best ensure the safety and security of patrons and
`the community;
`(c) positive connections to the local community; and
`(d) the extent to which the applicant can reduce the cost to patients of cannabis in
`a medicinal dosage form or cannabis products in a medicinal dosage form.
`
`Utah Code Ann. § 4-41a-205 (West) (Effective December 3, 2018 to September 22,
`
`
`
`2019).
`
`77. The Department of Agriculture did not follow this procedure. Instead,
`
`they set minimum arbitrary scores which the applicants must achieve for
`
`sections relating to the business plan and operating plan. This is contrary
`
`to the statute, which required that only after applicants are deemed
`
`qualified would the department then evaluate which “applicants that best
`
`demonstrate… an operating plan that will best ensure the safety and
`
`security of patrons and the community.”
`
`78. The Procurement Board noted that JLPR’s application was determined by
`
`the DAF Evaluation Committee to meet the mandatory requirements to
`
`move on to the technical criteria evaluation stage. However, contrary to
`
`the statute, JLPR was still somehow disqualified under these criteria by
`
`being given a score below the minimum required 525 for Business Plan
`
`Questions 19-20.
`
`
`
`18
`
`

`

`Case 2:21-cv-00436-TS-DAO Document 2 Filed 07/19/21 PageID.21 Page 19 of 41
`
`79. Examining the DAF’s Award Justification Statement, there is no
`
`indication that the threshold scores were at all tied to whether or not the
`
`Business Plan or Operating Plan complied with Section 4-41a-204 and
`
`Section 4-41a-406. Instead, it was up to the individual evaluators to
`
`disqualify companies based on their subjective evaluation of which
`
`“applicants that best demonstrate… an operating plan that will best ensure
`
`the safety and security of patrons and the community.” This allowed
`
`evaluators to quickly disqualify otherwise qualified companies.
`
`80. Furthermore, the evaluators heavily weighted community involvement to
`
`the point of it practically being a disqualifying criterion, making the
`
`category tied for second place as the most heavily weighted factor.
`
`Indeed, from the scores themselves, this factor appears to be dispositive.
`
`The eight applicants selected had the eight highest scores on this
`
`category.3
`
`81. There is no clear reason for applicants to think this factor would be
`
`weighted so heavily. This allowed evaluators the ability to quickly
`
`disqualify otherwise qualified companies.
`
`82. The DAF’s counterintuitive and illegal scorin

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