HomeMy WebLinkAbout21CV-0734 - Writ Exhibits Volume 1 of 2pdfELECTRONICALLY
RECEIVED April 8,2022
4/1/2022 4:43 PM
TQQ'iggfiederman..—'April 11,2022
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IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
IN AND FOR THE SECOND APPELLATE DISTRICT
DIVISION 6
NHC SLO,LLC
Court of Appeal
Petitioner and Petitioner No.
versus
Superior Court
San Louis Obis o Superior Court No.21-CV—0734
Respon ent.
City of San Luis Obispo Real Party in
Interest
Exhibits to Petition for Writ of Mandamus/
Prohibition/Other Relief
File 1 of 2,Volumes 1 of 2,pp.1-243
Honorable Rita Federman,Judge
San Luis Obispo Superior Court
Department 2
John Armstrong,
Bar No.183912
Armstrong Law Group
23232 Peralta Drive,Suite 102
Laguna Hills,CA 92653
Tel.949—942—6069
Cel.949-390-4307
John @ArmstrongLawGrouDCo
John @ArmstrongLawGrouD
Attorney for Petitioner and
Petitioner,NHC SLO,LLC
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MASTER CHRONOLOGICAL INDEX
EXHIBIT
NO.
DESCRIPTION DATE VOLUME PAGE
NO.
1
Petition for Writ of
Mandamus (Petitioner)
12/23/2021 1
2
Ex Parte Application for
TRO/Specially Set Hearing on
Preliminary Injunction to
Enable NHC SLO, LLC to
Operate (Petitioner)
1-28-2022 1
3
Opposition to Ex Parte
Application (Respondent)
1-28-2022 1
4
Evidentiary Objections
Respondent)
1-28-2022 1
5
Requests for Judicial Notice
Respondent)
1-28-2022 1
6
Declaration of Attorney
Christine Dietrick
1-28-2022 1
7
Declaration of Attorney Daniel
Richards
1-28-2022 2
8
Declaration of Chad Pfarr
1-28-2022 2
9
Declaration Michael Codron
1-28-2022 2
10
Order Denying Ex Parte Relief
Based on Legal Finding City of
San Luis Obispo Authorized to
Revoke Issued License Under
Its City Municipal Code
2-1-2022 2
4
153
171
191
199
000002
236
247
255
267
310
ALPHABETICAL INDEX
EXHIBIT
NO.
DESCRIPTION DATE VOLUME PAGE
NO.
6
Declaration of Chad Pfarr
12/23/2021 2
7
Declaration of Attorney
Christine Dietrick
1-28-2022 2
8
Declaration of Daniel
Richards
1-28-2022 2
9
Declaration of Michael
Codron
1-28-2022 2
4
Evidentiary Objections
1-28-2022 1
2
Ex Parte Application
1-28-2022 1
3 Opposition to Ex Parte
Application
1-28-2022 1
10
Order Denying Ex Parte Relief
Based on Legal Finding City of
San Luis Obispo Authorized to
Revoke Issued License Under
Its City Municipal Code
2-1-2022 2
1
Petion for Writ of
Mandamus/Prohibitions
12-31-2021 1
9
Requests for Judicial Notice
1-28-2022 1
000003
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236
247
267
191
153
171
310
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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John Armstrong
Armstrong Law Group
23232 Peralta Drive
Suite 102
Laguna Hills, CA 92653
Tel. 949-942-6069
Cell. 949-390-4307
Attorneys for Petitioner/Plaintiff
NHC SLO, LLC
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN LUIS OBISPO
NHC SLO, LLC,
Petitioner and Plaintiff,
versus
CITY OF SAN LUIS OBISPO; CITY
COUNCIL OF AND FOR THE CITY
OF SAN LUIS OBISPO; AND DOES
1-10, INCLUSIVE,
Defendants and
Respondents.
Case No.:
VERIFIED PETITION FOR
WRIT OF MANDAMUS OR
PROHIBITION OR BOTH,
AND VERIFIED COMPLAINT
FOR INJUNCTIVE AND
DECLARATORY RELIEF
CCP, §§ 187, 1060, 1084-
1087, 1094.5, 1094.6, 1095,
1102-1105]
INTRODUCTION
1.Petitioner and Plaintiff NHC SLO, LLC (“Petitioner” or “NHC”) seeks
relief against Respondent and Defendant, the City of San Luis Obispo
Respondent” or “the City”), arising from the City’s unilateral
termination of NHC’s retail Cannabis Operator Permit,1 which the City
1 To lawfully operate a cannabis business, the City of San Luis Obispo first requires a “Cannabis
Operation Permit” from the City. To legally operate thereafter, such Permit holder must acquire a
ELECTRONICALLY
FILED
12/23/2021 3:03 PM
21CV-0734
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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terminated without a hearing, and before NHC was open to the public for
business.
2. Respondent/Defendant is the City of San Luis Obispo, an incorporated
City. And respondent/defendant the City of Council of and for the City of
San Luis Obispo are the duly elected officials in charge of making
executive and legislative decisions for Respondent/Defendant City.
3. Parties named fictitiously as Does 1-10 are parties who may be
responsible or liable for the claims in this Compliant and Petition but
whose names and capacities are presently unknown to Petitioner, who
will amend this Petition to name such fictitious parties by their true
names when known, as set out more fully below.
4. The City of San Luis Obispo (the “City”) issued a retail Cannabis
Operator Permit to NHC (the “Permit”) , as was confirmed in letters from
the City, true and correct copies of which are attached as Exhibits A and
B.
5. The State of California’s Bureau of Cannabis Control (now Department of
Cannabis Control) also conformed Respondent City’s issuance of the
Cannabis Operator Permit to Petitioner, in that under the California
State Cannabis Regulations, the State must confirm with the local
jurisdiction that a valid local cannabis permit/license exists before
issuance of the State Cannabis license, which State license Petitioner
obtained on or about June 25, 2021.
license from the State of California’s Department of Cannabis Control (formerly the Bureau of
Cannabis Control). Hence, when the word “permit” is used, reference is made to City’s Cannabis
Operator Permit, and “license” refers to the California State cannabis license. California case law
uses the words “permit” and “license” interchangeably as they both designate a governmental body’s
grant of permission to engage in a regulated form of business.
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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6. A true and correct copy of the California Department of Cannabis
Control’s request to the City to confirm Petitioner’s local cannabis permit
is attached and incorporated here as Exhibit C.
7. A true and correct copy of Petitioner’s State Cannabis License is attached
hereto as Exhibit D.
8. A condition precedent of Petitioner’s obtaining its California state
cannabis license was the State’s confirmation from the City of San Luis
Obispo that Petitioner had a valid, local, retail cannabis permit, and that
such permit was in good standing with the City. (See 16 Cal. Code Regs.,
5002(c)(28)[State must confirm with local jurisdiction validity of local
cannabis authorization before issuing State cannabis license].)
9. That the State of California issued Petitioner a State Cannabis License is
by itself presumptive evidence that the City granted Petitioner a
Cannabis Permit.
10. The issuance of an actual Permit is more than a tentative approval
of a “cannabis application,” which is what the City has argued to justify
its failure to comply with its own City Ordinance regulating the
revocation of issued Cannabis Permits, by using its Ordinance regulating
mere Cannabis Permit Applications to “terminate” Petitioner’s Cannabis
Permit with the City.
11. At all times relevant before the existing dispute, City officials
represented that Natural Healing Center had acquired a valid cannabis
retail permit from the City to both the State of California and to
Petitioner.
12. Petitioner is informed and believes that plaintiff/petitioner Natural
Healing Center’s landlord has spent approximately $4.1 million dollars
building out the retail cannabis facility at 2640 Broad Street, San Luis
Obispo, California (the “Premises”), and the building owner started
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building property to the City’s required specifications for its tenant,
Petitioner, which construction was an express obligation of the Landlord
under the terms of Petitioner’s lease.
13. On October 6, 2021, shortly before the final construction “punch
list” items were completed at the Premises, the City informed Natural
Healing Center that its retail cannabis license was being terminated
immediately and without a hearing, due to alleged "fraud in the
application process," despite no City Ordinance allowing for such
termination of an issued cannabis license.
14. This “termination letter” expressly acknowledges that the City
issued Petitioner a “Cannabis Operator Permit,” in that is begins by
informing Petitioner that its City Cannabis Operator Permit is
terminated.”
15. A true and correct copy of this letter is attached as Exhibit E (the
Termination Letter”) .
16. The Termination Letter’s stated grounds for terminating the Permit
were that Helios Dayspring, a former member of NHC 2[] had settled
various criminal charges that had recently been brought against him,
whereby his plea bargaining admitted to certain criminal conduct that
was not disclosed during NHC’s Cannabis Permit Application to the City
of San Luis Obispo.
17. Specifically, the City wrote:
2 Mr. Daysping had transferred his interest Valnette Garcia with the City’s written approval one-year
earlier, and so presently has no interest in the cannabis business or permit, other than as the
landlord/property owner, and neither the California State Cannabis Laws or Regulations nor the
City’s Ordinances have a requirement that that property owners cannot have a criminal record or
must do anything other than confirm their consent to allowing a cannabis business to operate on their
property.
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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Subject: Notice of Automatic Disqualification and
Termination of Permit: CANN-0070-2019
2640 Broad St., 93401): NHC SLO, LLC
Dear Ms. Garcia,
This letter is to inform you that NHC SLO, LLC (NHC) is
automatically disqualified from activating, obtaining or
holding a Commercial Cannabis Operator Permit (Operator
Permit) to conduct commercial cannabis activity located at
2640 Broad St. and the Operator Permit issued to NHC is
hereby immediately terminated, and/or shall not be
permitted to be activated, pursuant to San Luis Obispo
Municipal Code (SLOMC) Sections 9.10.070, Subsections C.4
and D, as well as the express terms of the Operator Permit
application submitted by NHC.
Please be advised that the business is not permitted
to operate in any form from the date of this notice.
This action is the result of NHC's submission of false or
misleading information in obtaining and maintaining the
Operator Permit, as set forth below, which results in
automatic disqualification from the City's permitting process
and precludes NHC from obtaining or maintaining an
Operator Permit to operate a cannabis business in the City.”
18. In response to this notice of termination, NHC provided
information to the City that its concerns regarding Mr. Dayspring were
irrelevant, reminding the City that Mr. Dayspring was no longer a
member of NHC, and, because the City had already issued NHC the
Permit (meaning that NHC’s cannabis permit application had already
ripened into a Permit), the City’s permit revocation procedures under the
applicable municipal code were required to be followed, as opposed to
the Municipal Code sections regulating cannabis applications, which
applications do not trigger vested rights.
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19. NHC’s correspondence further pointed out to the City that the
misrepresentations cited in the Termination Notice were inaccurate, as
stated by the City. A true and correct copy of NHC’s response is attached
hereto as Exhibit F.
20. At the time of the issuance of the Permit Mr. Dayspring was not a
member or owner of NHC , as his interests had previously been
transferred to Ms. Valnette Garcia, with the City’s written consent. Ms.
Garcia had no criminal past—nor were there any other circumstances
that would disqualify her or Petitioner NHC from operating a retail
operation under the Permit.
21. Since the issuance of the Permit NHC has spent $520,982 in
preparing to open the cannabis business.
22. Additionally, without the ability to open for business with the
Permit, NHC anticipates that it will remain liable under its current lease
with the landlord, which as a term of 5 years at an initial monthly rental
of $55,000 per month.
23. NHC has no available means of meeting this lease obligation
without being able to operate with the Permit and should NHC default on
that obligation NHC anticipates that it will be liable for the Landlord’s
cost and expense of improving the Premises, over of $4,000,000.00
which will result in the financial destruction of NHC.
24. A true and correct copy of the Petitioner’s Lease is attached as
Exhibit G.
25. In response to Petitioner’s Response to the City’s Termination
Letter of October 6, 2021, the City Manager sent Petitioner a
Memorandum of Decision” on October 19, 2021, “re-affirming” the
City’s Termination of Petitioner’s City Cannabis Permit.
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26. A true and correct copy of the City’s Memorandum of Decision is
attached as Exhibit H.
27. In the City’s Memorandum, it cited San Luis Obispo City Ordinance
9.10.070.C.4 as the grounds upon which the City was terminating
Petitioner’s Cannabis Permit.
28. This Ordinance, however, merely grants the City to disqualify a
person’s cannabis application: It does not apply to issued and cannabis
permits, which are expressly governed by a different City Ordinance.
29. Nonetheless, the City’s Memorandum of Decision, while expressly
recognizing that the City issued Petitioner Cannabis Permit [“On October
6, 2021, NHC was served with notice that actions of NHC SLO LLC
resulted in the automatic nullification of your Commercial Cannabis
Operator Permit (Operator Permit)”], cited San Luis Obispo Ordinance,
9.10.070.C.4 as the legal basis for the “automatic” “termination” of
Petitioner’s Cannabis Permit stating that “…pursuant to Section
9.10.070.C.4 of the Municipal Code, NHC’s permit remains automatically
disqualified and terminated”. (See attached Exhibit H.)
30. San Luis Obispo Ordinance § 9.10.070, subpart C provides in
pertinent part as follows:
31. “C. Grounds for Automatic Disqualification. In addition to
any other reason that may be established by the city council as a basis for
disqualification, an applicant shall be disqualified from applying for,
or obtaining, a commercial cannabis operator permit…..”
32. The above provision does not allow for termination of an issued
Cannabis Permit in the City’s sole discretion. Under the above referenced
City Ordinance, the City only has discretion to deny a cannabis
license applicant from applying or obtaining a permit. Once a cannabis
application has ripened into a cannabis permit, the Ordinance governing
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cannabis applications no longer applies to permit holders by its express
terms.
33. This result is further compelled in that the City has a different and
separate Ordinance regulating when and how a cannabis permit holder
may have its cannabis permit “revoked.” It is not identical to the
Ordinance given the City admittedly broader discretion to disqualify
cannabis permit applicants’ applications: As set out below, the
Ordinance governing Cannabis Permit holders restricts the City’s
discretion to Terminate Cannabis Permits by requiring a Permit holder to
operate unlawfully.
34. Since Petitioner was never given the chance to operate, it cannot
have its Permit “terminated” or “revoked” under the City’s own
Ordinance.
35. San Luis Obispo Ordinance, § 9.10.090 governs “Suspension or
Revocation” of City Cannabis Permits.
36. Section 9.10.090 of the San Luis Obispo Code provides as follows:
9.10.090 Suspension or revocation of permit.
In addition to any other penalty authorized by law, a
commercial cannabis operator permit may be suspended or
revoked if the city finds, after notice to the permittee and
opportunity to be heard, that the permittee or his or her
agents or employees have violated any condition of the
permit imposed pursuant to, or any provision of, this chapter.
A. Upon a finding by the city of a first permit violation within
any five-year period, the permit shall be suspended for thirty
days.
B. Upon a finding by the city of a second permit violation
within any five-year period, the permit shall be suspended for
ninety days.
C. Upon a finding by the city of a third permit violation
within any five-year period, the permit shall be
revoked. (Ord. 1647 § 4 (Exh. A (part)), 2018)”
r
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37. The City Ordinance governing the revocation of a cannabis
operator permit does not allow the City to terminate an issued Permit for
misstatements or misinformation in the cannabis license application
process.
38. Nor does the City Ordinance governing the suspension of
revocation of City Cannabis Permits allow “termination” of an issued
Cannabis Permit without fair notice and a fair hearing.
39. Rather, by its express terms, revocation of a Permit is limited
to active misconduct by the licensee in the operation of the permit. (See
S.L.O. City Ordinance 9.10.090, "Suspension of revocation of permit.")
40. In construing any statute, the first step is to construe the plain
language of the statute itself. (Hunt v. Superior Court (1999) 2 Cal.4th
984, 1000.)
41. “Where different words or phrases are used in the same connection
in different parts of a statute, it is presumed the Legislature intended a
different meaning.” (Briggs v. Eden Council for Hope & Opportunity
1999) 19 Cal.4th 1106, 1117.)
42. The City Ordinance regulating cannabis permit suspensions or
revocations requires both notice and a hearing before the City may
revoke” a permit and has a specific Ordinance that applies to revoke an
issued cannabis permit, which the City did not comply with.
43. Not only did the City fail to adhere to basic notions of fair play and
substantial justice by unilaterally revoking the subject permit without a
hearing, but it also failed to follow on its own published ordinances and
procedures in doing so.
44. The City may only revoke a cannabis operator permit for violation
of the cannabis permit—facts that most certainly cannot be established
for a cannabis business that has not yet opened its doors to the public,
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and which has never sold cannabis any cannabis products, which are
conditions precedent before the subject permit may be revoked.
45. The Due Process clause of the Fourteenth Amendment is
inextricably intertwined with land use law. Due process requires
reasonable notice and an opportunity to be heard by an impartial
decision maker for administrative proceedings that affect liberty or
property interests. (See Gov. Code section 65905(a); Fascination, Inc. v.
Hoover (1952), 39 Cal.2d 260, 271[“unless the statute expressly provides
to the contrary a license cannot be revoked without a hearing where the
statute contemplates a quasi-judicial determination by the administrative
agency that there be cause for the revocation…."; see Nightlife Partners
v. City of Beverly Hills (2003) 108 Cal.App.4th 81, 90: “Due process,
however, always requires a relatively level playing field, the so-called
constitutional floor’ of a ‘fair trial in a fair tribunal,’ in other words, a fair
hearing before a neutral or unbiased decision-maker.”)
46. While the City may claim that its general cannabis ordinance
prevents any expectation of a vested property right, the innumerable
requirements of the building where cannabis activities will occur that
must be met and built (and were met and built), the requirement to apply
for the State Cannabis license, and numerous other expenditures
incurred by NHC in order to obtain the City’s Cannabis Operator Permit
establish that the issuance of such permit, once an applicant gets through
the City’s arduous application process, is a vested property right that
cannot be unilaterally terminated without a hearing, without an
independent review of whether a fair permit revocation was conducted
as required by the City’s own ordinances.
47. "When a right 'has been legitimately acquired or is otherwise
vested,’ and when that right is of a fundamental nature from the
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standpoint of its economic aspect or its “effect ... in human terms and the
importance ... ... to the individual in the life situation," then a full and
independent judicial review of that decision is indicated because "[t]he
abrogation of the right is too important to the individual to relegate it to
exclusive administrative extinction."...’”" (301 Ocean Ave. Corp. v. Santa
Monica Rent Control Bd. (1991) 228 Cal. App. 3d 1548, 1556.)
48. Turning to the proper legal standard, in California, where a
business permit has been issued, and the applicant has shown that
substantial expenses were made on reliance on issuance of the permit as
here, the permit holder has a "vested" property right in the business
license, which means that courts give no deference to the City and
independently review the permit revocation to determine whether the
City violated the licensee's due process rights.
49. If so, the permit license is to be reinstated, and the City enjoined
from revoking the permit until such time as an active violation of the
permit has been committed, if ever.
50. “[A] land owner has a vested right to use his property in accordance
with the terms of his permit, and … a valid permit once issued cannot be
arbitrarily revoked.” (See Spindler Realty Corp. v. Monning, 243
Cal.App.2d 255, 267 (1966).
51. While Petitioner is not the “landowner,” Petitioner is the owner of a
leasehold estate in the Premises, a legally recognized property interest,
and so has the same right to utilize its leasehold in accordance with the
Permit terms.
52. In determining whether a vested right exists, the question is not
whether the permit has an expiration date, but “whether the affected
right is deemed to be of such significance that it should not be
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extinguished by a body lacking in judicial power.” (Malibu 21 Mountains
Recreation, Inc. v. County. of L.A., 67 Cal.App.4th 359, 367 (1998).)
53. Here, Petitioner has a vested right. When the City granted
Petitioner the Permit, Petitioner acquired the right to use its leasehold to
sell retail cannabis to consumers at the subject Premises, and Petitioner
detrimentally relied on that right by incurring substantial monetary
expenses, numerous hours to improve and maintain the properties to
comply with the City's demands, and now faces potential liability of
millions of dollars under the terms of that lease without the benefit of the
Permit.
54. Since Petitioner and the Premises were never open to the public,
Petitioner never committed infractions or nuisances, but spent extensive
time, resources, and efforts to comply with the City's and City's sub-
agencies demands, (fire, police, etc.), and to comply with the City’s final
construction punch list items. (See Avco Community. Devs., Inc., 17
Cal.3d at 791 (“if a property owner has performed substantial work and
incurred substantial liabilities in good faith reliance upon a permit issued
by the government, he acquires a vested right”); Clerici v. Dep’t of Motor
Vehicles, 224 Cal.App.3d 1016, 1023 (1990) (vested rights are defined
in terms of a contrast between a right possessed and one that is merely
sought”); see also Berlinghieri v. Dep’t of Motor Vehicles, 33 Cal.3d 392,
396 (1983) (“[b]usiness or professional licensing cases have
distinguished between the denial of an application for a license
nonvested right) and the suspension or revocation of an existing license
vested right)”).) Again, while Petitioner is not the “property owner”
Petitioner is the owner of a leasehold estate in the Premise and has the
same right to utilize its leasehold in accordance with the Permit terms.
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55. While admittedly the subject Permit as issued to Petitioner has to
be renewed, that a cannabis permit must be renewed annually does not
mean that the holder has no legally vested right in that permit. (See Goat
Hill Tavern v. City of Costa Mesa, 6 Cal.App.4th 1519, at 1529-30 (that a
permit had to be renewed did not change the fact that permit holder had
a vested right); Pardee Const. Co. v. Cal. Coastal Comm’n, 95 Cal.App.3d
471, 481-82 (1979) (developer still had a vested right even though it
allowed permit to lapse).)
56. Where, as here, the Petitioner has performed substantial work and
incurred significant expenses with respect to the leasehold and incurred
substantial liabilities in good faith reliance on the issuance of the Permit,
there is a vested right to operate the business consistent with the issued
permit. (See Avco Community Devs., Inc., 17 Cal.3d at 791 (where “a
property owner has performed substantial work and incurred substantial
liabilities in good faith reliance upon a permit issued by the government,
he acquires a vested right to complete construction in accordance with
the terms of the permit.”).)
57. Vested rights outlive the permit upon which they are based, due to
their vested nature. In other words, due process protects the Petitioner’s
interests, not their permits specifically. (See Traverso v. People Ex Rel
Dept. of Transp., 6 Cal.4th 1152, at 1162 (1993) (“Once a permit has
been issued, its continued possession becomes a significant factor in the
possessor]’s legitimate pursuit of a livelihood. The revocation of a
permit thus … cannot be accomplished without affording the procedural
due process required by the Constitution.”).)
58. According, Petitioner has the right to use the Premises to operate a
retail cannabis operation once all the final approvals were made to enable
the business to open to the public--the issuance of the cannabis retail
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business permit was therefore a vested right “of which [petitioner] may
not be deprived arbitrarily without injustice.” (See Doe v. Cal. Dep’t of
Justice, 173 Cal.App.4th 1095, 1106 (2009) (citation omitted).)
59. In Goat Hill Tavern, a business owner sued when the city denied
its application to renew its business permit. (See Goat Hill Tavern,
supra, 6 Cal.App.4th at 1522.) The city argued that the owner had no
vested right in the permit, given the fact that it had to be renewed. (Id. at
1526.) The court emphasized that the question could not be resolved on
the formalistic basis that the permit was subject to renewal. Instead, in
determining whether a person had a vested right, a court must examine
the degree to which the permit holder acted “in reliance on the permit,”
and the degree to which the permit holder’s “rights [are] impacted by
the government’s] denial of … [the] renewal application.” (Id. at 1527.)
60. In fact, the court found that the “[d]enial of an application to
renew a permit” actually “merits a heightened judicial review,” because
revocation of the right to renew “is far more serious than the interference
a property owner experiences when denied a conditional use permit in
the first instance.”(Id. at 1529-30.)
61. The same principle applies here. Petitioner and its landlord spent
money in reliance on the permit, undertaking expensive and extensive
renovations of its property to enable it to lawfully operate a
compliance cannabis retail business in the City, and so detrimentally
relied on the City’s Ordinances that its permit would not be arbitrarily
revoked without a hearing and without some problem in the
actual operation of the permit.
62. As in Goat Hill Tavern, therefore, the revocation of Petitioner's
permit is “more like the revocation of a conditional use permit than the
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mere issuance of one.” (See Goat Hill Tavern, supra, 24 Cal.App.4th at
1530.)
63. As in that case, Petitioner here has a vested property right in the
Cannabis Permit, even though the City had minor, construction-related
approvals for Petitioner to get before allowing Petitioner to open its
business doors to the public, and even though such permit must be
periodically renewed.
64. In Malibu Mountains Recreation, Inc. v. County. of L.A., 67
Cal.App.4th 359 (1998), the county granted a conditional use permit to a
business, which it later revoked. The county argued that the business
owner had no vested right, because it was not actually using the property
for the purposes approved in the permit, and because it could still seek a
new permit. (Id. at 369. )
65. The Malib Mountains appellate court, however, found that the
question of whether a person has a vested right is to be determined based
on “the nature of the right rather than the actual amount of harm.” (Id.)
66. In finding for the business owner and against the County, the court
held that the business had “acted in reliance on the [permit],” and
therefore had acquired a vested right. (Id. at 370.)
67. Here, an even stronger case to re-instate Petitioner’s Cannabis
Permit because Petitioner relied economically on the Permit,
and continually spent more and more money and made changes to the
construction plans at the City's demand after the City issued the cannabis
retail permit to Petitioner, before the City unilaterally revoked the permit
without a hearing or just cause.
68. Many other cases have also held that the vested rights
determination depends on an analysis of reliance interests and on the
weight of those interests—rather than a formalistic determination of
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whether the permit included a time limit. (See Bauer v. City of San
Diego, 75 Cal.App.4th 1281, 1296 (1999) (“the City could not properly
deem Bauer’s grandfathered rights automatically terminated without
providing Bauer with an opportunity to be heard.”); San Benito Foods v.
Veneman, 50 Cal.App.4th 1889, 1897 (1996) (because “the nature of the
right itself was crucial to plaintiff’s economic viability as a food 25
processor,” vested rights were at issue and government could not
terminate license).)
69. Whenever the government “deprive[s] an individual of an
important interest, it may not do so without affording the procedural due
process.” (See Traverso, supra, 6 Cal.4th at 1162.)
70. Petitioner spent considerable time and money completing the City's
cannabis permit application process and pursuing the preparation of the
Premises for operating under the Permit.
71. Admittedly, the City had much more discretion whether to issue
petitioner a cannabis retail permit during the application process.
72. However, the application process was completed long ago.
73. Thereafter, based on the City’s and its agents and employees’
innumerable representations that Petitioner would be allowed to operate
a retail cannabis dispensary under its City Cannabis Permit, Petitioner
spent more time and money to meet all the City's requirements to open
its retail cannabis dispensary in a timely manner, only in the final days
before the anticipated opening to have the City "terminate” petitioner's
Cannabis Permit without a hearing.
74. The City’s unilateral Termination was not based on its express
Ordinance governing suspension or termination of cannabis permits, but
on its Ordinance regulating mere cannabis applications.
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75. The obvious distinction with a difference is that a cannabis permit
application has no vested rights, and the expenses to apply for a license
are a mere fraction of the cost to get a building and business ready to
comply with applicable California State and Local regulations and
requirements that apply to active business.
76. None of the grounds that the City cited were lawful grounds to
Terminate Petitioner’s Cannabis Permit, which termination has forced
Petitioner to now face substantial economic liabilities that will likely
bankrupt Petitioner and its owner, based on their reliance on the City’s
representations that Petitioner would be allowed to operate a compliant,
retail cannabis dispensary at the premises, as long as Petitioner obeyed
all State and City Ordinances pertaining to operating Petitioner’s retail
cannabis business.
77. Petitioner has the same if not stronger vested rights to its Permit
like those recognized in the cases cited above, including, without
limitation, Goat Hill Tavern, Malibu Mountains, and Bauer.
78. Both the United States' Constitution and the California
Constitution prohibits the City from depriving Petitioner of its property
without due process of law and without at least giving them an
opportunity to be heard on the merits.
JURISDICTION AND VENUE
79. This Court has jurisdiction to resolve this dispute under Code of
Civil Procedure, §§ 187, 1060, 1085, 1094.5, and 1102-1105.
80. Venue is proper because the land at issue and all the acts
complained of occurred in San Luis Obispo County, California, and
defendant is the City of San Luis Obispo.
THE PARTIES
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81. Petitioner and Plaintiff NHC SLO, LLC is a registered limited
liability company with the California Secretary of State and is the
cannabis permit holder and the owner of the leasehold at the Premises
whose cannabis permit was unilaterally terminated by City of San Luis
Obispo without a hearing, or in compliance with City’s Ordinances,
including its Cannabis Ordinances, whose place of business is in the City
of San Luis Obispo.
82. Respondent and Defendant, the Charted City of San Luis Obispo,
which is City organized and existing under the laws of the State of
California that is responsible for enacting and enforcing City Ordinances
against persons using land within its City.
83. Respondent and Defendant, the City Council of and for the City of
San Luis Obispo is the duly elected legislative body politic of and for the
City of San Luis Obispo, which is responsible for regulating and
controlling all uses of land in the City of San Luis Obispo, and is charged
with complying with all applicable laws, and ensuring its inferior and
executive officers comply with all applicable laws.
84. Petitioners are ignorant of the true names and capacities of the
respondents/defendants named as DOES 1-10, inclusive, and so sues
these persons under such fictitious names, and will amend this Petition
and Complaint to allege the true names and capacities of such
respondents/defendants when so ascertained.
85. Petitioners are informed and believe and so allege that each party
designed as a DOE respondent/defendant is responsible in some manner
for the events alleged in this Petition/Complaint.
86. Petitioner is informed and believes, and on that basis alleges that
at all relevant times, Respondents and the DOE Respondents were and
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are the agents of each other, and authorized to do the acts complained of
herein, each of which was ratified by the others.
87. Petitioner further alleges that each Respondent was a substantial
factor in causing the acts or omissions to act complained of herein, and
the cause of the injuries complained of in this Petition/Complaint.
88. Petitioner further alleges that every Respondent aided and abetted
every other Respondent and knowingly conspired with every other
Respondent to commit the acts and omissions complained of in this
Petition/Complaint.
STATEMENT OF FACTS
89. Petitioner adopts Paragraphs 1-88 here.
90. On October 6, 2020, Respondents/Defendants City of San Luis
Obispo notified that Petitioner that it was immediately “terminating”
Petitioner’s Cannabis Permit but asked for information from Petitioner.
91. After providing all the information requested, on October 21, 2021,
Respondents then advised Petitioner that its cannabis permit was
immediately terminated and revoked for failing to comply with the City’s
Ordinance’s regulating cannabis permit applications.
92. Petitioner attempted to appeal both the October 6, 2021 and
October 21, determinations, but were told by the City that its automatic
termination of Petitioner’s Cannabis Application was “not appealable.”
93. Both the City’s October 6, 2021 and October 21, 2021 Termination
Notices (Exhibits E and H), warned Petitioner that the only review of
the City’s Termination of Petitioner’s Cannabis License would by a Writ
Petition filed with the Superior Court.
94. Because Petitioner is beneficially interested in the issuance of a writ
to reinstate its Cannabis Permit, and because Petitioner has no plain or
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speedy remedy in the ordinance course of the law, it now seeks writ relief
from this court.
95. In addition to the City Respondents failure to follow their own
Ordinance regarding the grounds and procedures for cannabis permit
revocation proceedings (as opposed to the materially different grounds
and discretion in terminating cannabis applications), the City’s conduct
in revoking Petitioner’s license was arbitrary and capricious, and lacking
in evidentiary support.
96. This conclusion is based on a plain reading of the City’s Cannabis
Ordinances, since any error in the application process does not apply to
persons or entities who the City has issued permits to, and who have
invested significant time and expense and the grant of an express permit
to conduct the business for which the permit was sought.
CAUSE OF ACTION FOR WRIT OF MANDATE, PROHIBITION,
AND DECLARATORY RELIEF
97. Petitioner adopts paragraphs 1-96, and all attached Exhibits here.
98. Petitioner has exhausted its administrative remedies.
99. Petitioner has no plain, speedy, or adequate remedy in the ordinary
course of the law, other than relief sought here.
100. Petitioner has a beneficial interest in the issuance of peremptory
writ of mandate and/or prohibition and/or for declaratory relief as
Petitioner has been and will continue to be harmed by Respondents if
Respondents continue to act as if Petitioner’s cannabis permit was
lawfully revoked and interfere with Petitioner’s right to conduct the
cannabis business for which it sought and obtained a permit to conduct.
101. A trial court may issue a writ of administrative mandate where an
agency has (1) acted in excess of its jurisdiction, (2) deprived the
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petitioner of a fair hearing, or (3) committed a prejudicial abuse of
discretion. (Code Civ. Proc., § 1094.5, subd. (b).)
102. "Abuse of discretion is established if the [agency] has not
proceeded in a manner required by law, the order or decision is not
supported by the findings, or the findings are not supported by the
evidence." (Clark v. City of Hermosa Beach (1996) 48 Cal.App. 4th 1152,
1169-1170.)
103. Here, there was no hearing: The Respondent City merely
summarily revoked Petitioner’s cannabis permit without a hearing.
104. “In conducting the hearing, the [City Council] ... has power to make
final adjudications of fact in connection with matters properly submitted
to it. The action of such an administrative board exercising adjudicatory
functions when based upon information of which the parties were not
apprised and which they had no opportunity to controvert amounts to a
denial of a hearing.... Administrative tribunals which are required to
make a determination after a hearing cannot act upon their own
information, and nothing can be considered as evidence that was not
introduced at a hearing of which the parties had notice or at which they
were present.... The fact that there may be substantial and properly
introduced evidence which supports the [Council's] ruling is
immaterial.... A contrary conclusion would be tantamount to requiring a
hearing in form but not in substance, for the right of a hearing before an
administrative tribunal would be meaningless if the tribunal were
permitted to base its determination upon information received without
the knowledge of the parties. A hearing requires that the party be
apprised of the evidence against him so that he may have an opportunity
to refute, test, and explain it, and the requirement of a hearing
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necessarily contemplates a decision in light of the evidence there
introduced...." (English v. City of Long Beach (1950) 35 Cal. 2d 155,
158-159.)
105. At all relevant times, Respondents have been able to perform their
duties and obligations as Petitioner requests, but Respondents have
failed and refused to so undertake their obligations to Petitioner.
106. Yet, the record shows that Petitioner had its issued Permit revoked
without prior notice or hearing, much less a hearing before an impartial
tribunal, as the exact same City persons acted as the legislature,
prosecutor, and judge in their decision to unilaterally terminate
Petitioner’s license.
107. The California Administrative Procedure Act is not applicable to
cities but is an appropriate reference point in determining whether a
hearing is fair:3
108. An actual and present controversy exists between the parties as to
the ability of Respondents to revoke Petitioner’s cannabis business
permit and to treat Petitioner as if lacks a lawful Cannabis Operator
Permit from the City of San Luis Obispo.
109. Accordingly, Petitioner seeks a judgment declaring that City must
forthwith re-instate Petitioner’s Cannabis Operator Permit with City, and
thereafter must cooperate with Petitioner to enable to Petitioner to open
its cannabis retail business at the Premise to the public, and to take no
3 “[T]o the extent citizens generally are entitled to due process in the form of a
fair trial before a fair tribunal, the provisions of the APA are helpful as
indicating what the Legislature believes are the elements of a fair and carefully
thought out system of procedure for use in administrative hearings.” (Nightlife
Partners, Ltd. v. City of Beverly Hills (2003) 108 Cal.App.4th 81, at 92; see
Govt. Code, § 11503 [hearing required and charges to be given before an issued
license may be suspended or revoked by a government agency].)
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action against Petitioner as if Petitioner had no valid cannabis business
permit with the City of San Luis Obispo.
REQUEST FOR RELIEF
110. WHEREFORE, Petitioner requests for relief as follows:
a. An alternate and peremptory writ of mandate and prohibition
commanding Respondents to immediately reinstate Petitioner’s
City Cannabis Operator Permit, to cooperate with Petitioner to
enable Petitioner to open its business at the Premises to the public,
and to take no further enforcement measures against Petitioner as
if Petitioner did not/does not have a validly issued Cannabis Permit
with the City of San Luis Obispo;
b. A stay, temporary restraining order, preliminary, and permanent
injunction prohibiting Respondents from taking any further action
against Petitioner based upon the circumstances set forth in the
Termination Notice;
c. A declaratory judgment declaring that the Respondents’
administrative enforcement action and resulting order revoking
Petitioner’s Cannabis Permit was and is unlawful and
unenforceable as against Petitioner;
d. For costs of suit;
e. For reasonable, statutory attorney’s fees under Code of Civil
Procedure, § 1021.5; and
f. For such other and further as the Court deems just and proper after
trial.
Dated: December 8, 2021
John Armstrong, as attorneys
for Petitioners/Plaintiffs
000026
1
2
VERIFICATION
3 I, Valnette Garcia, declare:
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I am the managing member and owner of Petitioner/PlaintiffNHC SLO,
5 LLC in this action, and am authorized to make this verification on its behalf.
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I have read the foregoing Verified Petition and Complaint for Writ of
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Mandate, Prohibition, Or Both, And For Declaratory Relief with its attached
8 Exhibit, and know its contents.
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I declare under penalty of perjury under the laws of California, the facts
in this Petition and Complaint are true, except as to matter of opinion or law,
which I believe to be true, and acknowledged that I signed this verification
electronically on December 22, 2021 in San Luis Obispo, California.
Valne
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EXHIBIT A
000028
October 22, 2019 Sent via Email
Mr. Helios Dayspring
Natural Healing Center - SLO
7510 Los Osos Valley Rd.
San Luis Obispo, CA 93405
helios@nhcgroverbeach.com
805) 888-7823
Subject: CANN-0070-2019 (2600/2640 Broad St., 93401)
Review of Commercial Cannabis Operator Permit - Natural Healing Center - SLO
Dear Mr. Dayspring:
In January 2019 the City of San Luis Obispo received your application for a Commercial Cannabis
Operator Permit. After careful review and consideration by the Cannabis Review Panel and City
Manager, including a background investigation process, Natural Healing Center has been granted a
Commercial Cannabis Operator Permit.
This Operator Permit is valid unless findings are made that the business is operating in a manner that
is inconsistent with Municipal Code Sections 9.10 and 17.86.080. You are responsible for
familiarizing yourself with all sections of the Municipal Code, however, we would like to draw your
attention to:
1. Municipal Code section 9.10.060: Natural Healing Center shall post a copy of this letter so
that it is readily visible to the public:
Dual Permits Posted and Visible.A copy of the commercial cannabis operator permit issued
by the city of San Luis Obispo pursuant to this chapter, together with a copy of the appropriate
state license(s) for the commercial cannabis activity being conducted, shall be posted and readily
visible to the public at all times, at each location where commercial cannabis activity occurs.”
2. Municipal Code Section 17.86.080: Each commercial cannabis operator permit must be
activated within twelve months of issuance. The permit is activated by the issuance of a use permit for
the commercial cannabis activity pursuant to Section 17.86.080, together with all other applicable city
permits and state licenses, and the commercial cannabis operator thereafter opening and continuously
operating the commercial cannabis activity.
3. In accordance with section 17.104.070 Expiration: If building permits are not issued for site
development authorized by a discretionary permit within one year of the date of approval or such
longer time as may be stipulated as a condition of approval, the permit shall expire with the building
permit application…”
Community Development
919 Palm Street, San Luis Obispo , CA 93401-3218
805 .781 . 7170
slocity.org
000029
Natural Healing Center - SLO
October 21, 2019
Page 2
This Operator Permit is valid subject to the following conditions.
Conditions:
1. The commercial cannabis operator shall require all employees successfully pass a
background check conducted by the San Luis Obispo Police Department Cannabis Regulations
Unit prior to any such employee working on any permitted premises or conducting any
commercial cannabis business by or on behalf of the permitted cannabis operator.
2. The commercial cannabis operator and its employees shall wear a Cannabis Identification
Card issued by the San Luis Obispo Police Department at chest length, and visible at all
times while conducting commercial cannabis business.The operator and its
employees shall acknowledge in writing that a Cannabis Identification Card is property of the
City of San Luis Obispo.
3. The commercial cannabis operator shall adhere to the Cannabis Security Plan
submitted to the City, as approved by the Chief of Police or designee and shall not alter or
modify any improvement or procedure required by said plan without the express written
authorization of the Police Chief, or designee.
If you have any questions, or if you need additional information, please contact me at (805) 781-7187,
or by email mcodron@slocity.org
Sincerely,
Michael Codron
Director of Community Development
City of San Luis Obispo
000030
EXHIBIT B
000031
November 13, 2020
Ms. Valnette Garcia
Natural Healing Center - SLO
7510 Los Osos Valley Rd.
San Luis Obispo, CA 93405
Sent via Email
Subject: CANN-0070-2019 (2600/2640 Broad St., 93401)
Review of Commercial Cannabis Operator Permit - Natural Healing Center - SLO
Dear Ms. Garcia:
In January 2019 the City of San Luis Obispo received your application for a Commercial Cannabis
Operator Permit. After careful review and consideration by the Cannabis Review Panel and City
Manager, including a background investigation process, Natural Healing Center was granted a
Commercial Cannabis Operator Permit on October 22, 2019.
This Operator Permit is valid unless findings are made that the business is operating in a manner that
is inconsistent with Municipal Code Sections 9.10 and 17.86.080. You are responsible for
familiarizing yourself with all sections of the Municipal Code, however, we would like to draw your
attention to:
1. Municipal Code section 9.10.060: Natural Healing Center shall post a copy of this letter so
that it is readily visible to the public:
Dual Permits Posted and Visible.A copy of the commercial cannabis operator permit issued
by the city of San Luis Obispo pursuant to this chapter, together with a copy of the appropriate
state license(s) for the commercial cannabis activity being conducted, shall be posted and readily
visible to the public at all times, at each location where commercial cannabis activity occurs.”
2. Municipal Code Section 17.86.080: Each commercial cannabis operator permit must be
activated within twelve months of issuance. The permit is activated by the issuance of a use permit for
the commercial cannabis activity pursuant to Section 17.86.080, together with all other applicable city
permits and state licenses, and the commercial cannabis operator thereafter opening and continuously
operating the commercial cannabis activity.
3. In accordance with section 17.104.070 Expiration: If building permits are not issued for site
development authorized by a discretionary permit within one year of the date of approval or such
longer time as may be stipulated as a condition of approval, the permit shall expire with the building
permit application…”
Community Development
919 Palm Street , San Luis Obispo , CA 93401-3218
805 .781 .7170
sloclty .org
000032
Natural Healing Center - SLO
November 3, 2020
Page 2
This Operator Permit is valid subject to the following conditions.
Conditions:
1.The commercial cannabis operator shall require all employees successfully pass a
background check conducted by the San Luis Obispo Police Department Cannabis Regulations
Unit prior to any such employee working on any permitted premises or conducting any
commercial cannabis business by or on behalf of the permitted cannabis operator.
2.The commercial cannabis operator and its employees shall wear a Cannabis Identification
Card issued by the San Luis Obispo Police Department at chest length, and visible at all
times while conducting commercial cannabis business.The operator and its
employees shall acknowledge in writing that a Cannabis Identification Card is property of the
City of San Luis Obispo.
3.The commercial cannabis operator shall adhere to the Cannabis Security Plan
submitted to the City, as approved by the Chief of Police or designee and shall not alter or
modify any improvement or procedure required by said plan without the express written
authorization of the Police Chief, or designee.
On October 29, 2020 the City of San Luis Obispo accepted and approved the transfer of ownership
from former principal Helios Dayspring to Valnette Garcia, another principal listed in the
application for Natural Healing Center. This Operator Permit is reissued to reflect the change of
ownership between Mr. Dayspring and Ms. Garcia. Ms. Garcia is now reflected as the primary
owner of Natural Healing Center.
The original date Natural Healing Center was issued an operator permit, October 22, 2019, remains
as their current Operator Permit issuance date.
If you have any questions, or if you need additional information, please contact me at (805) 781-7187,
or by email mcodron@slocity.org
Sincerely,
Michael Codron
Director of Community Development
City of San Luis Obispo
000033
EXHIBIT C
000034
From:Toomer, Jalisha@DCA Jalisha.Toomer@dca.ca.gov
Subject:RE: NHC SLO local authority authorization
Date:June 16, 2021 at 5:01 PM
To :Bailey, Georgina gbailey@slocity.org
Cc:Stacey Wooten stacey@calcoastcompliance.com
Hello Ms. Bailey,
I will send this information to the Bureau reps who send the local authority letters.
Thank you!
Jalisha Toomer
Licensing Analyst
www.bcc.ca.gov
https://cannabis.ca.gov
From: Bailey, Georgina <gbailey@slocity.org>
Sent: Wednesday, June 16, 2021 4:56 PM
To: Toomer, Jalisha@DCA <Jalisha.Toomer@dca.ca.gov>
Cc: Stacey Wooten <stacey@calcoastcompliance.com>
Subject: RE: NHC SLO local authority authorization
EXTERNAL]: gbailey@slocity.org
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Hello Ms. Toomer,
It is nice to make your acquaintance. Would you be able to resend what you need for
local authorization to mcodron@slocity.org and I will make sure our representative,
Michael Codron, the City’s Community Development Director reviews the information for
sign off.
If you need more information, please feel free to call me at 805-783-7875.
Best,
Georgina Bailey
From: Stacey Wooten <stacey@calcoastcompliance.com>
Sent: Wednesday, June 16, 2021 4:50 PM
To: Bailey, Georgina <gbailey@slocity.org>
Cc: Jalisha@DCA Toomer <jalisha.toomer@dca.ca.gov>
Subject: NHC SLO local authority authorization
000035
This message is from an External Source. Use caution when deciding to open attachments, click
links, or respond.
Georgina,
I have Ms. Toomer on this email, she’s the processing agent for the NHC SLO Bureau of
Cannabis Control license.
She hasn’t received local authorization from the City yet.
I’m hoping the two of you can connect to get this last item checked off.
Thank you,
Stacey Wooten
stacey@calcoastcompliance.com
www.calcoastcompliance.com
O: (805) 691-9095
C: (805) 708-0994
000036
EXHIBIT D
000037
Bureau of Cannabis Control
833)768-5880
Adult-Use and Medicinal - Retailer License
Provisional
Storefront
LICENSE NO:
C10-0000830-LIC
LEGAL BUSINESS NAME:
NHC SLO, LLC
PREMISES:
2640 BROAD ST
SN LUIS OBISP, CA 93401-5707
VALID:
6/25/2021
EXPIRES:
6/25/2022
Non-Transferable Prominently display this license
as required by Title 16 CCR 5039
BUREAU OF
CANNABIS
CONTROL
CALIFORNIA
000038
Scan to verify
this license.
Valid:
6/25/2021
Expires:
6/25/2022
License No:
C10-0000830-LIC
Legal Business Name:
NHC SLO,LLC
Premises Address:
2640 BROAD ST SN LUIS OBISP,CA
934015707
1.Use your smartphone camera to scan the QR code for licensing information.
2.If your camera doesn’t have scanning functionality,you can look up a location at
CApotcheck.com using license number C10-0000830-LIC.
000039
EXHIBIT E
000040
City Administration
990 Palm Street. San LUIS Obispo CA 93401-3249
805 781 71 ),t
October 6, 2021
Ms. Valnette Garcia,
Chief Executive Officer, NHC SLO, LLC
2640 Broad St
San Luis Obispo, CA 93405
val@nhcdispensari es. com
Sent via US Mail and Email
Ms. Valnette Garcia,
Chief Executive Officer, NHC SLO, LLC
998 Huston Street
Grover Beach, CA 93433
Subject: Notice of Automatic Disqualification and Termination of Permit: CANN-0070-2019
2640 Broad St., 93401): NHC SLO, LLC
Dear Ms. Garcia,
This letter is to inf01m you that NHC SLO, LLC (NHC) is automatically disqualified from
activating, obtaining or holding a Commercial Cannabis Operator Permit (Operator Permit) to
conduct commercial cannabis activity located at 2640 Broad St. and the Operator Permit issued to
NHC is hereby immediately terminated, and/or shall not be permitted to be activated, pursuant to
San Luis Obispo Municipal Code (SLOMC) Sections 9.10.070, Subsections C.4 and D, as well as
the e xpress terms of the Operator Permit application submitted by NHC.
Please be advised that the business is not permitted to operate in any form from the date of
this notice.
This action is the result of NHC~s submission of false or misleading information in obtaining and
maintaining the Operator Permit, as set forth below, which results in automatic disqualification
from the City's permitting process and precludes NHC from obtaining or maintaining an Operator
Permit to operate a cannabis business in the City.
By their own terms, neither the SLOMC nor the terms of the application submitted by NHC, allow
appeals of automatic disqualifying events (versus suspensions or revocations for infractions
involving an active permit) because such events undermine the integrity of the C ity's process and
constitute irreparable violations, which act as an absolute bar to obtaining or holding a permit in the
City.
Notwithstanding that there is no formal appeal process because automatic disqualification is self-
executing and ministerial in natme, you may address your responses to this notice and action to
the City Manager, in writing, and you may request an in-person meeting to occur no later
than end of business on October 15, 2021 if you believe the City's regulatory or factual
determinations are in error. Your failure to provide a response and/or present a legal or factual
basis for any claim of error will constitute a waiver of any objections to this action. Purs uant to
SLOMC Section 9.10. l 00 A, absent your presentation of information that the City Manager
concludes warrants reconsideration, this shall be the fina l action of the C ity and not appealable.
Your subseq uent recourse wou ld be to pursue a writ action in Superior Court.
000041
Because of the public nature of the criminal plea and related bases of the action herein , and the clear
public interest in transparency related to the criminal misconduct of Mr. Dayspring in public
processes, the City considers this notice and any subsequent responses you may provide to be public
records subject to disclosure under the California Public Records Act. Similarly, please be advised
that any subsequent in-person meeting requested with the City will be recorded and those
recordings or transcripts thereof will similarly be considered disclosable public records, subject to
possible redaction to protect otl1erwise ex.empt protected personal information (e.g ., social security
numbers , banking information, or personal financial information) not related to Mr. Dayspring 's
admitted criminal misconduct.
ReguJatory Basis For Action:
Section 9.10.070 of the San Luis Obispo Municipal Code provides:
A]n applicant shall be disqualified from applying for, or obtaining , a commercial cannabis
operator permit if .... The applicant made one or more false or misleading statements or
omissions in the appJication process. (SLOMC § 9.10.070 C.4)
Duration and A ctivation of Permit. [ ... J Each commercial cannabis operator permit must
be activated within twelve months of issuance. 1
The pennit is activ ated by the issuanc o f a use permit for the commerc ial
cannabi. activity pursuant to Section !17. _Q _ g, together with all other applicable ity
permits and state licenses , and the commercial cannabis operator thereafter opening and
continz~ously operating the commercial cannabis activity. Failure to timely activate the
permit shall be deemed abandonment of the permit and the permit shall automatically
lapse. (SLOMC § 9.10.070(D) [ emphasis added].)
Section 9.10.170 of the San Luis Obispo Municipal Code provides:
The commercial cannabis business shall operate all times in compliance with all applicable
state and local laws, regulations, and any specific , additional operating procedures or
requirements which may be imposed as conditions of approval of the commercial cannabis
operator permit or use permit or state license(s). Nothing in this chapter shall be constrned
as authorizing any action which violates state law or local law with respect to the operation
of a commercial cannabis activity.
Section 9.10.200 of the San Luis Obispo Municipal Code provides:
1 In this case, COVlD related extensions on the activation date were granted by the City Council for
all affected cannabis businesses, resulting in a mandatory activation date for NHC of October 22 ,
2021. NHC 's permit was not activated prior to the date of this notice
000042
The responsible person and any entity to whom a commercia l cannabis operator permit is
issued pursuant to this chapter shall be responsible for all viol ations of the regulations and
ordinances of the City of San Luis Obispo committed by the permittee or any employee or
agent of the permittee, which violations occur in or about the premises of the commercial
cannabis business, even if the responsible person is not present. Violations by an employee
or agent may result in the tenuination or nonrenewal of the permit by the city. [ emphasis
added]
As it relates to NHC's land u se permit, the City's Municipal Code provides as follows :
No Vested Right to Operate. No person shall have any entitlement or vested right to operate
a cannabis business solely by virtue of licens ing under these (land use) regulations.
Operation of cannabis activity(ies) requfres both the approva l of a conditional use permit
and a commercial cannabis operator permit under Chapter [j]1 which is a revocable
pri vilege and not a right in the city. The applicant bears the burden of proving that all
qualifications for licensure have been satisfied and continuously mciintained prior to
conducting a cannabis business at an otherwise allowed location within the city. (SLOMC §
17.86.080 E.2 [c larification and emphasis added])
Finally, and for absolute clarity, NHC's application for an Operator Permit, signed by Mr.
Dayspring on behalf of N HC and its owners and managers (inc luding Ms. Garcia), expressly
reiterates the intent of the SLOMC and provides:
Applicants providing false or misleading information in the permitting process will result
in rejection of the application and/or nullification or revocation of any issued permit."
Factual Basis For Action :
On January 29, 20 19, NHC submi tted to the City a s igned application for a retai l storefront from
NHC SLO, LLC acknowledging the application requirements and attesting to the truthfulness of the
information provided. At the time the City received the application, the owners listed on the
application were Helios Dayspring, Nicholas A n dre, Valnette Garcia, Kenneth Johnson and Antonio
Contreras.
At the time NHC's application was submitted, Mr. Dayspring was a primary principal and the
identified responsible party for NHC and the current controlling owner, Ms. Garcia, was identified
as an owner, general manager and integral part of the application team. Nick Andre was identified
as an additional responsible party for the business.
On March 28, 2019, NHC was issued a Contin gent Operator Permit. The issuance of a final
Operator Permit waa contingent on all applicants' truthful participation in and successful
comp letion of a comprehensive background check conducted by th e San Lui s Obispo Police
Department.
Between the period of March 28, 2019 and October 22, 20 19, all of the owners listed on NHC's
application were processed through the City's background check process. All the owners s igned
000043
documentation and stated during the background interviews that all of the information provided to
the City was true and correct, and acknowledged that any information omitted, not disclosed, or
found to be false , or misleading would subject the entfre application to disqualification for an
Operator Permit.
On October 22, 2019, the City issued N HC an Operator Permit based on applicants' representations
and the successful completion of the City's application and background check process. The owners
listed on the application were successfully passed through the City's background check based on the
information provided in the City's background check questionnaire, interviews with the San Luis
Obispo Police Department, and all other information supplied during the initial application,
backgroW1d check, and final permitting review process.
On July 27, 2021 , Mr. Dayspring entered into a plea agreement with the United States Attorney 's
Office for the Central District of California ("USAO") in which Mr. Dayspring admits:
1. He wilJfully made and subscribed to a materially false U.S Individual Income Tax Return, Form
10401 for the calendar year 2018.
2. He underreported his individual taxable income by approximately $9 million, collectively for
the tax years 2014, 2015, 2016, 2017, and 2018 , resul ting in a tax loss of in the agreed amount
of $3 ,438 ,793.
3. He committed Federal Program Bribery with CoW1ty Supervisor l , an elected position within
the County of San Luis Obispo. Beginning in or about the Fall of 2016 and continuing until on
or about November 2019, defendant paid County Supervisor 1 approximately $29,000 in
unreported cash payments. Defendant provided County Supervisor 1 this stream of benefits with
the W1derstanding that as opportunities arose, County Supervisor 1 would do, amongst other
things, the following: (a) vote on cannabis legislation benefiting his Cannabis Farms, (b)
advocacy of other public officials in support of cannabis legislation benefiting his Cannabis
Fanns, and (c) disclose non~public County information concerning cannabis-related issues, all
ofwhich benefitted Helios Dayspring and Helios Dayspring's businesses.
4. He conducted an attempted bribery scheme for Mayor 1 in September 2017. Mayor l was the
City's mayor, an elected position within the City. As the City's mayor, Mayor 1 voted on
matters appearing before the City Council including matters that affected the Grover Beach
Dispensary.
Within the City's background questionnaire submitted under penalty of perjury, returned dated
April 9 , 2019 , and during the background interview on May 14, 2019, Mr. Dayspring was asked
directly the following questions:
I. Have you ever spent money for illegal purposes (for example: illegal drugs, prostitution, to
purchase fraudulent documents, etc.)?
2. Have you ever committed any of the following crimes? ... P. Forgery (falsifying any type of
document, check certificate, license, currency, etc.)?
3. Have you been involved in any matter regarding a tax lien, tax fraud, or evasion of taxes?
Each of the applicant team members, including Mr. Dayspring, also;
000044
1. Signed an acknowledgement that all information provided in the background questionnaire and
background interv iew is true and correct.
2. Signed an acknowledgement in the b ackground questionnaire, during the background interview,
that any infonnation omitted, not disclosed, or found to be false is subject to disqualification for
a Cannabis Operator Permit.
fn responses to the relevant questions outlined above, neither Mr. Dayspring nor any other member
of the applicant team, disclosed Mr. Dayspring's past and/or ongoing involvement in the bribery or
attempted bribery of elected officials, and/or his willfully false tax filing, and/or his illegally
underreported taxable income and/or other fraudulent tax activities.
The dates of involvement in the bribery or attempted bribery of elected officials, and/or the willful
false tax filing, and/or illegally underreported taxable income, as admitted in tbe plea agreement,
confirms that Mr. Dayspring provided the City with false or misleading information in NHC 's
application, background and/or permitting review p roc ess.
Conclusions:
Mr. Dayspring has admitted in a federal plea agreement to criminal misconduct, which, in effect,
also admits that he provided "false or misleading information in the permitting process". If Mr.
Dayspring had not omitted or actively concealed his criminal misconduct from the City in the
application, background and pennitting process, NHC's application for an Operator Permit would
have been rejected and/or NHC would have been automatically disqualified fro m obtaining an
Operator Pennit. NHC 's concealment of misconduct and provision of false or misleading
information results in the automatic disqualification, termination, nullification and/or revocation of
the Operator Permit issued.
Following issuance of the Operator Permit to N HC , and with full knowledge of his own criminal
misconduct and concealment, Mr. Dayspring maintained express ownership, ongoing control of,
and operational affi liation with NHC and its permitted premises at all relevant times and in all
relevant activities on site and with the City at least until October 30, 2020. Specifically, from the
date of application, and throughout the background and final operator and land use permitting
processes, and continuing through the building permit and ongoing inspection processes, Mr.
Oayspting knew that he had engaged in criminal tax and bribery activities and, therefore, was not
qualified to hold, and had wrongfully obtained, an operator permit based on false and misleading
information. With that knowledge, he continued to direct and control the operations and premises
associated with the cannabis business, which also con stitutes a clear violation of the SLOMC
sections referenced above. The illegal conduct in which he admittedly e ngaged related to his
cannabis businesses is also dis qualifying under state law.
The C ity verifi ed that the transfer of ownership complied with the SLOMC, as between Mr.
Dayspring and Ms. Garcia, which took place October 30, 2020. However, Mr. Dayspring's
admitted ongoing pattern and practice of criminal misconduct in the City Operator Permit
application, background and pennitting process, as well as on the premises of and in association
with the cannabis business and activities is imputed to the business entity as provided in Section
9.10.200. Thus, automatic disqualification, termination , nullification and/or revocation of the
000045
cannabis business permit issued to NHC is compelled by the SLOMC, irrespective of Mr.
Dayspring's continuing involvement.
The truthful and successful completion of the City's application process, including the application,
background check, and permitting review process by all the interest holders li sted on NHC's
application was a substantial bas is for NHC being granted an Operator Permit. All responsible
parties, employees and agents were, at alJ times after issuance of permits, re quired to be and remain
in compliance with the laws governing cannabis business operations, purs uant to Section 9 .10.170.
Pursuant to Section 9.10.200, all responsible parties, and the N HC entity, of which Ms. Garcia is
now the controlling owner, and at all t imes has held a manage ment and equity interest, are
responsible for Mr. Oayspr ing's violations while holding an operator permit and operating the
cannabis business in the City. Likewise, several other members of the original applicant t eam
remain involved with the NHC entity to which Mr. Dayspring's actions are imputed by the
SLOMC.
Finally, as of the date of this notice, NHC's permit has not been activated as required by SLOMC,
Section 9.10.070 and, because the stated misconduct automatically disqualifies NHC from obtaining
and lawfully maintaining an Operator Permit, the SLOMC does not permit NHC to activate and
obtain the benefits of the cu1Tently issued permit or to initiate retail cannabis business operations in
the City.
Because Mr. Dayspring's admitted criminal misconduct at the time o f application and continuing
thereafter, and because the current owners/interest holders of the business and the business entity
itself are respon sible under City regulation for Mr. Dayspring 's violations, NHC's Operator Permit
is hereby determined to be n ullified, revoked and/or terminated, as provided by the provisions set
forth above.
000046
EXHIBIT F
000047
LAW OFFICES
R E E T Z, F O X & B A R T I , E T T LLJ>
Via E-Mail & U.S. Mail
Greg Hermann
Deputy City Manager
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 9340 I
2.hermmm(@,slocity.o r g
116 EAST SOLA STREET
SANTA BARBARA. CAUfiORNlA 93J0l
TELEPHONE: (805) 965-0523 FAX: (805) 564-8675
E-MAIL: frontdesk@reetzfo1<.com
1MPROPER ATTEMPTED DISQUALIFICATION AND TERMINATION OF PERMIT:
CANN-0070-2019 (2640 BROAD ST., 93401): NHC SLO LLC
Dear Mr . Hermann,
My office has been retained for the purpose of litigating NHC SLO LLC's ("N HC" or
lhe "Company") claims against the City of San Luis Obispo ("City") and potentially certain
individuals regarding the City's unj\ateral and wrongful efforts to terminate NHC's above-
referenced permit. On October 6, 2021, our client received a letter ("your Letter") penned by
you on behalf of the City wrongfully purp01ting to terminate NHC' s Commercial Cannabis
Operator Permit On October 7, 2021, I sent you a demand fo r preservation of evidence.
YOUT Letter pm-porting to terminate my client's Commercial Cannabis Operator
Pe11nit for retail sales at 2640 Broad Street miss tates both the applicable ordinances and
regulations, as well as the facts. As invited by yow-Letter we request an in-person m eeting
on October 15, 202 1, at 9:00 a.m., with participation by Attorney Mark Beck via Zoom or
speaker phone, to discuss these issues and hopefully resolve this dispute short of filing a
formal complaint.
Before addressing specifics, I would like to draw yom attention to the City of Grover
Beach's handling of the identical issues facing San Luis Obispo. Grover Beach conducted an
investigation which affirmed that Mr. Dayspring is no longeI an owner and has n o further
affiliation with the business. Grover Beach examined Natw·al Healing Center's operations
since 2018 and found the business operated wjtb.in the stringent ordinances and regulations
establi shed by the City and St.ale. The City th en closed its investigation.
In response to your Letter:
l. The Cjty 's stated factual detem,inations aJe enoneous. You have attempted to
disqualify and terminate NH C's permit based on the alleged conduct of one of its fonner
members, who was neither th e legal "applicant" nor the permit holder.
000048
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page2
As the application form makes clear, NHC was the applicant, and is the operator
permit holder. This limited liability company is an independent legal entity recognized by
the State of California with registration number 201834710403. No individual was the
applicant, nor did any individual ever hold the relevant permit.
NHC is not Helios Dayspring. Mr. Dayspring is merely a former member of NHC
who no longer holds any position with the Company or any ownership interest in it. While
your Letter asserts that Mr. Dayspring's circumstances violate the "intent" of the applicable
City ordinances, you have failed to set forth any facts which suggest that there has been an
actual violation of any of the express provisions of such ordinances. There are millions of
dollars at stake here, and reading between the lines to establish some subjective measure of
intent and punish my client for the sins of a former owner flies in the face of the City's actual
ordinances, as well as the legal rights and reasonable expectations of my client.
While Mr. Dayspring was a principal of NHC when the original application was filed,
the City is well aware that he left the Company and transferred all of his membership interest
approximately one year ago, in October 2020. He has not held any position with the
Company since that time.
2. Mr. Dayspring is not a principal in NHC and has no ownership or position in
it. The City cannot now enforce claims based on Mr. Dayspring because City accepted his
withdrawal as principal from the Company and its operator permit. On October 29, 2020, the
City Attorney's Office on behalf of the City acknowledged the transfer of all of Mr.
Dayspring's former membership interest in NHC to Valnette Garcia had been accomplished
in conformance with the City's Municipal Code, thereby accepting that Mr. Dayspring's
interest in NHC had been unconditionally transferred to Ms. Garcia. By this action, the City
amended the operator permit to withdraw Mr. Dayspring as a principal and approved Ms.
Garcia as the new owner and manager. Ms. Garcia had already been approved as an owner
and principal as a result of the vetting which followed the original application ofNHC for an
operator permit.
By approving Mr. Dayspring's transfer to Ms. Garcia, combined with the City's
continued encouragement to proceed with the timely construction at 2640 Broad Street and
commencement of retail operations, the City effectively waived any claims based on Mr.
Dayspring's conduct and/or is estopped to now deny NHC's ability to open and operate the
commercial cannabis storefront.
3. Based on my review, City's understanding and recitation of the facts is
inaccurate. 1
1 We believe this may be a conscious effort by individuals within the City because this is not the frrst
occurrence of egregious error. Previously, a report made regarding Mr. Dayspring's interview with the San
Luis Obispo Police Department included references to a number of"statements" which were utilized as a basis
000049
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page 3
a) In particular, we note that the materials submitted by Mr. Dayspring on March 29,
2019, to the Police Department contained extensive disclosures about his past conduct.
Contrary to the claims within your Letter, Mr. Dayspring answered "yes" to the disclosure
questions 1, 2, 3, 4, 5B, and 6.
Question 1: Have you ever spent money for illegal purposes (for example:
illegal drugs, prostitution, to purchase fraudulent documents etc.)?
Question 2: Have you ever used/possessed illegal drugs?
Question 3: Have you ever been placed on court probation (either formal or
iriformal)?
Question 4: Have the police ever been called to your home for any reason?
Question 5B: Have you ever committed any of the following crimes -Battery
use offorce or violence upon another)?
Question 6: Are you involved in any criminal or civil litigation or any
litigation involvingfraud at this time?
The City was aware that Mr. Dayspring admitted that he spent money for illegal
purposes, used or possessed illegal drugs, had been placed on court probation, that police had
been called to his home, that he had in the past committed a battery, and that he was then
involved in litigation involving fraud. All of those written disclosures were made prior to the
City issuing NHC the permit, and none of those disclosures now support your efforts to
terminate the permit.
b) According to your Letter, the City is asserting that Mr. Dayspring committed
forgery. Forgery is defined in California by Penal Code Section 470 which states: "Every
person who, with the intent to defraud, knowing that he or she has no authority to do so,
signs the name of another person or of a fictitious person to any of a specific list of items is
guilty of forgery." There is no allegation or indication made by you that Mr. Dayspring
signed any names other than his own to any document.
c) With respect to your suggestion that false statements were made as to whether
Mr. Dayspring had been involved in "any matter" regarding a tax lien, tax fraud or evasion of
taxes, City does not refer to any evidence that any such "matter" involving Mr. Dayspring
existed at the time of the relevant disclosures. Mr. Dayspring's plea agreement indicates that
for denying the issuance of the pennit. A subsequent review of the relevant recording served to establish that
such "statements" were never made by Mr. Dayspring.
000050
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page4
he underreported his personal taxes for several years but the investigation "matter" did not
occur until long after submission of his background questionnaire in April 2019. Only
following the issuance of the FBI's search warrants did Mr. Dayspring's taxes become a
matter".
The relevant question was "Have you been involved in any matter regarding a tax
lien, tax fraud or evasion of taxes?" As of April, 2019, there were no matters regarding tax
liens, tax fraud, or evasion that existed.
4. Prior to the receipt of your Letter, NHC was set to begin business operations
at 2640 Broad Street on October 22, 2021, in compliance with the operator permit that the
City improperly seeks to terminate. To the extent your actions have or may delay the actual
opening and commencement of retail sales, it will be solely the City who will be responsible
for that delay, and under no circumstances will any court allow the City to take advantage of
its own misdeeds.
If the Company's ability to open is delayed, it will be because of City's efforts to
unilaterally terminate NHC's permit, which is clearly based upon the City's improper
understanding, and/or interpretation of its own ordinances, as applied to a number of
falsehoods you have raised related to NHC's permit and operations. Obviously, the operator
permit is extremely valuable, and NHC is not about to accept efforts to unilaterally destroy
its investment of time and resources without just cause or right.
NHC Grover Beach's dispensary operations are now the single largest sales tax
revenue generator in the City of Grover Beach, actually exceeding the sales tax revenue
generated by the local Vons Grocery Store. NHC's operations at 2640 Broad Street will no
doubt generate significant sales tax revenue for the City as well. Valnette Garcia has seven
and one-half years' experience in the industry and five years cannabis compliance experience
in San Luis Obispo County. She has done an extraordinarily good job managing the
operations in Grover Beach and Morro Bay, and we expect even greater success here in San
Luis Obispo.
Following Ms. Garcia's acquisition of Mr. Dayspring's interest in NHC, and
notwithstanding the rumors and reports of Mr. Dayspring's personal activities, the City
continued to encourage NHC to meet their commercial cannabis store opening deadline for
approximately one additional year (from October 2020 to October 2021).
Your most recent last minute and unsupported effort to now prevent NHC from
opening and operating the cannabis retail store will significantly and negatively impact
NHC's financial condition. If we are forced to litigate, NHC will hold the City responsible
for NHC's resultant damages. Based on Ms. Garcia's established operations in Grover
Beach and Morro Bay, these losses are not speculative and the damages to the Company are
both readily ascertainable and significant.
000051
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page 5
5. The City has violated its own regulatory scheme. Section 9.10.170 of the
Municipal Code provides that the commercial cannabis business shall operate at all times in
compliance with all applicable state law and local laws, regulations, etc. Once again, this
ordinance is not directed at individuals but rather at the Company. The Company, as the
Operator Permit holder, remains in compliance with Section 9.10.170.
states:
Responsible parties are subject to Section 9.10.200 of the Municipal Code which
the responsible person and any entity to whom a commercial cannabis
operator permit is issued pursuant to this chapter shall be responsible for all
violations of the regulations and ordinances of the City of San Luis Obispo
committed by the permittee or any employee or agent ofthe permitee, which
violations occurred in or about the premises of the cannabis business, even
if the responsible person is not present." [emphasis added.]
This section expressly establishes the City's oversight of the entity, its employees and agents.
By its express provisions, the City's oversight is limited to "violations [which] occur in or
about the premises of the commercial cannabis business." NHC has not commenced
operation yet and it is accordingly impossible for violations to have occurred in or about the
premises of the commercial cannabis business. The Company is entitled to the proper
application of the law.
6. Finally, notwithstanding your recitation that the termination determination is
not appealable, the applicable legal process for challenging the City's conduct with regard to
the Company's commercial cannabis operator permit is set forth in Section 9.10.1 00B of the
Municipal Code.
A decision of the city to reject an application for renewal, or to revoke or
suspend a commercial cannabis operator permit, is appealable to the city
manager. An appeal must be filed with the city manager within 10 working
days after the renewal has been denied, suspended or revoked. A decision
ofthe city manager or his or her designee is appealable to the City Council
in accordance with Chapter 1.20." [emphasis added.]
Section 9.10.090 of the Municipal Code articulates the penalty for violation of this
Chapter. "Upon a finding by the City of a first permit violation within any five-year period,
the permit shall be suspended for 3 0 days."
By this letter we hereby request an appeal to the City Manager. This letter shall also
constitute a notice of appeal to the City Council pursuant to Section 1.20.030 of the
Municipal Code to the extent required.
000052
EXHIBIT G
000054
COMMERCIAL LEASE AGREEMENT
THE PARTIES. This Lease Agreement agreed on 05012021 is between:
The Lessor is l individual(s) known as SLO Broad Holdings a CA Limited Liability Company with
a in.ailing address of998 Huston Street, Grover Beach, California, 9343434, hereinafter referred to
as the "Lessor."
AND
The Lessee is 1 i.ndividual(s) known as NHC SLO LLC with a mailing address of the Property's
Address, hereinafter referred to as the "Lessee."
The Lessor and Lessee hereby agree as follows:
DESCRIPTION OF LEASED PREMISES. The Lessor agrees to lease to the Lessee the
following described warehouse space located at 2600 and 2640 Broad St., San Luis Obispo,
California, 93401.
Tax Map: Book A Lot: 1-5 Block: 5
Hereinafter referred to as the "Premises".
USE OF LEASED PREMISES. The Lessor is leasing the Premises to the Lessee and the Lessee is
hereby agreeing to lease the Premises for any legal use allowed in accordance with local, State, and
Federal laws.
Any change in use 01· purpose of the Premises other than as described above shall be upon prior
written consent of Lessor only otheiwise the Lessee will be considered in default of this Lease
Agreement.
EXCLUSIVE USE. The Lessee shall not hold exclusive rights on the Premises. The Lessor shall
hold the rights to lease other areas of the Property to any same or like use as the Lessee.
TERM OF LEASE. This Lease shall commence on 05012021 and expire at Midnight on
05012026 (''Initial Tenn").
RENT AMOUNT. Payment shall be made by the Lessee to the Lessor in the amount of$55,000.00
per month for the Initial Term of this Lease Agreement hereinafter referred to as the "Rent."
RENT PAYMENT. The Rent shall be paid under the following instructions: 000055
Rent shall be paid by the Lessee to the Lessor on a per month basis with payment due no later than
the 3rd of every month.
RETURNED CHECKS (NSF). If the Lessee attempts to pay Rent with a check that is not deemed
valid by a financial institution due to non-sufficient funds, or any other reason for it to be returned,
the Lessee will be subject to a fee of$55.00 in addition to any late fee.
LATE FEE. The Lessor shall not charge a late payment fee if the rent is not paid on time by the
Lessee.
OPTION TO RENEW. The Lessee shall have the right to renew this Agreement under the
following conditions:
Lessee shall have the right to renew this Lease Agreement, along with any renewal period, and be
required to exercise such renewal period(s) by giving written notice via certified mail to the Lessor
no less than 60 days prior to the expiration of the Initial Term or any subsequent renewal period.
The Lessee shall have a total of 3 renewal periods which will continue to abide by the same
covenants, conditions and provisions as provided in this Lease Agreement as described:
RENEW AL PERIODS
The first (1st) renewal period shall begin on 05012026 and end on 05012027 with the Rent to be
paid per month with the Rent for the renewal period to be negotiated in good faith upon the Lessee
providing notice of their intention to renew.
The second (2nd) renewal period shall begin on 05/01/2027 and end on 05/01/2028 with the rent to
be paid per month with the Rent for the renewal period to be negotiated in good faith upon the
Lessee providing notice of their intention to renew.
The third (3rd) renewal period shall begin on 05/01/2028 and end on 05/01/2029 with the rent to be
paid per month with the Rent for the renewal period to be negotiated in good faith upon the Lessee
providing notice of their intention to renew.
EXPENSES. In accordance with a Modified Gross Lease the responsibility of the expenses shall be
attributed to the following:
It is the intention of the Parties, and they hereby agree, that in addition to the Rent, the Lessee shall
be obligated to pay the following expenses to the Lessor on a per month basis:
COMMON AREA MAINTENANCE (CAM's) -The Lessee shall be responsible for all costs
related to the parking area maintenance, snow removal, landscaping, trash removal, janitorial
services, and security systems on the Premises.
000056
REAL ESTATE TAXES -Lessor shall pay, during the term of this Lease, the real estate taxes and
special taxes and assessments ( collectively, the "taxes") attributable to the premises and accruing
during such term.
INSURANCE -The Lessor shall provide and maintain any personal liability or property damage
insurance with no payment obligations by the Lessee.
UTILITIES. The Lessee shall be responsible for any and all utilities to the Premises in relation to
the total property area.
SECURITY DEPOSIT. A security deposit in the amount of $110,000.00 shall be due and payable
in advance upon the signing of this Lease and which amount shall be held in escrow by the Lessor
in a separate, interest-bearing savings account as security for the faithful performance of the terms
and conditions of the Lease.
Provided the Premises is returned to the Lessor in the same condition as the Start the Initial Term,
less any normal "wear and tear", the Lessee shall have their Security Deposit amount of
110,000.00 returned within 30 days.
FURNISHINGS. The Lessor will not provide any furnishings to the Lessee under this Lease.
PARKING. Parking shall be provided to the Lessee in a dedicated manner provided on the
Premises. There is no set number of parking spaces provided to the Lessee.
There shall be no fee charged to the Lessee for the use of the Parking Space(s).
LEASEHOLD IMPROVEMENTS. Construction and installations of all building, retail fixture and
interior improvements to the Premises are to be performed by Lessor prior to Lessee's occupancy.
Lessor will complete construction of these improvements to the Premises in accordance with
Lessee's plans approved by the City of San Luis Obispo and according to the Lessee's Commercial
Cannabis Operator Permit. This Premise will be delivered to Lessee "Built-to-Suit" and "Turn
Key". Lessee shall provide Lessor with any and all change orders as required by the City of San
Luis Obispo in order to complete the improvements as required in this section. The Lessee agrees
that no leasehold improvements, alterations or changes of any nature, ( except for those listed on any
attached addenda) shall be made to the leasehold Premises or the exterior of the building without
first obtaining the consent of the Lessor in writing, which consent shall not be unreasonably
withheld, and thereafter, any and all leasehold improvements made to the Premises which become
affixed or attached to the leasehold Premises shall remain the property of the Lessor at the
expiration or termination of this Lease Agreement. Furthermore, any leasehold improvementsshall be
made only in accordance with applicable federal, state, or local codes, ordinances, or regulations,
having due regard for the type of construction of the building housing the subject leasehold
Premises. If the Lessee makes any improvements to the Premises the Lessee shall be responsible for
payment.
Nothing in the Lease shall be construed to authorize the Lessee or any other person acting for the
Lessee to encumber the rents of the Premises or the interest of the Lessee in the Premises or any
person under and through whom the Lessee has acquired its interest in the Premises with a
mechanic's lien or any other type of encumbrance. Under no circumstance shall the Lessee be
construed to be the agent, employee, or representative of Lessor. In the event a lien is placed against
the Premises, through actions of the Lessee, Lessee will promptly pay the same or bond against the
same and take steps immediately to have such lien removed. If the Lessee fails to have the Lien
removed, the Lessor shall take steps to remove the lien and the Lessee shall pay Lessor for all
expenses related to the Lien and removal thereof and shall be in default of this Lease.
000057
LICENSES AND J>ERMITS. A copy of any and all local, state, or federal pennits acquired by the
Lessee which are required for the use of the Premises shall be kept on-site at all times and shall be
readily accessible and produced to the Lessor and/or their agents or any local, slate, or federal
officials upon demand.
MAINTENANCE. The Lessee shall be responsible for all repairs and maintenance on the Premises
due to nonnaJ wear and tear on the Premises. Particularly items which need immediate attention
including but not limited to, the replacement of light bulbs, nonnal repair and cleaning of windows,
cleaning of bathrooms, clearing of toilets, etc. The Lessee .shall properly maintain the premises in a
good, safe, and clean condition and shall properly and promptly remove all rubbish and hazardous
wastes and see that the same are properly disposed of according to all local, state, or fedcrnl laws,
rules regulations or ordinances.
In the event the Premises is damaged as a result of any neglect or negligence of Lessee, his
employees, agents, business invitees, or any i1ldependent contractors serving the Lessee or in any
way as a result of Lessee's use ru1d occupancy of the premises, then the Les1,ee shall be primadly
responsible for seeing that the proper claims are placed with the Lessee's in8Urance company, or the
damaging party's insurance company, and shall furthermore be responsible for seeing that the
building is safeguarded with respect to said damage and that all proper notices with respect to said
damage, are made in a timely fashion, including notice to the Lessor, and the party or parties
causi1lg said damage.
INSURANCE. In the event Lessee shall fail to obtain insurance required hereunder and fails to
maintain the same in force continuously during the term, Lessor may, but shall not be required to,
obtain tl1e same and charge the Lessee for same as additional rent. Furthermore, Lessee agrees not
to keep upon the premises any articles or goods which may be prohibited by the standard form of
fire insurance policy, and in the event the insurance rntes applicable to fire and extended coverage
covering the premises shall be increased by reason of any use of the premises made by Lessee, then
Lessee shall pay to Lessor, upon demancl, such increase in insurance premium as shall be caused by
said use or Lessee's proportionate share of any such increase.
SUBLET/ASSIGNMENT. The Lessee may not transfer or assign this Lease, or any right or
interest hereunder or sublet said leased premises or any part thereof.
DAMAGE TO LEASED PREMISES, In the event the building housing the leased premises shall
be destroyed or damaged as a result of any fire or other casualty which is not the result of the
intentional acts or neglect of Lessee and which precludes or adversely affects the Lessee's
occupancy of the leased premises, then in every such cause, the rent herein set forth shall be abated
or adjusted according to the extent to which the Premises have been rendered unfit for use and
occupation by the Lessee and until the demised premises have been put in a condition at the
expense of the Lessor, at least to the extent of the value and as nearly as possible to the condition of
the premises existing immediately prior to such damage. It is understood, however, in the event of
total or substantial dest11Jction to the Premis.es that in no event shall the Lessor's obligation to
restore, replace or rebuild exceed an amount equal to the sum of the insurance proceeds available
for reconstruction with respect to said damage.
The Lessee shall, during the term of this Lease, and in the renewal thereof, at its sole expense, keep
the interior of the leased premises in as good a condition and repair as it is at the date of this Leuse,
reasonable wear and use excepted, This obligation would include the obligation to replace any plate
glass damaged as a result of the neglect or acts of Lessee or her guests or invitees. Furlhem10re, the
Lessee shall not knowingly commit nor pennit to be committed any act or thing contrary to the
rules and regulations prescribed from time to time by any federal, state, or local authorities and
shall expressly not be allowed to keep or maintain any hazardous waste materials or contaminates
on the premises. Lessee shall also be responsible for the cost, if any, which would be incurred to
bring her contemplated operation and business activity into compliance with any law or regulation
ofa federal, state, or local authority.
000058
HAZARDOUS MATERIALS LAWS. Shall mean any and all federal, state, or local laws,
ordinances, rules, decrees, orders, regulations, or court decisions relating to hazardous substances,
hazardous materials, hazardous waste, toxic substances, environmental conditions on, under, or
about the Premises, the Building, or the Property, or soil and ground water conditions, including,
but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CER.CLA), the Resource Conservation and Recovery Act (RCRA), the Hazardous Materials
Transportation Act, any other law or legal requirement concerning hazardous or toxic substances,
and any amendments to the foregoing.
LESSEE'S DEFAULT AND POSSESSION. In the event that the Lessee shall fail to pay said rent
and expenses as set forth herein, or any part thereof, when the same are due and payable, or shall
otherwise be in default of any other terms of said Le.ase for a period of more than 15 days, after
receiving 11otice of said default, then the parties hereto expressly agree and covenant that the Lessor
may declare the Lease terminated and may immediately re-enter said premises and take possession
of the same together with any of Lessee's personal property, equipment or fixtures left on the
premises which items may be held by the Lessor as security for the Lessee's eventual payment
and/or satisfaction of rental defaults or other defaults of Lessee under the Lease. It is further agreed,
that if the Lessee is in default, that the Lessor shall be entitled to lake any and all action to protect
its interest in the personal property and equipment, to prevent the unauthorized removal of said
property or equipment which threatened action would be deemed to constitute irreparable harm and
iajury to the Lessor in violation of its security interest in said items of personal property.
Furthenuore, in the event of default, the Lessor may expressly undertake all reasonable preparations
and eff011s to release the Premises including, but not limited to, the removal of all inventory,
equipment or leasehold improvements of the Lessee's, at the Lessee's expense, without the need to
first procure an order of any court to do so, although obligated in the interim lo undertake
reasonable steps and procedures to safeguard the value of Lessee's prope11y, including the storage
of the same, under reasonable terms and conditions at Lessee's expense, and, in addition, it is
understood that the Lessor may sue the Lessee for any damages or past rents due and owing and
may undertake all and additional legal remedies then available.
LESSOR'S DEFAULT. TI1e Lessee may send written notice to the Lessor slating duties or
obligations that have not been fulfilled under the full performance of this Lease Agreement. If said
duties or obligations have not been cured within 30 days from receiving such notice, unless the
Lessor needs to more time to cure or remedy such issue in accordance with standard industry
protocol, then the Lessor shall be in default of this Lease Agreement.
If the Lessor should be in default the Lessee shall have the option to terminate this Lease
Agreement and be held hannless against any of its terms or obligations.
DISPUTES. If any dispute should arise in relation to this Lease Agreement the Lessor and Lessee
shall first negotiate amongst themselves in "good faith." Afterwards, if the dispute is not resolved
then the Lessor and Lessee shall seek mediation in accordance with the laws in the State of
California. If the Lessor and Lessee fail to resolve the dispute through mediation, then the
American Arbitration Association shall be used in accordance with their rules. Lessor and Lessee
agree to the binding effect of any ruling or judgment made by the American Arbitration
Association.
INDEMNIFICATION. The Lessee hereby covenants and agrees to indemnify, defend, and hold
the Lessor harmless from any and all claims or liabilities which may arise from any cause
whatsoever as a result of Lessee's use and occupancy of the premises, and forther shall indemnify
the Lessor for any losses which the Lessor may suffer in connection with the Lessee's use and
occupancy or care, custody, and control of the premises. The Lessee also hereby covenants and
agrees to indemnify and hold harmless the Lessor from any and all claims or liabilities which may
arise from any latent defects in the subject premises that the Lessor is not aware of at the signing of
the lease or at any time during the lease tenn.
BANKRUPTCY -INSOLVENCY. The Lessee agrees that in the event nil or a substantial portion
of the Lessee's assets are placed in the hands of a receiver or a Trustee, and such status continues 000059
for a period of 30 days, or should the Lessee make an assignment for the benefit of creditors or be
adjudicated bankrupt, pr should the Lessee institute any proceedings under the bankruptcy act or
any amendment thereto, then such Lease or interest in and to the leased premises shall not become
an asset in any such proceedings and, in such event, and in addition to any and all other remedies of
the Lessor hereunder or by law provided, it shall be lawful for the Lessor to declare the tem1 hereof
ended and to re-enter the leased land and take possession thereof and all improvements thereon and
to remove all persons therefrom and the Lessee shall have no further claim thereon.
SUBORDINATION AND A1TORNMENT. Upon request of the Lessor, Lessee will subordinate
its rights hereunder to the lien of any mortgage now or hereafter in force against the property or any
portion thereof, and to all advances made or hereafter to be made upon the security thereof, and to
any groond or underlying lease of the property provided, however, that in.such case the holder of
such mortgage, or the Lessor under such Lease shall agree that this Lease shall not be divested or in
any way affected by foreclosure, or other default proceedings under said mortgage, obligation
secured thereby, or Lease, so long as the Lessee shall not be in default under the terms of this
Lease. Lessee agrees that this Lease shall remain in foll force and effect notwithstanding any such
default proceedings under said mortgage or obligation secured thereby.
Lessee shall, in the event of the sale or assignment of Lessor's interest in the building ofwhich the
Premises form a part, or in the event of any proceedings brought for the foreclosure of, or in the
event of exercise of the power of sale under any mortgage made by Lessor covering the Premises,
atfom to the purchaser and recognize such purchaser as Lessor tinder this Lease.
USAGE BY LESSEE. Lessee shall comply with all rules, regulations, and laws of any
governmental authority with respect to use and occupancy. Lessee shall not conduct or pem1it to be
conducted upon the premises any business or permit any act which is contrary to or in violation of
any State of California law, rules or regulations and requirements that may be imposed by any Stale
of California authority or any insurance company with which the premises is insured, nor will the
Lessee allow the premises to be used in any way which will invalidate or be in conflict with any
insurance policies applicable to the building. In no event shall explosives or extra hazardous
materials be taken onto or retained on the premises. Furthennore, Lessee shall not install or use any
equipment that will cause undue interference with the peaceable and quiet enjoyment of the
premises by other Lessees of the building.
SIGNAGE. Lessee shall not place on any exterior door, wall, or window of the premises any sign
or advertising matter without Lessor's prior written consent and the approval of the local
municipality. Thereafter, Lessee agrees to maintain such sign or advertising matter as first approved
by Lessor in good condition and repair. Furthermore, Lessee shall conform to any unifonn
reasonable sign plan or policy that the Lessor may introduce with respect to the building. Upon
vacating the premises, Lessee agrees to remove all signs and to repair all damages caused or
resulting from such removal.
PETS. No pets shall be allowed on the premises without the prior written permission of Lessor
unless said pet is required for reasons of disability under the Americans with Disability Act.
CONDITION OF PREMISES/INSPECTION IlY LESSEE. The Lessee acknowledges they have
bad the opportunity to inspect the Premises and acknowledges with its signature on this Lease that
the Premises are i11 good condition and comply in all respects with the requirements of this Lease,
The Lessor makes no representation or warranty with respect lo the condition of the premises or its
fitness or availability for any particular use, and the Lessor shall not be liable for any latent or
patent defect therein. The Lessee represents that Lessee has inspected the premises and is leasing
and will take possession of the premises with all current fixtures present in their "as is" condition as
of the date hereof.
AMERICANS WITH DISABILITY ACT. Per 42 U.S. Code§ 12183 if the Lessee is using the
Premises as a public accommodation (e.g., restaurants, shopping centers, office buildings) or there
are more than 15 employees the Premises must provide accommodations and access to persons with
disabilities that is equal or similar to that available to the general public. Owners, operators, lessors, 000060
and lessees of commercial properties are all responsible for ADA compliance. If the Premises is nol
in compliance with the Americans with Disability Act any modifications or construction will be the
responsibility of the Lessor.
RIGHT OF ENTRY. It is agreed and understood that the Lessor and its agents shall have the
complete and unencumbered right of entry to the Premises at any time or times for purposes of
inspecting or showing the Premises and for the purpose of making any necessary repairs to the
building or equipment as may be required of the Lessor under the terms of this Lease orris may be
deemed necessary with respect to the inspection, maintenance, or repair of the building. In
accordance with Stale and local laws, the Lessor shall have the right to enter the Premises without
the consent of the Lessee in the event of an emergency.
ESTOPPEL CERTIFICATE, Lessee at any time and from time to time, upon at least ten (10)
days prior notice by Lessor, shall execute, acknowledge and deliver lo Lessor, and/or to any other
person, firm or corporation specified by Lessor, a statement certifying that the Lease is unmodified
and in full force and effect, or if the Lease has been modified, then that the same is in full force and
effect except as modified and stating the modifications, stating the dales to which the fixed rent and
additional rent have been paid, and stating whether or not there exists any default by Lessor und.er
this Lease and, if so, specifying each such default.
HOLDOVER PERIOD. Should the Lessee remain in possession of the Premises after the
cancellation, expiration, or sooner termination of the Lease, or any renewal thereof, without the
execution of a new Lease or addendum, such holding over in the absence of a written agreement the
Lessor sha!J This cla\1se is Not Applicable to this Agreement.
WAIVER. Waiver by Lessor of a default under this Lease shall not constitute a waiver of a
subsequent default of any nature.
GOVERNING LAW. This Lease shall be governed by the laws of the Stale of California.
NOTICES. Notices shall be addressed to the following:
Lessor: SLO Broad Holdings a CA Limited Liability Company
2600 and 2640 Broad St., San Luis Obispo, California, 93401
Lessee: NHC SLO LLC
998 Hudson Street, Grover Beach, California, 93433
ADDITIONAL TERMS AND CONDITIONS, Rent will not accrue until residency is given.
AMENDMENT(S). No amemlmenl of this Lease shall he effective unless reduced lo writing and
subscribed by the parties with all the formality of the original.
SEVERAUILITY. If any term or provision of this Lease Agreement is illegal,Jnvalid, or
unenforceable, such term shall be limited to the extent necessary to make it legal and enforceable,
and, if necessary, severed from this Lease. All other terms and provisions of this Lease Agreement
shall remain in full force and effect.
000061
EXHIBIT H
000063
October 19, 2021
Sent via US Mail and Email
Ms. Valnette Garcia,
Chief Executive Officer, NHC SLO, LLC
2640 Broad St
San Luis Obispo, CA 93405
val@nhcdispensaries.com
Ms. Valnette Garcia,
Chief Executive Officer, NHC SLO, LLC
998 Huston Street
Grover Beach, CA 93433
Subject: Memorandum of Decision: Disqualification and Termination of Permit: CANN-
0070-2019 (2640 Broad St., 93401): NHC SLO, LLC
Dear Ms. Garcia,
On October 6, 2021, NHC was served with notice that actions of NHC SLO LLC resulted in the
automatic nullification of your Commercial Cannabis Operator Permit (Operator Permit). A
meeting was held on October 15, 2021 to allow NHC SLO LLC and its representatives to provide
information to inform the nullification of the Operator Permit.
This letter is to notify you that after carefully evaluating information that the decision to
automictically disqualify NHC SLO, LLC (NHC) from activating, obtaining or holding an
Operator Permit to conduct commercial cannabis activity located at 2640 Broad St is unchanged.
Attachment A to this letter provides information and the rationale for the unchanged decision.
Sincerely yours,
Derek Johnson
City Manager
ENC: Attachment A-Memorandum of Decision
City Administration
990 Pa lm Street, San Luis Obispo, CA 93401-3249
805,781.7114
sloclty.org
000064
ATTACHMENT A
I. INTRODUCTION
When NHC SLO LLC (“NHC”) applied for a commercial cannabis operator permit in the City of
San Luis Obispo (“City”) in 2019, Helios Dayspring was the Chief Executive Officer, super-
majority owner (88%), sole manager, and primary principle of NHC. Mr. Dayspring signed the
application submitted by NHC. NHC’s merits-based application repeatedly emphasized the
experience, expertise, and history of regulatory and tax compliance of Mr. Dayspring as a reason
why the City should choose NHC to receive one of the limited number of commercial cannabis
permits available. Mr. Dayspring and Mr. Nick Andre were also designated as Responsible Parties
in the application.
Prior to, and apparently continuing through, the submission of this application and the permitting
process, Mr. Dayspring engaged in an undisclosed and shocking course of fraudulent and criminal
conduct – specifically, conduct involving the operation of Mr. Dayspring’s cannabis enterprises.
First, Mr. Dayspring committed federal program bribery, in violation of 18 U.S.C. § 666(a)(2).
This is a federal felony with a maximum sentence of 10 years in prison. Mr. Dayspring committed
this felony by bribing an elected County Supervisor repeatedly from 2016 to 2019 with both
unreported cash payments and cannabis. In exchange for these bribes, the County Supervisor
agreed to (1) vote on cannabis legislation favoring Mr. Dayspring’s cannabis businesses, (2)
attempt to convince other supervisors to vote in favor of legislation benefitting Mr. Dayspring’s
cannabis businesses, (3) extend an abeyance on enforcement actions against Mr. Dayspring’s
cannabis businesses, and (4) provide Mr. Dayspring non-public information involving cannabis
related issues.
In 2017, Mr. Dayspring unsuccessfully attempted to bribe the mayor of another City on the Central
Coast. Mr. Dayspring offered a bribe of $100,000 in an effort to ensure Mr. Dayspring received
permits to operate two dispensaries in Grover Beach.
From 2014 to 2018, Mr. Dayspring fraudulently1 underreported his taxable income by
approximately $9,000,000, resulting in a tax loss to the United States Government of $3,438,793.
For at least the calendar year 2018, Mr. Dayspring willfully, knowingly and intentionally
submitted a false tax return that was signed under penalty of perjury – in other words, Mr.
Dayspring committed perjury.
Mr. Dayspring’s plea agreement, in which he admitted to all of this conduct, is attached hereto as
Exhibit 1.
1 Mr. Dayspring admitted that he was liable for fraud underpayment penalty pursuant to 26 U.S.C. § 6663.
City Administration
990 Pa lm Street, San Luis Obispo, CA 93401-3249
805,781.7114
sloclty.org
000065
Despite an obligation to disclose all of the above, Mr. Dayspring failed to disclose any of this
fraudulent and criminal activity to the City in connection with Mr. Dayspring’s submission of
NHC’s application or the subsequent extensive background check process.
A. Notice of Automatic Disqualification
Because of the failure to disclose discussed above, and under the terms of the San Luis Obispo
Municipal Code, the City provided notice to NHC on October 6, 2021, that NHC’s Commercial
Cannabis Permit was automatically disqualified.
That notification is attached hereto as Exhibit 2 and is incorporated by reference as though fully
set forth herein.
B. Meeting With City Manager
As permitted by the Notice of Automatic Disqualification, representatives of NHC submitted a
substantive written response to the City’s Notice on October 14, 2021 and, on October 15, 2021,
representatives of NHC met with representatives of the City. NHC was represented by its counsel
Randall Fox of Reetz, Gox & Bartless, LLP and Mark Beck of Mark Beck Law, and current CEO
and majority owner of NHC Valnette Garcia.
The meeting was attended by City Attorney Christine Dietrick, Derek Johnson, City Manager and
outside counsel Jeffrey Dunn and Daniel Richards of Best Best & Krieger, LLP. As NHC was
advised prior to the meeting, the meeting was recorded in its entirety, a copy of the recording was
immediately made available to NHC’s legal counsel following the meeting, and the City has
requested a transcript of the meeting be produced from that recording. Those documents are public
records.
The purpose of the meeting was to provide NHC the opportunity to address and present any
additional information it wished to provide relevant to the application process, Mr.
Dayspring’s actions, and the findings and conclu sions made in the Notice of Automatic
Disqualification.
The meeting also provided a n opportunity for Ms. Dietrick, Mr. Dunn, Mr. Richa rds, and me
to ask for further clarification regarding the role and activities of Mr . Dayspring as the primary
representative of NHC and the NHC applicant team during the timeframe during which the
City was considering NHC’s application for a Cannabis Operator Permit.
The gravamen of NHC’s arguments were that (1) Mr. Dayspring no longer has any affiliation with
NHC, (2) Mr. Dayspring and NHC in fact made no false or misleading statements or omissions in
connection with NHC’s Application, and (3) that the City is estopped, subject to waiver, or
City Administration
990 Pa lm Street, San Luis Obispo, CA 93401-3249
805,781.7114
sloclty.org
000066
otherwise legally prohibited from taking action against NHC because it accepted as compliant with
the Municipal Code Mr. Dayspring’s transfer of his equity interest in NHC to Valnette Garcia
before Mr. Dayspring pled guilty to a number of federal felonies involving cannabis business
activities. Additional arguments were made in NHC’s written correspondence dated October 14,
2021, which is attached hereto as Exhibit 3.
This decision has carefully considered the information and argument provided by NHC and have
reviewed additional information and documents available to the City, and now make the following
findings and conclusions.
II. ANALYSIS AND FINDINGS
The relevant provisions of the San Luis Obispo Municipal Code are discussed in the attached and
incorporated Notice of Automatic Disqualification. The most relevant provision here is San Luis
Obispo Municipal Code section 9.10.070(C), which provides for automatic disqualification of an
applicant if the applicant “made one or more false or misleading statements or omissions in the
application process.”
As a San Luis Obispo Superior Court determined in another lawsuit involving application of the
same sections of the San Luis Obispo Municipal Code, these sections are not ambiguous, and
provide for disqualification in the event of a false or misleading statement or omission:
The municipal code does not provide applicants with the discretion to decide if
the information sought is material and should be provided, nor mandate that the
City must find specific fraudulent intent prior to disqualification. Rather, the
municipal code provides plainly that a false or misleading statement in the
application process is grounds for automatic disqualification. . . . The San Luis
Obispo Municipal Code does not require that the statement or omissions be material
in order to subject an applicant to automatic disqualification ”
Final Judgment in San Luis Obispo Wellness Center Corp. v. City of San Luis Obispo, Case No.
20Cv-0035 at Ex. A. p. 11–12, attached hereto as Exhibit 4 and incorporated by reference as though
fully set forth herein.)
The City interprets its Ordinance consistent with the interpretation of the Court in San Luis Obispo
Wellness Center Corp. v. City of San Luis Obispo, Case No. 20Cv-0035.
NHC also agreed and expressly acknowledged that disqualification would result in the event of
false statements or omissions in connection with its application.
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The Commercial Cannabis Business Operator Permit Application, signed by Mr. Dayspring on
behalf of NHC, provided: “Applicants providing false or misleading information in the permitting
process will result in rejection of the application and/or nullification of any issued permit.”
The background questionnaire, signed by each principle of NHC (including Ms. Garcia) similarly
required each applicant subject to background check to acknowledge that any “information
omitted, not disclosed, or found to have been false,” would subject the applicant to disqualification.
NHC, by and through Mr. Dayspring a, made at least the following false or misleading statements
or omissions in the application process:
A. Background Check Falsehoods
On May 19, 2019, Mr. Dayspring submitted a signed cannabis background check questionnaire.
When signing this background check questionnaire, Mr. Dayspring acknowledged that:
I acknowledge that by signing the documents contained in this Background
Package, that all information that I have provided is true and correct. I acknowledge
that any information omitted, not disclosed, or found to be false is subject to
disqualification for a Cannabis Business Operator Permit.”
As part of this questionnaire, Mr. Dayspring was asked whether he had engaged in a variety of
illegal conduct. In a subsequent interview with Detective Suzie Walsh, Mr. Dayspring was asked
a number of follow up questions. In connection with filling out the questionnaire and in the
subsequent interview, Mr. Dayspring made at least the following false or misleading statements or
omissions that automatically nullify the permit under San Luis Obispo Municipal Code section
9.10.070(C).
1. Spending Money for Illegal Purposes
Mr. Dayspring was asked whether he had ever “spent money for illegal purposes.” Mr. Dayspring
ticked the “yes” box. At his subsequent police interview, Mr. Dayspring clarified that this
affirmative answer was only a reference to illegal purchases of marijuana before it was legal to
purchase cannabis in California. He did not, either in response to the written question, or in
response to verbal follow up questioning under oath, disclose the criminal misconduct that was the
basis of his federal plea agreement and that is the subject of this determination.
This statement and related omissions constitutes false and misleading statements and omissions
and supports the finding that Mr. Dayspring spent money for the illegal purpose of bribing a
government official. Although not required as a basis for disqualification, these misleading
statements and omissions were and are material and knowing.
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Additionally, and as a separate and independent ground for disqualification, it appears that any
monies retained or gained by Mr. Dayspring as the result of his fraudulent and/or underreported
taxes, if spent for any purpose other than the payment of taxes as required, would also constitute
an illegal expenditure of money by Mr. Dayspring that should have been, but was not, disclosed
to the City.
2. Falsification of Documents
Mr. Dayspring was asked whether he had ever engaged in “forgery,” which was explained by the
questionnaire to include, for purpose of the questionnaire, “falsifying any type of document.” Mr.
Dayspring ticked the “no” box.”
The response to the questionnaire and corresponding statement constitutes a false or misleading
statement or omission and that Mr. Dayspring committed forgery, as the term was used in the
questionnaire, by falsifying his tax returns.
The contention that Mr. Dayspring’s statement was accurate and complete because the federal
charges to which Mr. Dayspring pled guilty may not satisfy the formal elements of the crime of
forgery” as it is defined by the California Penal Code is rejected.
The parenthetical in this question sufficiently alerted Mr. Dayspring that he was obliged to disclose
any falsification of documents, which includes submitting a falsified tax return. To the extent Mr.
Dayspring was uncertain as to whether submitting falsified tax returns constituted forgery as the
term was used in the questionnaire, he had a full and fair opportunity to seek clarification at his
subsequent interview.
At a minimum, Mr. Dayspring’s answer and failure to seek clarification constitute a misleading
statement or omission.
3. Perjury
In reviewing the application/background forms in follow up to your responses, it is noted that Mr.
Dayspring also was asked whether he had ever committed perjury. Mr. Dayspring ticked the “no”
box.
This statement is arguably the more pertinent and constitutes a false or misleading statement or
omission. Mr. Dayspring pled guilty to submitting knowingly and intentionally false and
fraudulent tax returns signed under penalty of perjury, acts which constitute committing perjury.
4. Tax Fraud and Tax Evasion
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Mr. Dayspring was asked whether he had been involved “in any matter regarding a tax lien, tax
fraud, or evasion of taxes.” Mr. Dayspring ticked the “no” box.
This statement constitutes a false or misleading statement or omission. Mr. Dayspring had
committed tax fraud and tax evasion in 2014, 2015, 2016, 2017, and 2018 as evidenced by his
Federal plea agreement.
NHC’s argument that a tax fraud and tax evasion “matter” did not exist until the Federal Bureau
of Investigation issued search warrants or notified Mr. Dayspring of a formal investigation is in its
entirety rejected. “Matter,” as used in the questionnaire, as commonly understood by an ordinary
person, and as understandable by persons wishing to truthfully respond to the City’s questionnaire,
is used in the broad sense of a topic or situation, particularly one that is or should be dealt with or
resolved. (See, e.g., Oxford Language Dictionary [“An affair or situation under consideration, a
topic.”]; Cambridge Dictionary [“A situation or subject that is being dealt with or considered”];
MacMillan Dictionary [“something that you are discussing, considering, or dealing with.”];
Collins Dictionary [“A matter is a task, situation, or event which you have to deal with or think
about, especially one that involves problems.”].) In my experience, it is actually very common for
laypeople to make reference to their “tax matters” or “financial matters” in reference to routine,
transactional, and/or non-criminal matters and the term was used in that broad sense.
NHC’s apparent interpretation of the word “matter” in this context is rejected. To accept the
interpretation asserted would allow an applicant who has committed a litany of tax fraud and tax
evasion (like Mr. Dayspring) to answer “no” because no formal investigation, charges or
prosecution had yet commenced; to put it more simply, it would encourage concealment of facts
and excuse dishonesty by applicants so long as they had not yet been caught. Such an outcome is
nonsensical and contrary to the clear expectations and intent expressly conveyed and reiterated
throughout the City’s process.
In other words, the fact Mr. Dayspring may have2 hidden his tax fraud and tax evasion from the
United State Government, or at least from the City, until after he signed his background
questionnaire or completed his interview does not mean that he was not involved in “matters”
regarding tax fraud and evasion of taxes
To the extent there was any ambiguity in the term “matter,” Mr. Dayspring had a full and fair
opportunity to seek clarification during his subsequent interview.
At best, his answer and failure to seek clarification constitute a false or misleading statement or
omission; at worst they reflect a proactive course of action to conceal material facts in order to
wrongfully obtain a Cannabis Operator Permit.
2 I am without knowledge, at this time, as to when the United States’ formal investigation of Mr. Dayspring began.
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It is also important to note that in the background interview, Mr. Dayspring repeatedly expressed
his concern that he and NHC could be penalized for any bad acts or criminal conduct of the
minority 3% equity holders of NHC (despite Mr. Dayspring’s knowledge of his own substantial
wrongdoing).
This demonstrates Mr. Dayspring’s knowledge, which is imputed to NHC, that any criminal
actions of the equity owners (himself included) were relevant and material and could lead to
disqualification if known. Based on this articulated concern, it is inferred and find that Mr.
Dayspring made conscious decisions not to disclose his own criminal wrongdoing.
In sum, it is categorically rejected, as lacking credibility, NHC’s argument, made in NHC’s
response letter and at the City Manager meeting, that Mr. Dayspring honestly and fully answered
all of these questions regarding his past and current criminal misconduct. The finding in support
of the automatic nullification of the permit is due to Mr. Dayspring’s multiple false and misleading
statements and omissions and that his concealment of highly relevant information was in the sole
control of Mr. Dayspring and the NHC applicant team and wholly outside the City’s control.
B. NHC Cannabis Business Operators Merit Based Permit Application
Falsehoods
NHC made false or misleading statements in its merit-based Cannabis Business Operators
Application.
In the application, NHC proactively, voluntarily and affirmatively represented, independent of any
specific question from the City, that Mr. Dayspring had a history of regulatory compliance, and in
particular compliance with taxation laws:
When other cannabis businesses were operating in the shadow without paying
taxes, Helios Dayspring raised the bar by implementing self-regulatory policies
and complying with all tax laws, evidence in his 8+ years of tax history and his
operations running with the highest standards in the industry.”
This was a false or misleading statement or omission. In fact, “Helios Dayspring” had not
compl[ied] with all tax laws.”
NHC also discussed Mr. Dayspring’s active licenses and operations throughout the state. NHC
failed to disclose that one of those operations was active in whole or part because Mr. Dayspring
had committed felony bribery. This constitutes a false or misleading statement or omission.
More broadly, NHC’s omissions concerning the criminal conduct of Mr. Dayspring were
misleading and likely affected the scoring received by NHC.
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NHC’s application repeatedly stressed the experience and track record of success of Helios
Dayspring and highlighted this experience and history of success and compliance as a reason why
the City should select NHC for one of the few competitive permits available in the City. Non-
exhaustive examples of these representations include the following statement:
Helios has a wealth of knowledge in business development, entitlements, and
contract negotiations . . . Helios has also opened six different storefront dispensaries
in the Inland Empire and in Grover beach, gaining invaluable experience in retail
operations . . . Helios has connected all the dots from cultivation, manufacturing,
and retail, completing the seed to sale networks. . . . [Helios Dayspring] is an
industry leader and is helping bring cannabis into mainstream society . . . his
experience and dedication to our community is unmatched in the industry.”
The application further satisfied financial criteria by expressly relying on the personal wealth of
Mr. Dayspring (wealth which was, at least in part, the result of bribery and tax evasion or fraud):
NHC has ample access to funding. Primary principal Helios Dayspring will use
personal funds to build and operate the project. A person financial statement
documenting $3.6 million in liquid assets and $12.3 million in real estate equity is
enclosed on the following page. . . . Additionally, Helios Dayspring has access to a
3 million loan if needed.”3
The application satisfied the “Property Control” merit criteria by indicating that the three APNs
associated with the project “are fully owned by Helios Dayspring.”
NHC likely would not have received the score it did and would not have been permitted to move
forward had the City known of the substantial and ongoing criminal history of Mr. Dayspring,
including his history of tax fraud and evasion, and his acts of felony bribery. NHC’s false
inducement of the City to permit its operation has resulted in substantial delays to the City’s ability
to permit a qualified applicant that has not engaged in admitted criminal misconduct of the
significant nature at issue here.
During the City Manager meeting, NHC’s counsel made the conclusory statement that NHC would
have received a City permit even absent the participation of Mr. Dayspring. This conclusion is
unsupported by the application or prior record of the permitting process. While it is not possible
to turn back time and precisely predict what would have happened in the past, there is a strong
likelihood that NHC would not have received the score it did if Mr. Dayspring had not participated
3 Given this, it remains unclear how NHC intends to proceed absent the financing of Helios Dayspring. If Mr.
Dayspring is still financing the project, this suggests Mr. Dayspring retains an interest in and control over NHC.
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in the application process, given the substantial number of points available for: (1) primary
principles’ record of compliant current or previous business operations; (2) ownership or control
over the property; and (3) financial investment. NHC’s entire application relied heavily on Mr.
Dayspring’s experience, financial capacity and operational and management involvement and
likely derived significant advantage in the scoring process from that reliance.
Mr. Dayspring’s failure to disclose the substantial back taxes owed to the IRS on his personal
financial statements constituted a false or misleading statement or omission. This failure resulted
in a substantial overstatement of the financial assets available to NHC and Mr. Dayspring, an
important merit criteria. These were misleading omissions that very likely would have affected
the outcome of the application process.
To the extent NHC contends that NHC itself had no knowledge of the criminal conduct of Mr.
Dayspring is rejected. Entities such as an LLC can only act through and have the knowledge of
their agents and employees. Mr. Dayspring was the Chief Executive Officer, super-majority
owner, sole manager, and primary principle and he was a responsible party (along with Mr. Andre)
of NHC. Mr. Dayspring signed the applications submitted by NHC. NHC was organized in 2018,
and Mr. Dayspring was the organizer. The LLC was organized as a single manager LLC, and Mr.
Dayspring was that sole manager. Mr. Dayspring was also the agent for service of process. The
business and mailing address of NHC were Mr. Dayspring’s home address. The City therefore
finds that Mr. Dayspring’s knowledge was actually known to and imputed to NHC the entity, as
well as the entire application and applicant team.
NHC’s representatives argued that NHC should not be impacted by the conduct of Mr. Dayspring,
despite his corporate roles and interests during and after the application process and the significant
overlap of applicant team members, owners and principles from then until now. At the same time,
they argued that Ms. Garcia and NHC are now, in effect, synonymous and NHC should benefit
from Ms. Garcia’s substantial experience, gained almost entirely in business collaboration with
Mr. Dayspring, and have its slate wiped clean due to Ms. Garcia’s now supermajority ownership
and controlling interests. NHC simply cannot have it both ways and it acknowledged as much in
response to questions regarding the corporate action and responsibility, past and present.
C. False or Misleading Statement or Omissions in the Transfer to Ms. Garcia
To the extent relevant, and in response to NHC counsel’s repeated statements to the effect that Ms.
Garcia has nothing to do with Mr. Dayspring’s criminal misconduct, NHC made the following
false or misleading statements or omissions in connection with the transfer of ownership to Ms.
Garcia.
Based on statements made by NHC counsel during the meeting, the circumstances surrounding
Mr. Dayspring’s transfer of ownership to Ms. Garcia support an inference that Ms. Garcia and
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NHC knew or should have known of the criminal investigation of Mr. Dayspring and potentially
the forthcoming criminal charges at or around the time NHC and Mr. Dayspring undertook to
transfer Mr. Dayspring’s interest to Ms. Garcia.
The failure to disclose these matters to the City in connection with the transfer of ownership to
Ms. Garcia constitutes a continuation and reaffirmation by NHC, Ms. Garcia and Mr. Dayspring
of the prior and ongoing pattern and practice of providing false or misleading statements or
omissions of highly relevant information to the City in order to obtain and wrongfully maintain
the Cannabis Operator Permit.
Following consultation with the City Attorney, the contention that the City is somehow subject to
waiver or estoppel to act on NHC’s pattern of misleading statements or omissions, and the
concealment of those actions, based on the transfer of ownership to Ms. Garcia is entirely rejected
as convincing. In response to the waiver and estoppel arguments advanced, the it is advised that
the waiver is the intentional relinquishment of a known right after knowledge of the facts.4 A party
asserting estoppel must show that the estopped party either misrepresented or concealed material
facts with knowledge of the true facts (or gross negligence as to them) with the intent that another
who is ignorant of the facts will rely on the misrepresentation or concealment, and the other party
must reasonably rely on the misrepresentation or concealment to their detriment.5 The
requirements to prove estoppel against a governmental body are substantially heightened.6 NHC
cannot show any element of either doctrine, most notably NHC admittedly does not contend that
the City knew or should have known of the extraordinary pattern of criminal conduct of Mr.
Dayspring. During the recent meeting, NHC was asked multiple times whether it believed the City
knew or should have known of Mr. Dayspring’s criminal conduct. NHC evaded the question each
time and did not once answer in the affirmative. It was NHC, not the City, that concealed facts
from the City and to the City’s detriment; thus, it is difficult to conceive of how the City might
now be estopped from acting on NHC’s concealment by virtue of NHC’s concealment of its own
misconduct. NHC’s contentions turn the concept of estoppel on its head.
It is important to reiterate the City’s limited role in the transfer of ownership to Ms. Garcia, in light
of the regulations applicable at the time and the fact that Ms. Garcia had already been through the
City’s background check process. The applicable process effectively requires only a ministerial
acknowledgement from the City that the transfer satisfies the facial requirements of the ordinance,
4 Roesch v. De Mota (1944) 24 Cal.2d 563, 572; A.B.C. Distrib. Co. v. Distillers Distrib. Corp. (1957) 154
Cal.App.2d 175, 187.
5 See, e.g., California Cigarette Concessions, Inc. v. City of Los Angeles (1960) 53 Cal.2d 865, 870–871; Jordan v.
City of Sacramento (2007) 148 Cal.App.4th 1487, 1496.
6 See, e.g., City of Long Beach v. Mansell (1970) 3 Cal.3d 462; City of Goleta v. Superior Court (2006) 40 Cal.4th
270, 279 [Equitable estoppel “will not apply against a governmental body except in unusual instances when
necessary to avoid grave injustice and when the result will not defeat a strong public policy”].
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based on information provided by NHC; such transfers among existing, previously backgrounded
owners do not require an extensive City application and approval process.
Any arguments that the City is estopped or waived rights in connection with allowing construction
to proceed in recent months is rejected. A Commercial Cannabis Operator Permit – the
disqualification/termination of which is the subject of the current City action based on Mr.
Dayspring and NHC’s undisclosed criminal misconduct– is separate and distinct from the building
permit inspections and activities in which NHC has recently been engaged to complete the building
that was the intended location of the cannabis business. In each formal communication to NHC
since the facts of the criminal misconduct became known to the City, the City has advised that the
City was conducting a separate inquiry into the implications of the criminal plea and that any
actions or communication related to the construction permits should not be construed as related to
the Operator Permit considerations.
Moreover, it is disingenuous at best to simultaneously suggest that the City somehow wrongfully
induced NHC to continue its construction project to NHC’s detriment and that the City should be
responsible for NHC’s losses based on allegations of City delay of the construction project. To
the contrary, the City has recognized that the building could be used for purposes other than a
cannabis business operation in accordance with City zoning and building codes. The City has
acted in good faith to allow building construction to proceed in accordance with plans, so that the
building could be prepared for occupancy in some form, whether or not the Operator Permit was
activated and effective.
D. False or Misleading Statement or Omissions Made in Connection with
Disqualification Process
To the extent relevant, I also find that NHC made false or misleading statements or omissions in
connection with this disqualification process.
In an October 14, 2021 letter to the City, NHC represented that Mr. Dayspring “has no further
affiliation with NHC.” This is false or misleading statement and/or omission, based upon
information NHC’s representatives have provided regarding statements made during an onsite
security plan inspection that occurred subsequent to the City’s Notice. The City documented that
interaction in a letter summarizing the site visit dated October 8, 2021, which is attached hereto as
Exhibit 5.
As NHC confirmed at the City Manager meeting, an entity owned and/or controlled by Mr.
Dayspring continues to be the owner of the building and underlying land in which NHC will
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operate and is and will be NHC’s landlord. There continues to be substantial continuing affiliation
with NHC.7
While any assumptions regarding Mr. Dayspring’s continuing affiliations with NHC did not form
the basis of the City’s original Notice or action, following the explanation of NHC’s
representatives, that NHC’s representation that Mr. Dayspring will be no more than a passive and
uninvolved landlord is not credible, given the extent of his past and current financial interests in
the business’s operation in SLO. The dozens of entities which Mr. Dayspring has created and
controls renders it difficult, and beyond the scope of the current action, to determine the extent to
which Mr. Dayspring or one of his controlled or affiliated entities may have continuing active or
passive involvement or exercise financial, operational and/or management direction or control
over NHC in SLO.
However, the scope and interrelated nature of the multiple entities with which Mr. Dayspring
remains affiliated supports at least the strong inference of continuing affiliation or involvement
with NHC. Mr. Dayspring indicated in his background interview that these various entities were
created to operate cultivation enterprises, hold licenses, hold properties, run operations, and pay
employees. While Mr. Dayspring has divested himself of equity in NHC SLO LLC, it has not been
possible for the City to determine whether Mr. Dayspring has divested himself of all entities related
to, deriving profits from, or providing services to NHC. It is further noted that NHC’s application
disclosed that Mr. Dayspring is involved with “cultivation, manufacturing, distribution, and retail,
completing the seed to sale network.” To the extent that Mr. Dayspring has not divested himself
from all of these entities, and to the extent that Mr. Dayspring, through his continuing corporate
or financial interests, continues to exercise passive or active ownership, direction or financial or
operational control over or in NHC SLO, the City reserves the right to assert any relevant,
undisclosed interests or control in NHC as separate and independent grounds on which to base a
subsequent disqualification determination.
While also not a basis for the City’s current action against NHC, it is also relevant to note that Mr.
Dayspring’s longstanding and continuing personal relationship with the new majority owner, Ms.
Garcia, strains the credibility of statements that Mr. Dayspring has not had and will not have any
affiliation with NHC from and after the date of the October 2020 transfer of his interests to Ms.
Garcia. Ms. Garcia apparently started her career in the cannabis industry “as a receptionist of
Helios Dayspring’s dispensary in Bloomington, California.” As Ms. Garcia and Mr. Dayspring
acknowledged in their background investigations, they are and have been in an intimate personal
relationship. This relationship apparently continues, as on August 24, 2021, Ms. Garcia filed an
affidavit of surety in Mr. Dayspring’s federal criminal case, obligating herself to guarantee Mr.
Dayspring’s release bond and identifying herself as Mr. Dayspring’s “Girlfriend.” Again, to the
7 I also note that this information was not volunteered, but only disclosed when City Attorney Dietrick noted that
City staff had recently visited the property and employees or agent of NHC indicated they would have to speak with
Mr. Dayspring regarding certain City inquiries. In other words, after NHC was “caught red handed.”
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extent that Mr. Dayspring, through his personal or professional relationship with Ms. Garcia,
continues to exercise passive or active ownership, direction or financial or operational control over
or in NHC SLO, the City reserves the right to assert any relevant, undisclosed interests or control
in NHC as separate and independent grounds on which to base a subsequent disqualification
determination.
III. NHC’S FRAUDULENT MISREPRESENTATIONS
NHC has suggested that it has incurred or will incur damages, and has threatened to sue the City,
based on its contentions that the City’s asserted wrongful action resulted in damages to NHC. The
following is a statement that NHC should evaluate and consider before advancing any claims or
actions.
It is the City’s position that any harm incurred by NHC is solely and exclusively the result
of NHC’s own conduct, which has at all times been within NHC’s sole knowledge and
control. Moreover, based on all of the above, based on the evidence it can be concluded
that NHC has committed several wrongful acts that not only violated the City’s Code and
permitting requirements, but also resulted in concrete damages to the City; in particular,
fraudulent misrepresentation and fraudulent concealment.
The elements of a claim for fraudulent misrepresentation are: “(1) the defendant
represented to the plaintiff that an important fact was true; (2) that representation was false;
3) the defendant knew that the representation was false when the defendant made it, or the
defendant made the representation recklessly and without regard for its truth; (4) the
defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably
relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on
the defendant's representation was a substantial factor in causing that harm to the
plaintiff.”8
The elements of a claim for fraudulent concealment are: “(1) concealment or suppression
of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the
defendant intended to defraud the plaintiff by intentionally concealing or suppressing the
fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if
he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage
as a result of the concealment or suppression of the fact.”9
Here, NHC’s conduct would appear to satisfy the elements of both of these claims. NHC,
by and through its CEO, primary principle, super-majority owner, responsible party, and
sole managing member, Helios Dayspring, made the numerous misrepresentations
8 Graham v. Bank of Am., N.A. (2014) 226 Cal.App.4th 594, 605–06.
9 Id. at p. 606.
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described above. In particular, Helios Dayspring represented in his background
questionnaire and in the subsequent interviews that he had not committed the various
felonies to which he pled guilty. NHC and Mr. Dayspring similarly made affirmative
misrepresentation in the merit-based application, including representations related to Mr.
Dayspring’s history of compliance with all tax laws. These representations were false, and
Mr. Dayspring and NHC knew the representations were false. NHC and Mr. Dayspring
intended that the City rely on these representations so that NHC would be awarded one of
the very few commercial cannabis permits available.
The City reasonably relied on these representations, as it had no way to know of the
felonious conduct of Mr. Dayspring; this information was uniquely in the possession of
Mr. Dayspring and NHC.
Because of these misrepresentations, the City was harmed. Had the City known of the true
facts, it could not have and would not have allowed NHC to proceed forward in the
application process and would instead have allowed another applicant to proceed.
The City has also been harmed in that another applicant has been prevented from moving
forward in the process. As NHC’s October 14, 2021 letter notes, successfully and
responsibly operated cannabis storefronts generate a substantial amount of sale tax
revenue. (Letter at p. 4 [“NHC Grover Beach’s dispensary operations are now the single
largest sales tax revenue in the City of Grover Beach.”].) But for NHC and Mr. Dayspring’s
misrepresentations, another commercial cannabis operator would have been permitted to
move forward and open a storefront operation that would generate substantial sales tax
revenue that will be a direct financial impact to the City. The City’s process delays in
permitting an operational business and related financial losses of this sales tax revenue is
directly attributable to the fraudulent conduct of NHC and Mr. Dayspring.
The City has also suffered a substantial loss in the amount of staff time that has been lost
in processing NHC’s application, evaluating and responding to the implications of Mr.
Dayspring’s and NHC’s misconduct and working to move NHC forward in the process.
All of this time is now wasted because of NHC’s fraudulent misrepresentations and
concealment.
NHC and Mr. Dayspring’s actions also satisfy the elements of a claim for fraudulent
concealment. NHC and Mr. Dayspring had a duty to disclose Mr. Dayspring’s various
felonies in connection with the background check and application process, and
intentionally failed to do so and affirmatively concealed these facts. The City was unaware
of Mr. Dayspring’s fraudulent and felonious conduct and would not have allowed NHC to
move forward in the process if it knew of these acts. Because NHC was permitted to move
forward instead of a qualified applicant as a result of this concealment, the City has suffered
the harms described above.
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In the event NHC were to initiate litigation against the City, or the City to pursue litigation
independently, the City expects that discovery may unearth additional misrepresentations,
fraud, or other wrongful conduct on the part of NHC and Mr. Dayspring. Discovery may
also uncover fraud, misrepresentations, or other conduct on the part of other principles or
affiliates of NHC. For example, the City could pursue claims if it learned that these
individuals had knowledge of Mr. Dayspring’s conduct and either concealed or
misrepresented these facts (including in connection with the more recent transfer of Mr.
Dayspring’s equity interest to Ms. Garcia).10
Based on the foregoing, your claims of liability against the City lack merit and do not form a basis
on which to reconsider this disqualification action.
IV. CONCLUSION
The documents and information discussed herein are not exhaustive of the materials and
information considered in reaching these conclusions. All facts were evaluated and considered and
all information submitted by NHC and/or its members, principles, and employees in connection
with NHC’s application and the entire application process, including all information and
recordings previously re-produced to NHC’s prior legal counsel in conjunction with the permitting
process. Other information considered was all publicly available information concerning the
criminal activities and prosecution of Helios Dayspring, including all publicly filed documents in
the matter United States of American v. Helios Raphael Dayspring, Central District Case No. 2:21-
CR-00343-AB. All relevant communications the City and its representatives, agents, and
employees have had with NHC, its employees, members, principles, and agents, all information
within the knowledge and/or possession of NHC were considered. Lastly, The Secretary of State
filings related to NHC and other entities which Helios Dayspring does or did have any interest in
or relationship with was also considered.
For all of the foregoing reasons, pursuant to Section 9.10.070.C.4 of the Municipal Code,
NHC’s permit remains automatically disqualified and terminated. NHC may seek judicial
review of the City's decision by filing a peti tion for a writ of mandate with the San Luis Obispo
Superior Court no later than the 90 th day after October 19, 2021, in accordance with Californi a
Code of Civil Procedure 1094.6, or as otherwise provided by the Code of Civil Procedure.
10 I note that any conversations between Ms. Garcia and Mr. Dayspring would not be privileged or otherwise
protected. For example, Evidence Code section 980 would not be applicable.
City Administration
990 Pa lm Street, San Luis Obispo, CA 93401-3249
805,781.7114
sloclty.org
000079
Exhibit 1
000080
2:21-cr-00343 -AB
7/28/2021
JB
1 TRACY L . WILKISON
Acting United States Attorney
2 SCOTT M. GARRINGER
Assistant United States Attorney
3 Chief , Criminal Division
THOMAS F . RYBARCZYK (Cal . Bar No. 316124) 4 ARON KETCHEL (Cal . Bar No . 250345)
Assistant United States Attorneys
5 Public Corruption and Civil Rights Section
1500 United States Courthouse
6 312 North Spring Street
Los Angeles , California 90012
7 Telephone : (213) 894 -8452/1019
Facsimile : (213) 894 -0141
8 E-mail : thomas .rybarczyk@usdoj .gov
aron .ketchel@usdoj .gov
9
Attorneys for Plaintiff
10 UNITED STATES OF AMERICA
11 UNITED STATES DISTRICT COURT
l~,~~cr~~I
CDTRilDIST1l1Cf OFCAUFO.L'1A
av, D£PL"n'
12 FOR THE CENTRAL DISTRICT OF CALIFORNIA
13 UNITED STATES OF AMERICA ,
14 Plaintiff,
15 v .
16 HELIOS RAPHAEL DAYSPRING ,
aka "Bobby Dayspring,,,
Defendant .
No . CR
PLEA AGREEMENT FOR DEFENDANT
HELIOS RAPHAEL DAYSPRING
17
18
19 1. This constitutes the plea agreement between HELIOS RAPHAEL
20 DAYSPRING ("defendant") and the United States Attorney's Office for
21 the Central District of California ("the USAO,,) in the investigation
22 of federal program bribery in San Luis Obispo County and tax evasion
23 in San Luis Obispo and Santa Barbara Counties. This agreement is
24 limited to the USAO and cannot bind any other federal , state , local,
25 or foreign prosecuting , enforcement , administrative , or regulatory
26 authorities .
27 DEFENDANT 'S OBLIGATIONS
28 2 . Defendant agrees to :
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a. Give up the right to indictment by a grand jury and ,
at the earliest opportunity requested by the OSAO and provided by the
Court , appear and plead guilty to a two-count information in the form
attached to this agreement as Exhibit A or a substantially similar
form, which charges defendant with federal program bribery, in
violation of 18 U .S .C. § 666(a) (2), and subscribing to a false income
tax return , in violation of 26 O.S .C. § 7206(1).
b. Not contest facts agreed to in this agreement .
c. Abide by all agreements regarding sentencing contained
in this agreement.
d . Appear for all court appearances , surrender as ordered
for service of sentence , obey all conditions of any bond , and obey
any other ongo ing cou r t order in this matter .
e. Not commit any crime ; however, offenses that would be
excluded for sentencing purposes under United States Sentencing
Guidelines ("O .S .S.G." or "Sentencing Guidelines") § 4Al .2(c) are not
within the scope of this agreement.
f . Be truthful at all times with the United States
Probation and Pretrial Services Office and the Court.
g . Pay the applicable specia l assessments at or before
the time of sentencing unless defendant has demonstrated a l ack of
ability to pay such assessments.
h . Defendant admits that he underreported his individual
taxable income by approximately $9 million , collectively for the tax
years 2014, 2015 , 2016, 2017 , and 2018 , resulting in a tax loss in
the agreed amount of $3 ,438 ,793 . Defendant agrees that :
i. Defendant will make his best efforts to pay to
the Fiscal Clerk of the Court at or before sentencing all additional
2 000082
1 taxes assessed by the Internal Revenue Service ("IRS") pursuant to
2 the closing agreement referred to in paragraph 2(h); and, will make
3 his best efforts to promptly pay to the Fiscal Clerk of the Court all
4 additional taxes thereafter determined by the IRS to be owing as a
5 result of any computational error. Payments may be made to the
6 Clerk, United States District Court , Fiscal Department , 255 East
7 Temple Street , Room 1178, Los Angeles, California 90012 .
8 ii . Defendant will not file any claim for refund of
9 taxes, penalties, or interest for amounts as set forth in the closing
10 agreement, referred to in paragraph 2(b) (iv), in connection with this
11 plea agreement .
12 iii. Defendant agrees that he is liable for the civil
13 fraud penalty imposed by the Internal Revenue Code, 26 U .S.C. § 6663 ,
14 on the under statements of his personal income tax liability for 2014 ,
15 2015, 2016 , 2017 , and 2018.
16 iv. Defendant will work in good faith with the IRS to
17 enter into a closing agreement, at or before the time of sentencing,
18 which will be consistent with this plea agreement and permit the IRS
19 to assess and collect the deficiency in tax liabilities for the tax
20 years 2014 through 2018 . Defendant will also agree, pursuant to such
21 closing agreement, that the IRS may assess the civil fraud penalties
22 and statutory interest on the tax liabilities , as provided by law.
23 v. Defendant gives up any and all object i ons that
24 could be asserted to t he Examination Division of the IRS receiving
25 materials or information obtained during the criminal investigation
26 of this matter , including materials and information obtained through
27 grand jury subpoenas.
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3 . Defendant further agrees to cooperate fully with the USAO,
the Federal Bureau of Investigation and IRS, and , as directed by the
USAO , any other federal , state, local , or foreign prosecuting,
enforcement , administrative, or regulatory authority . This
cooperation require s defendant to :
a . Respond t ruthfull y and completely to all questions
th at may be put to de fen dant , whether in interviews, before a grand
jury , or at any trial or other court proceeding .
b. Attend all me e ting s, grand jury sessions, trials or
other proceedings at which defendant 's presence is requested by the
USAO or compelled by subpoena or court order.
c. Produce voluntarily all documents , records , or other
tar.gible evidence relating to matter s about which the USAO , or its
designee , inquires.
4 . for purposes of this agreement : (1) "Cooperation
Information" shall mean any s tatements made , or documents , records ,
tangible evidence , or other information provided, by defendant
pursuant to defendant's cooperation under this agreement or pursuant
to the letter agreement previously entered into by the parties dated
June 11 , 2020 (the "Letter Agreement "); and (2) "Plea Informat ion"
shall mean any statements made by defendant , under oath, at the
guilty plea hearing and the agreed to factual basis statement in this
agreement .
5 .
TRE USAO 'S OBLIGATIONS
The USAO agrees to :
a . Not contest facts agreed to in this agreement .
27 b. Abide by all agreements regarding sentencing contained
28 in thi s agreement .
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c . At the time of sentencing, provided that defendant
demon s trates an acceptance of responsibility for the offenses up to
and including the time of sentencing , recommend a two -level reduction
in the applicable Sentencing Guidel i nes offense level , pursuant to
U .S .S .G . § 3El .1 , and recommend and , if necessary , move for an
additional one -level reduction if available under that section .
d . At the time of sentencing , provided that defendant
demon s trates an acceptance of respon s ibility for the offenses up to
and including the time of sentencing , recommend a three-level
downward variance . This variance is based upon substantial
assistance defendant provided to the government related to this
investigation , but which cannot be accounted for pursuant to U.S .S .G .
5Kl .1 .
e . Recommend that defendant be sentenced to a term of
imprisonment no higher than the low-end of the applicable Sentencing
Guidelines range , as determined by the USAO . For purposes of this
agreement, the low -end of the Sentencing Guidelines range is that
defined by the Sentencing Table in U .S .S .G . Chapter 5 , Part A .
f . Not further criminally prosecute defendant for any
additional violations known to the USAO at the time of the plea
arising out of defendant 's conduct (i) described in the Information
or (ii) described in the Factual Basis.
6 . The USAO further agrees :
a . Not to offer as evidence in its case -in -chieI in the
25 above -captioned case or any other criminal prosecution that rray be
26 brought against defendant by the USAO , or in connection with any
27 sentencing proceeding in any criminal case that may be brought
28 against defendant by the USAO , any Cooperation Information .
5 000085
1 Defendant agrees, however , that the USAO may use both Cooperation
2 Information and Plea Information: (1) to obtain and pursue leads to
3 other evidence , which evidence may be used for any purpose , i ncluding
4 any criminal prosecution of defendant; (2) to cross -examine defendant
5 should defendant testify, or to rebut any evidence offered, or
6 argument or representation made, by defendant , defendant 's counsel ,
7 or a witness called by defendant in any trial , sentencing hearing , or
8 other court proceeding ; and (3) in any criminal prosecution of
9 defendant for false statement , obstruction of justice, or perjury .
10 b. Not to offer as evidence in its case-in-chief in the
11 above -captioned case or any other criminal prosecution that may be
12 brought against defendant by the OSAO, any Cooperation
13 Information . Defendant agrees , however, that the OSAO may use both
14 Cooperation Information and Plea Information : (1) to obtain and
15 pursue leads to other evidence , which evidence may be used for any
16 purpose, including any criminal prosecution of defendant ; (2) to
17 cross -examine defendant should defendant testify, or to rebut any
18 evidence offered, or argument or representation made , by defendant,
19 defendant's counsel, or a witness called by defendant in any trial,
20 sentencing hearing , or other court proceeding ; (3) in any criminal
21 prosecution of defendant for false statement, obstruction of justice ,
22 or perjury ; and (4) at defendant's sentencing. Defendant understands
23 that Cooperation Information will be disclosed to the United States
24 Probation and Pretrial Services Office and the Court .
25 c. In connection with defendant 's sentencing, to bring to
26 the Court's attention the nature and extent of defendant's
27 cooperat i on.
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d . If the USAO det e rmines , in it s exclusive judgment ,
that defend a nt has both complied with defendant 's obligations under
pa r agraphs 2 and 3 above and provided substantial assistance to law
enforcement in the prosecution or investigation of another
s ubstantial assistance "), to move the Court pursuant to O .S .S .G .
5Kl .1 to fix an offen s e level and corresponding guideline range
below th a t oth e rwise dictated by the sentencing guidelines , and to
recommend a term of imprisonment within this reduced range .
DEFENDANT 'S UNDERSTANDINGS REGARDING COOPERATION
7 • Defendant understands the following :
a . Any knowingly false or misleading statement by
de f endant will subject defendant to prosecution for false statement ,
obstruction of justice, and perjury and will constitute a breach by
defendant of this agreement .
b . Nothing in this agreement requires the OSAO or any
other prosecuting , enforcement , adm i ni s trative , or regulatory
authority to accept any cooperation or assistance that defendant may
offer, or to use it in any particular way .
c . Defendant can n ot withdraw defendant 's guilty pleas if
the USAO does not make a motion pursuant to U .S.S.G . § 5Kl.1 for a
reduced guideline range or if the USAO makes such a motion and the
Court does not grant it or if the Court grants such a USAO motion but
elects to sentence above the reduced range .
d . At thi s time the USAO makes no agreement or
representation as to whether any cooperation that defendant has
provided or intends to provide constitutes or will constitute
27 substantial assistance . The decision whether defendant has provided
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1 substantial assistance will rest solely within the exclusive judgment
2 of the USAO .
3 e . The USAO 's determination whether defendant has
4 provided substantial assistance will not depend in any way on whether
5 the government prevails at any t r ial or court hearing in which
6 defendant testifie s or in which the government otherwise presents
7 information resulting from defendant 's cooperation .
8 NATURE OF THE OF FENSES
9 8 . Defendant understands that for defendant to be guilty of
10 the crime charged in count one , that is , federal program bribery , in
11 violation of Tit l e 18 , United States Code , Section 666(a) (2), the
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following must be true : (1) Defendant corruptly gave , offered , or
agreed to give s omething of value to a person ; (2) Defendant intended
to influence or reward an agent of a local government --here , the
County of San Luis Obispo --in connection with any business ,
transaction, or series of transactions of that local government
involving anything of value of $5 ,000 or more ; and (3) The County of
San Luis Obispo received , in any one year period , benefits in excess
of $10 ,000 under a Federal program involving a grant , contract ,
subsidy , loan , guarantee , insurance, or other form of Federal
assistance .
9 . Defendant understands that for defendant to be guilty of
the crime charged in Count Two , that is , subscribing to a false
24 income tax return , in violation of Title 26, United States Code ,
25 Section 7206(1), the following must be true : (1) defendant signed and
26 caused to be filed a tax return that he knew contained false or
2 7 ·ncorrect information as to a material matter ; (2) the return
28 co~tained a written declaration that it was being signed subject to
8 000088
1 the penalt i es of perjury ; and (3) in causing the filing of the false
2 tax return , defendant acted willfully . A matter is material if it
3 ha d a natural tendency to influence , or was capable of influencing ,
4 the decisions or act i vities of the I RS . A defendant acts willfully
5 when de f enda n t know s that federal tax law imposed a duty on defendant
6 and d efendant intentional l y and voluntarily violated that duty .
7 PENALTIES AND RESTITUTION
8 10 . Defendant understands that the statutory maximum sentence
9 that the Court can impose for a violation of 18 U.S .C . § 666(a) (2)
10 is : 10 years ' imprisonment ; a three -year period of supervised
11 release ; a fine of $250,000 or twice the gross gain or gross loss
12 resulting from the offense , whichever is greatest ; and a mandatory
13 specia l assessment of $100.
14 11 . Defendant understands that the statutory maximum sentence
15 that the Court can impose for a violation of Title 26 , United States
16 Code, Section 7206(1), is : three years ' imprisonment ; a one -year
17 period of supervised release ; a fine of $250 ,000 or twice the gross
18 gain or gross lo s s resulting from the offense , whichever is greatest ;
19 and a mandatory special assessment of $100.
20 12 . Defendant understands , therefore , that the total maximum
2 1 sentence for both of the offenses to which defendant is pleading
22 guilty is : 13 years ' imprisonment ; a three -year period of supervised
23 release ; a fine of $500,000 or twice the gross gain or gross loss
24 resulting from the offenses , whichever is greatest ; and a mandatory
25 special assessment of $200 .
26 13 . Defendant understands a nd agrees that pursuant to 18
27 U .S .C . § 3663(a) (3), the Court : (a) may order defendant to pay
28 re s titution in the amount of $3 ,438 ,795 , which is the agreed total
9 000089
1 tax loss ba s ed upon the count of conviction and relevant conduct ; and
2 (b) must order d e fendant to pay the costs of prosecution , if any ,
3 which may be in a ddition to the s tatutory maximum fine stated above.
4 Defendant agrees that restit u tion is due and payable immediately
5 after the judgment is entered and is subject to immed i ate
6 enforcement , in full , by the United States . If the Court imposes a
7 schedule of payments , Defendant agrees that the schedule of payments
8 is a schedule a minimum payment due , and that the payment schedul e
9 does not prohibit or limit the methods by which the United States may
10 immediately enforce the judgment in full . The IRS will use the amount
11 of restitution ordered as the ba s i s for a civil assessment under 26
12 U .S .C . § 6201(a) (4). Defendant does not have the right to challenge
13 the amount of this restitution-base s assessment . See 26 U.S .C .
1 4 § 6201 (a) (4) (C). Neither the existence of a restitution payment
15 schedule nor Defendant's timely payment of restitution according to
16 the schedule will preclude the IRS from immediately collecting the
17 full amount of the restitution-based assessment .
18 14 . Defendant understands that supervised release is a period
19 of time following imprisonment during which defendant will be subject
20 to various restrictions and requirements . Defendant understands that
21 if defendant violates one or more of the conditions of any supervised
22 release imposed , defendant may be returned to prison for all or part
23 of the term of supervised release authorized by statute for the
24 offense that resulted in the term of supervised release , which could
25 result in defendant serving a total term of imprisonment greater than
26 the statutory maximum stated above .
27 15. Defendant understands that , by pleading guilty , defendant
28 may be giving up valuable government benefits and valuable civic
10
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1 rights , such as the right to vote , the right to possess a firearm ,
2 the right to hold office, and the right to serve on a jury .
3 Defendant unders tand s that he is pleading guilty to a felony and that
4 it is a federal crime for a convicted felon to possess a firearm or
5 ammunition . Defendant understa n ds that the convictions in this case
6 may also subject defendant to vcrious other collateral consequences ,
7 including but not limited to revocation of probation , parole , or
8 supervised release in another case and suspension or revocation of a
9 professional license . Defendant understands that unanticipated
10 collateral con sequences will not s erve as grounds to withdraw
11 defendant 's guilty pleas .
12 16. Defendant and his counsel have discussed the fact that , and
13 defendant understands that , if defendant is not a United States
14 citizen , the convictions in this case makes it practically inevitable
15 and a virtual certainty that defendant will be removed or deported
16 from the United States . Defendant may also be denied United States
17 citizenship and admission to the United States in the future .
18 Defendant understands that while there may be arguments that
19 defendant can raise in immigration proceedings to avoid or delay
20 removal , removal is presumptively mandatory and a virtual certainty
21 in this case . Defendant further understands that removal and
22 imm i gration consequences are the subject of a separate proceeding and
23 that no one, including his attorney or the Court , can predict to an
24 absolute certainty the effect of his convictions on his immigration
25 status. Defendant nevertheless affirms that he wants to plead guilty
26 regardless of any immigration con se quences that his pleas may entail ,
27 even if the consequence is automatic remov a l from the United States.
28
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FACTUAL BASIS1
2 17 . Defendant admits t hat defendant is, in fact , gui l ty of the
3 offe n s es to which defendant is agreeing to plead guilty . Defendant
4 and the OSAO agree to the statement of fact s provided below and a gree
5 that this statement of facts i s suf£icient to support the plea s of
6 guilty to the charges described i n t hi s agreement and to establish
7 the Sentencing Guidelines factors s et forth in paragraph 20 below but
8 is not meant to be a complete recitation of all facts relevant to the
9 underlying criminal conduct or all facts known to either party that
10 re:ate to that conduct .
1 1 At all times relevant to the charges in the Information,
12 defendant owned, operated, and/or controlled businesses specializing
13 in cannabis cultivation and di s tribution in the Central District of
14 California , including the County of San Luis Obispo ("County .n)
15 Defendant owned , operated , had a controlling interest , and/or a
16 financial stake in multiple farms that grew and cultivated cannabis
17 in the County (collectively , "Cannabis Farms "). Defendant also owned
18 or had a controlling interest or financial stake in businesses that
19 sold cannabis commercially to the public , including a dispensary in
20 Grover Beach , California ("Grover Beach Dispensary "). All of
21 defendant 's farms that cultivated cannabis required County approvals
22 to operate, and the Grover Beach Dispensary required approvals from
23 the City of Grover Beach (the "C i ty ") to operate .
24 County Supervisor 1 Bribery Scheme
25 County Supervisor 1 wa s a County Supervisor , an elected position
26 within the County . The County's Board of Supervisors was compromised
27 of five supervisors. As a County Supervisor , County Supervisor 1
28 voted on matters appearing before the County Board of Supervisors ,
12 000092
1 including matters that affected defendant 's Cannabis Farms, and had
2 influence over matters occurring within the County and its
3 departments . The County was a local government that received , every
4 calendar year between 2016 and 2020 , benefits in excess of $10,000
5 under a Federal program involving a grant , contract , subsidy , loan ,
6 guar a ntee , insurance , or other form of Federal assistance .
7 Beginning in or about the Fall of 2016 and continuing until on
8 or about November 2019 , defendant paid County Supe r visor 1
9 approximately $29 ,000 in unreported cash payments . Defendant
10 provided County Supervisor 1 the cash payments himself, in -person,
11 and with no one else present . During this same period1 defendant
12 also provided County Supervisor 1 cannabis products on multiple
13 occasions free of charge and paid for multiple meals for County
14 Supervisor 1 . Defendant provided County Supervisor 1 this stream of
15 benefits with the understanding that as opportunities arose , County
16 Supervisor 1 would do, amongst other things, the following : (a) vote
17 on cannabis legislation benefiting his Cannabis Farms , (b) advocacy
18 of other public officials in support of cannabis legislation
19 benefiting his Cannabis Farms , and (c) disclose non -public County
20 information concerning cannabis-related issues , all of which
21 benefitted defendant and defendant's businesses .
22 Offici al Acts Regardi ng Extending Abeyances on Defendant 's
23 Cannabis Farms
24 One of the matters for which defendant sought official action
25 from County Supervisor 1 involved the extension of an abeyance on
26 enforcement action on defendant 's Cannabis Farms, as the County
27 considered defendant 's applications for permits to cultivate cannabis
28 on the Cannabis Farms. In other words, defendant sought to ensure
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1 his Cannabis Farms could continue to operate , notwithstanding a
2 county law prohibiting cannabis cultivation farms from operating
3 without the appropriate county and state approvals . If the abeyances
4 on enforcement action were to have lapsed , the County may have
5 required the Cannabis Farms defendant purchased , controlled , and/or
6 took an interest to s hut down , resulting in significant financial
7 losses to defendant well in excess of $5 ,000 .
8 Regulatory Background on County Cannabis Cultivation Law
9 On September 20, 2016 , the County established a moratorium on
10 cultivation of cannabis in the County 's unincorporated areas (the
11 "September 2016 Ordinance "). The September 2016 Ordinance , however ,
12 also provided a temporary exemption from enforcement for cannabis
13 cultivators who had existing farms and registered with the County
14 pursuant to the ordinance . Accordingly , cannabis cultivators who
15 qualified for the exemption under the September 2016 Ordinance could
16 operate lawfully as there was a temporary abeyance on enforcement .
17 Those cultivators that did not qualify for an exemption risked being
18 shut down by the County . This temporary abeyance on enforcement
19 action expired on September 19 , 2018.
20 Defendant Begins Paying County Supervisor 1 and Receives His
21 Vote for a Continued Abeyance on Enforcement Action
22 Starting some time in Fall 2016 , defendant began paying County
23 Supervisor 1 cash , starting first with $1 ,000 . Prior to doing so , at
24 an event in October 2016, defendant provided County Supervisor 1
25 three $1 ,000 money orders made out in his name and the name of two
26 associates . Those money orders were subsequently deposited into
27 County Supervisor l 's persona l account . Later , in October 2016 ,
28 following County Supervisor l 's solicitation , defendant provided
14 000094
1 County Supervisor 1 $3 ,000 in cash. Over the next year , defendant
2 provided County Supervisor 1 another cash payment of $5,000 .
3 On November 27 , 2017, the County 's Board of Supervisors voted
4 5 -0 to establish a limited abeyance of enforcement policy for those
5 cannabis cultivators who had registered with the County in the
6 County 's Inland Zone pursuant to the September 2016 Ordinance . This
7 abeyance on enforcement action expired on December 31 , 2018 . County
8 Supervisor 1 voted in favor of the abeyance .
9 Defendant Continued Paying County Supervisor 1 Cash and Asked
10 Him To Vote on Continued Abeyances of Enforcement Action in 2018
11 and 2019
12 Sometime in early 2018, defendant provided County Supervisor 1
13 approximately $5,000 in cash as well as cannabis -related products .
14 On December 10, 2018, defendant and County Supervisor 1
15 discussed the importance of having County Supervisor 1 and other
16 County supervisors approve the continued abeyance on enforcement
17 action and how a lapse in the abeyance would affect his Cannabis
18 Farms. Specifically , defendant told County Supervisor 1 in a text
19 message that "it's really important u guys extend the timeframe for
20 submission and don't allow other people in yet " referring to the
21 County's impending vote on December 11, 2018 to extend the abeyances
22 on enforcement action against cannabis cultivators. Defendant
23 further told County Supervisor 1 via text message that "[t]his
24 affects all the properties that I just got investment into every one
25 of them. If I am not deemed complete and get accepted [conditional
26 use permits] I don 't get my ownership in the land ." County
27 Supervisor 1 responded: "Got it. We'll see what we can
28 do. Extension of timeframe seems reasonable and probably no one else
15 000095
1 in until ev e ryone has been deemed complete ." Defendant responded
2 th a t County Supervisor 1 was the "man ." On December 11 , 2018 , the
3 county 's Board of Supervisors voted 5 -0 to approve an extension of
4 the abeyances with County Supervisor 1 seconding the motion and
5 voting in favor of the resolution . On December 12 , 2018 , County
6 Supervisor 1 told defendant via text message "[w]e extended abeyance
7 yesterday " to which defendant replied : "Thank god . " In early
8 2019 , defendant provided County Supervisor 1 approximately $5 ,000 in
9 cash outside a restaurant in Avila Beach , California .
10 On November 15 , 2019 , defendant and County Supervisor 1 arranged
11 to meet at a Pismo Beach restaurant for dinner for which defendant
12 paid . After dinner , defendant gave County Supervisor 1 $5 ,000 in
13 cash .
14 At the December 10 , 2019 , County Board of Supervisors ' meeting ,
15 defendant , business associates of defendant , and other cannabis
16 cultivators spoke during the public comment period in support of
17 extending the cannabis abeyance extension . After these comments ,
18 County Supervisor 1, in his official capacity , advocated for and
19 advised the Board of Supervisors to pass the cannabis abeyance
20 extension and moved to place it on the agenda for the following
21 week 's Board of Supervisors ' meeting . The agenda motion failed .
22 At the December 17 , 2019, County Board of Supervisors ' meeting ,
23 defendant , business as s ociates of defendant , and other cannabis
24 cultivators spoke during the public comment period in support of
25 extending the cannabis abeyance extension . After these comments,
26 County Supervisor 1 , in his official capacity , moved to place on the
27 agenda the cannabis abeyance extension for the January 14 , 2020 Board
28 of Supervisors ' meeting . County Supervisor 1 voted in favor and the
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1 motion passed 3-2. On January 14 , 2020 , the County Supervisor 1
2 voted in favor of the County approving the cannabis abeyance
3 exten s ion , which passed by a 3 -2 vote.
4 County Supervisor l's Efforts to Preserve Defendant's Cannabis
5 Farms
6 At the March 26 , 2019 , County Board of Sup ervisor 's meet i ng , the
7 Board of Supervisors took 16 straw votes relating to cannabis
8 regul ation . Among s t the straw votes taken during the me e ting was a
9 vote to ban all outdoor cannabis cultivation , which , if enacted ,
10 would have caused significant f~nancial loss to defendant and the
11 Cannabis Farms , many of which grew cannabis outdoors . Throughout the
12 meeting , County Supervisor 1 sent text messages to defendant and
13 Employe e 1 , an employee of one of defendant 's companies , updating
14 them as the votes were taken . I n particular , County Supervisor 1
1 5 explained how he had to work to prevent another County Supervisor
16 from pushing the law banning all outdoor cannabis cultivation . At
17 one point , County Supervisor 1 wrote that he "had to keep these
18 fuckers [other County supervisor s ] from going way beyond and it is
19 exhausting! Where 's the industry [financial] support for my
20 reelection??" to which defendant responded writing that "[w ]e are the
21 industry " and "[w]ere (sic) all [you] need l ol ."
22 On March 29 , 2019 , County Supervisor 1 sent defendant and
23 Employee 1 a text message asking : "[t ]omorrow is your favorite County
2 4 Supervisor 's birthday ... what are you two [Cannabis] Kings gonna do
25 for him???" After Employee 1 asked if they cou ld take County
26 Supervisor 1 to dinner or lunch , defendant said they would take
27 County Supervisor 1 to dinner and asked County Supervisor 1 t o pick
28 the location and time . On March 30 , 2019 , defendant and Employee 1
17 000097
1 had dinner with County Supervisor 1 at a restaurant in Pismo Beach ,
2 California . After dinner, which defendant paid for , defendant met
3 with County Supervisor 1 and gave County Supervisor 1 $5 ,000 in cash .
4 On April 6, 2019 , County Supervisor 1 told defendant and
5 Employee 1 that "[y]ow: industry should give me one giant French kiss
6 wrapped in money after my work today ."
7 In June 2019 , defendant and Employee 1 held a political
8 fundraiser at County Supervisor l 's request at defendant 's home where
9 over $13 ,000 was raised .
10 Attempted Mayor 1 Bribery Scheme
1 1 Mayor 1 was the City 's mayor , an elected position within the
12 City. As the City 's mayor , Mayor 1 voted on matters appearing before
13 the City Council , including matters that affected the Grover Beach
14 Dispensary . Mayor 1 was also one of the two City council members on
15 t he Ci ty 's subcommittee charged with overseeing the City's expansion
1 6 of medical and commercial cannabis . The City was a local government
17 that received , every calendar year between 2016 and 2018, benefits in
18 excess of $10,000 under a Federal program invo l ving a grant ,
19 contract , subsidy , loan , guarantee , insurance , or other form of
20 Federal assistance .
21 In 2017, the City began accepting applications from companies
22 seeking to d i spense medical cannabis . In 2018 , the City allowed
23 those companies that obtained dispensary permits to sell cannabis
24 c ommercially . Defendant sought permits for two dispensaries ,
25 including the Grover Beach Dispensary . A City dispensary permit was
26 worth subst a ntially more than $5,000 , in light of the anticipated
27 income generated from a cannabis dispensary in the City .
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18 000098
l In September 2017 , defendant , Mayor 1, and Business Partner 1
2 (one of defendant 's business 's partners), met at a restaurant in
3 Ar royo Grande , California . At the time, defendant and Business
4 Partner 1 had already submitted their applications for two permits in
5 the City , including for the Grover Beach Dispensary. On their way to
6 the meeting , Business Partner 1 told defendant that Mayor 1 had been
7 pushing Business Partner 1 for a bribe in exchange for their cannabis
8 permits . Business Partner 1 told defendant that this meeting was
9 their chance to bribe Mayor 1
10 During the meal , Mayor 1 left the table to use the restroom .
1 1 While Mayor 1 was away from the table , Business Partner 1 told
12 defendant this was their chance to offer Mayor 1 a bribe . When Mayor
13 1 returned to the table , defendant had entered the number 100 ,000 on
14 the calculator app on his cellular phone , showed it to Mayor 1 , and
15 said it was for "two." Defendant wanted to convey to Mayor 1 that
16 defendant and Business Partner 1 were prepared to pay $100,000 to
17 Mayor 1 if Mayor 1 used Mayor l 's official position to secure two
18 cannabis dispensary permits for defendant and Business Partner 1 .
19 Mayor 1 did not respond to the offer at dinner .
20 The City later awarded a single dispensary permit to the Grover
21 Beach Dispensary . After the City awarded the permit for the Grover
22 Beach Dispensary , defendant asked Business Partner 1 if they owed
23 Mayor 1 $50 ,000 because they received one of the two requested
24 permits . Business Partner 1 told defendant that they did not owe any
25 money to Mayor 1 because their proposed deal required that defendant
26 and Business Partner l receive two permits .
27 Defendant's Fal sely Subscribed His Tax Returns
28 On or about October 15, 2019 , in San Luis Obispo County , within
19 000099
1 the Central District of California , defendant caused his U.S .
2 Individual Tax Return , Form 1040 , for 2018, to be filed
3 electronically with the IRS . Prior to doing so , defendant had
4 authorized his tax preparer to file his return electronically for him
5 with the IRS . Defendant willfully signed and subscribed to this
6 Income Tax Return , which contained a written declaration that it was
7 being signed under penalty of perjury and which defendant knew
8 contained materially false information, namely , on line 10 , defendant
9 falsely reported his taxable income was $1,262 ,894, when in fact , as
10 defendant then knew , his actual taxable income in 2018 was
11 substant ially greater . In fact, defendant 's actual income in 2018
12 was more than $6.5 million, resulting in a tax loss to the IRS of
13 approximately $2 ,048,950. Defendant understood that the false and
14 fraudulent income for 2018 was material in that it affected the IRS 's
15 calculation of the amount of income tax owed . Defendant acted
16 willfully i n that defendant knew that the law requ ired him to report
17 a l l income accurately, and to pay all income tax that was due and
18 owing . Defendant voluntarily and intent i onally violated that duty.
19 On defendant's U.S. Indiviciual Income Tax Returns for 2014,
20 2015, 2016, and 2017, defendant substant ially underreported his
21 income, causing an additional tax loss to the IRS of approximately
22 $1 ,389 ,843.
23 As a result of defendant's underreporting of h i s income in 20 1 4
24 through 2018 , defendant caused the IRS approximate l y $3,438,7 93 in
25 lost tax revenue .
2 6 SENTENCING FACTORS
27 18 . Defendant unders t ands that in determining defendant's
28 sentence the Court is required to calculate the applicable Sentencing
20
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1 Guidelines range and to consider that range , possib l e departures
2 under the Sentencing Guidelines , and the other sentencing factors set
3 forth in 18 U.S .C . § 3553(a). Defendant understands that the
4 Sentencing Guidelines are advisory only , that defendant cannot have
5 any expectation of r eceiving a sentence within the calculated
6 Sentencing Guidelines range , and that a fter considering the
7 Sentencing Guidelines and the other§ 3553(a) factors , the Court will
8 be free to exercise its discretion to impose any sentence it finds
9 appropriate up to the maximum set by statute for the crimes of
10 conviction .
11 19 . Defendant and the USAO agree to the following applicable
12 Sentencing Guidelines factors :
13 Count One
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Base Offense Level :
Value of the Bribes :
Involved Elected Public
Official
Count Two
Base Offense Level :
Grouping
Adjusted Offense Level :
Government Variance :
Acceptance of Responsibility :
Total Offense Level :
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U .S.S .G . § 2Cl .l(a) (2)
U.S .S .G . § 2Cl .l(b) (2)
U .S .S .G. § 2Cl.l(b) (3)
U .S .S .G . § 2Tl .l(a) (1)
U .S .S .G. § 2T4 .l(I)
U .S .S .G . § 301 .4
U .S .S .G . § 3El.l(a), (b)
27 The USAO will agree to a two -level downward adjustment for acceptance
28 of responsibility (and , if applicable , move for an additional one -
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level downward adjustment under U .S .S .G . § 3El .l(b)) only if the
conditions set forth in paragraph 2 are met and if defendant has not
committed , and refrains from committing, acts constituting
obstruction of justice within the meaning of U.S .S .G. § 3Cl .l , as
discussed below . Subject to paragraph 30 below , defendant and the
USAO agree not to seek, argue , or suggest in any way, either orally
or in writing , that any other specific offense characteristics,
adjustments, or departures relating to the offense level be imposed,
with the exception that , as set forth in paragraph 6(d) above , the
USAO , in it s exclusive judgment , reserves the right to move the Court
pursuant to U .S.S .G . § 5Kl .1 to fix an offense level and
corresponding guideline range below that otherwise dictated by the
sentencing guidelines . Defendant agrees, however , that if , after
signing this agreement but prior to sentencing , defendant were to
commit an act , or the USAO were to discover a previously undiscovered
act committed by defendant prior to signing this agreement , which
act, in the judgment of the USAO, constituted obstruction of justice
within the meaning of U.S.S.G . § 3Cl .1, the USAO would be free to
seek the enhancement set forth in that section and to argue that
defendant is not entitled to a downward adjustment for acceptance of
responsibility under U .S.S .G . § 3El.l , and to recommend a term of
imprisonment within this reduced range.
20 . Defendant understands that there is no agreement as to
defendant's criminal history or criminal history category .
21. Defendant and the USAO reserve the right to argue for a
sentence outside the sentencing range established by the Sentencing
Guidelines based on the factors set forth in 18 O .S .C . § 3553(a) (1),
a) (2), (a) (3), (a) (6), and (a) (7).
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1
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WAIVER OF CONSTITUTIONAL RIGHTS
22 . Defendant understands that by pleading guilty , defendant
3 gives up the following rights :
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a .
b .
The right to persist in a plea of not guilty .
The right to a speedy and public trial by jury.
c . The right to be represented by counsel -and if
necessary have the Court appoint counsel -at trial . Defendant
understands, however , that , defendant retains the right to be
represented by counsel -and if necessary have the Court appoint
counsel -at every other stage of the proceeding .
d. The right to be presumed innocent and to have the
burden of proof placed on the government to prove defendant guilty
beyond a reasonable doubt .
e . The right to confront and cross-examine wi tnesses
against defendant .
f. The right to testify and t o present evidence i n
opposition to the charges , including the right to compel the
attendance of witnesses to testify.
g . The right not to be compelled to testify , and, if
defendant chose not to testify or present evidence, to have that
choice not be used against defendant .
h. Any and all rights to pursue any aff i rmative defenses,
Fourth Amendment or Fifth Amendment claims , and other pretrial
motions t hat have been filed or could be fi led .
WAIVER OF APPEAL OF CONVICTION
23. Defendant understands that, with the exception o f an appeal
27 based on a claim that defendant 's guilt y pleas were involuntary , by
28 pleading guilty defendant is waiving and giving up any righ t to
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1 appeal defendant's convictions on the offenses to which defendant is
2 pleading guilty . Defendant understands that this waiver includes ,
3 but is not limited to , arguments that the statutes to which defendant
4 is pleading guilty are unconstitutional, and a ny and all claims that
5 the statement of facts provided herein is insufficient to support
6 defendant's pleas of guilty.
7 LIMITED MUTUAL WAIVER OF APPEAL OF SENTENCE
8 24. Defendant agrees that , provided the Court imposes a term of
9 imprisonment within or below the range corresponding to an offense
10 level of 20 and th e criminal history category calculated by the
11 Court, defendant gives up the right to appeal all of the following :
12 (a) the procedures and calculations used to determine and impose any
13 portion of the sentence ; (b) the term of imprisonment impo sed by the
14 Court; (c) the fine imposed by the Court, provided it is within the
15 statutory maximum; (d) to the extent permitted by law, the
16 conEtitutionality or legality of defendant's sentence, provided it is
17 within the statutory maximum; (e) the amount and terms of any
18 restitution order, provided it requires payment of no more th an
19 $3,438 ,793; (f) the term of probation or supervised release imposed
20 by the Court, provided it is within the statutory maximum ; and
21 (g) any of the following conditions of probation or supervised
22 release imposed by the Court: the conditions se t forth in Amended
23 General Order 20 -04 of this Court; the drug testing conditions
24 mandated by 18 u.s .c . §§ 3563(a) (5) and 3583(d); and the alcohol and
25 drug use conditions authorized by 18 U.S .C . § 3563(b) (7).
26 25 . The USAO agrees that, provided all portions of the sentence
27 are at or below the s tatutory maximum specified above, the USAO gives
28 up its right to appeal any portion of the sentence, with the
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1 exception that the USAO reserve the right to appeal th e amount of
2 re s titution ordered if that a mount is les s than $3 ,438,793 .
3 RESULT OF WITHDRAWAL OF GUILTY PLEA
4 26 . Defendant agrees th at if , after entering guilty pleas
5 pursuant to this agreement, defendant seeks to withdraw and succeeds
6 in withdrawing defendant's guilty pleas on any basis other than a
7 claim and finding that entry into this plea agreement was
8 involuntary , then (a) the USAO will be relieved of all of its
9 obligations under this agreement, including in particular its
10 obligations regarding the use of Cooperation Information; and (b) in
11 any investigation , criminal prosecution, or civil , administrative , or
12 regulatory action, defendant agrees that any Cooperation Information
13 and any evidence derived from any Cooperation Information shall be
14 admissible against defendant, and defendant will not assert, and
15 hereby waives and gives up , any claim under the United States
16 Constitution , any statute , or any federal rule , that any Cooperation
17 Information or any evidence derived from any Cooperation Information
18 should be suppressed or is inadmi ssible .
19 EFFECTIVE DATE OF AGREEMENT
20 27 . This agreement is effective upon signature and execution of
21 all required certifications by defendant , defendant 's counsel , and an
22 Assistant United States Attorney .
23 BREACH OF AGREEMENT
24 28 . Defendant agrees that if defendant, at any time after the
25 signature of th is agreement and execution of all required
26 certifications by defendant , defendant's counsel , and an Assistant
27 United States Attorney, knowingly violates or fails to perform any of
28 defendant 's obligations under th is agreement ("a breach "), the USAO
25 000105
1 may declare this agreement breached . For example, if defendant
2 knowingly, in an interview , before a grand jury , or at trial , falsely
3 accuses another person of criminal conduct or fal sely minimizes
4 defendant's own role , or the role of another, in criminal conduct,
5 defendant will have breached th is agreement. All of defendant 's
6 obligations are material, a single breach of this agreement is
7 sufficient for the USAO to declare a breach, and defendant shall not
8 be deemed to have cured a breach without the express agreement of the
9 OSAO in writing . If the USAO declares this agreement breached , and
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the Court finds such a breach to have occurred , then:
a. If defendant has previously entered guilty pleas
pursuant to this agreement, defendant will not be able to withdraw
the guilty pleas.
b . The USAO will be relieved of all its obligations under
this agreement; in particular , the USAO : (i) will no longer be bound
by any agreements concerning sentencing and will be free to seek any
sentence up to the statutory maximum for the crimes to which
defendant has pleaded guilty; and (ii) will no longer be bound by any
agreement regarding the use of Cooperation Information and will be
free to use any Cooperation Information in any way in any
investigation , criminal prosecution , or civil , administrative, or
regulatory action.
c. The USAO wi l l be free to criminally prosecute
defendant for false statement, obstruction of justice , and perjury
based on any knowingly false or misleading statement by defendant.
d. In any investigation , criminal prosecution , or civil,
administrative, or regulatory action : (i) defendant will not assert,
and hereby waives and gives up , any claim that any Cooperation
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1 Information was obtained in violation of the Fifth Amendment
2 privilege against compelled self-incrimination; and (ii) defendant
3 agrees that any Cooperation Information and any P l ea Information , as
4 well as any evidence derived from any Cooperation Information or any
5 Plea Information , shall be admissible against defendant, and
6 defendant will not assert, and hereby waives and gives up, any claim
7 under the United States Constitution , any statute, Rule 410 of the
8 Federal Rules of Evidence, Rule ll(f) of the Federal Rules of
9 Criminal Procedure , or any other federal rule, that any Cooperation
10 Information, any Plea Information , or any evidence derived from any
11 Cooperation Information or any Plea Information should be suppressed
12 or is inadmissible .
13 COURT AND UNITED STATES PROBATION AND PRETRIAL SERVICES
14 OFFICE NOT PARTIES
15 29. Defendant understands that the Court and the United States
16 Probation and Pretrial Services Office are not parties to this
17 agreement and need not accept any of the USAO 's sentencing
18 recommendations or the parties ' agreements to facts or sentencing
19 factors .
20 30. Defendant understands that both defendant and the USAO are
21 free to: (a) supplement the facts by supplying relevant information
22 to the United States Probation and Pretrial Services Office and the
23 Court, (b) correct any and all factual misstatements relating to the
24 Court's Sentencing Guidelines calculations and determination of
25 sentence, and (c) argue on appeal and collateral review that the
26 Court 's Sentencing Guidelines calculations and the sentence it
27 choose s to impose are not error , although each party agrees to
28 maintain its view that the sentencing calculations set forth above
27 000107
1 are consi s tent with the facts of this case . This paragraph permits
2 both the USAO and defendant to submit fulL and complete factual
3 information to the United States Probation Office and the Court , even
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if that factual information may be viewed as inconsistent with the
Factual Basis or Sentencing Factors agreed to in th i s agreement .
31. Defendant understands that even if the Court ignores any
sentencing recommendation , finds facts or reaches conclusions
different from those agreed to, and/or imposes any sentence up to the
maximum established by statute , defendant cannot , for that reason,
withdraw defendant 's guilty pleas , and defendant will remain bound to
fulfill all defendant 's obligations under this agreement . Defendant
understands that no one not the prosecutor , defendant 's attorney,
or the Court --can make a binding prediction or promise regarding
the sentence defendant will receive , except that it will be within
the statutory maximum.
NO ADDITIONAL AGREEMENTS
32 . Defendant understands that, except as set forth herein ,
18 there are no promises, understandings , or agreements between the USAO
19 and defendant or defendant's attorney, and that no additional
20 promise , understanding , or agreement may be entered into unless in a
21 writing signed by all parties or on the record in court .
22 Ill
23 Ill
24 Ill
25 ///
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28 000108
6-24-2021
July 27, 2021
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PLEA AGREEMENT PART OF THE GUILTY PLEA HEARING
33 . The parties agree that this agreement will be considered
3 part of the record of defendant 's guilty plea hearing as if the
4 entire agreement had been read into the record of the proceeding .
5 AGREED AND ACCEPTED
6 UNITED STATES ATTORNEY 'S OFFICE
FOR THE CENTRAL DISTRICT OF
7 CALIFORNIA
8 TRACY L . WILKISON
Acting United States Attorney
9
ARON KETCHEL
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Assista t United ttorneys
SANDRA R . BROWN-BODNER
ERIC D. SHEVIN
Attorneys for Defendant HELIOS
RAPHAEL DAYSPRING
18 / / /
19 ///
20 I I I
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CERTIFICATION OF DEFENDANT’S ATTORNEY
I am HELIOS RAPHAEL DAYSPRING’s attorney. I have carefully and
thoroughly discussed every part of this agreement with my client.
Further, I have fully advised my client of his rights, of possible
pretrial motions that might be filed, of possible defenses that might
be asserted either prior to or at trial, of the sentencing factors
set forth in 18 U.S.C. § 3553(a), of relevant Sentencing Guidelines
provisions, and of the consequences of entering into this agreement.
To my knowledge: no promises, inducements, or representations of any
kind have been made to my client other than those contained in this
agreement; no one has threatened or forced my client in any way to
enter into this agreement; my client’s decision to enter into this
agreement is an informed and voluntary one; and the factual basis set
forth in this agreement is sufficient to support my client’s entry of
guilty pleas pursuant to this agreement.
SANDRA R. BROWN-BODNER
Attorney for Defendant HELIOS
RAPHAEL DAYSPRING
Date
ty pleas pursuant
NDRA R BROWN BODN
6-24-2021
000111
EXHIBIT A
000112
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UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
HELIOS RAPHAEL DAYSPRING,
aka “Bobby Dayspring,”
Defendant.
CR No.
I N F O R M A T I O N
18 U.S.C. § 666(a)(2): Federal
Program Bribery; 26 U.S.C.
7206(1): Subscribing to a False
Income Tax Return]
The Acting United States Attorney charges:
INTRODUCTORY ALLEGATIONS
At times relevant to this Information:
A. RELEVANT PERSONS AND ENTITIES
1. Defendant HELIOS RAPHAEL DAYSPRING, also known as “Bobby
Dayspring,” owned, operated, and controlled businesses specializing
in cannabis cultivation and distribution in the Central District of
California, including San Luis Obispo County (“County”). Defendant
DAYSPRING owned, operated, and/or had a controlling interest in
multiple farms that grew and cultivated cannabis in the County
collectively, “Cannabis Farms”).
2. The County was a local government that received, every
calendar year between 2016 and 2019, benefits in excess of $10,000
000113
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under a Federal program involving a grant, contract, subsidy, loan,
guarantee, insurance, and other form of Federal assistance.
3. The County was governed, in part, by its Board of
Supervisors, which adopted legislation, adjudicated issues, held
public hearings, set hearing agendas, and set policy in the County.
4. The Board of Supervisors was comprised of five members, all
of whom represented a district within the County. Each district
elected its own supervisor to represent it.
5. County Supervisor 1 was a County supervisor, an elected
position within the County. As a County supervisor, County
Supervisor 1 voted on matters appearing before the County Board of
Supervisors, including matters that affected defendant DAYSPRING’s
Cannabis Farms, advocated for and against matters discussed at public
hearings, and had influence over matters occurring within the County
and its departments.
000114
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COUNT ONE
18 U.S.C. § 666(a)(2)]
From in or about the Fall of 2016 to in or about January 2020,
in San Luis Obispo County (“County”), within the Central District of
California, defendant HELIOS RAPHAEL DAYSPRING, also known as “Bobby
Dayspring,” corruptly gave, offered, and agreed to give things of
value to County Supervisor 1, an agent of the County, intending to
influence and reward County Supervisor 1 in connection with business,
transactions, and series of transactions of the County, having a
value of $5,000 or more. Specifically, defendant DAYSPRING gave
County Supervisor 1 approximately $29,000 in cash, over a series of
payments, and $3,000 in postal money orders, with the understanding
that when opportunities arose, County Supervisor 1 would take
official acts to benefit Defendant DAYSPRING’s Cannabis Farms,
including by voting and advocating for and against votes at County
Board of Supervisor hearings.
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COUNT TWO
26 U.S.C. § 7206(1)]
On or about October 15, 2019, in San Luis Obispo County, within
the Central District of California, and elsewhere, defendant HELIOS
RAPHAEL DAYSPRING, also known as “Bobby Dayspring”, a resident of San
Luis Obispo, California, willfully made and subscribed to a
materially false U.S. Individual Income Tax Return, Form 1040, for
the calendar year 2018, which defendant DAYSPRING verified by a
written declaration that it was made under the penalty of perjury,
which was filed with the Internal Revenue Service, and which
defendant DAYSPRING did not believe to be true and correct as to
every material matter, in that line 10 of the Form
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1040 reported his taxable income as $1,262,894, when, in truth and in
fact, as defendant DAYSPRING then well knew and believed, his taxable
income was substantially in excess of $1,262,894.
TRACY L. WILKISON
Acting United States Attorney
SCOTT M. GARRINGER
Assistant United States Attorney
Chief, Criminal Division
MACK E. JENKINS
Assistant United States Attorney
Chief, Public Corruption and Civil
Rights Section
THOMAS F. RYBARCZYK
Assistant United States Attorney
Public Corruption and Civil Rights
Section
ARON KETCHEL
Assistant United States Attorney
Public Corruption and Civil Rights
Section
000117
Exhibit 2
000118
City Administration
990 Palm Street. San LUIS Obispo CA 93401-3249
805 781 71 ),t
October 6, 2021
Ms. Valnette Garcia,
Chief Executive Officer, NHC SLO, LLC
2640 Broad St
San Luis Obispo, CA 93405
val@nhcdispensari es. com
Sent via US Mail and Email
Ms. Valnette Garcia,
Chief Executive Officer, NHC SLO, LLC
998 Huston Street
Grover Beach, CA 93433
Subject: Notice of Automatic Disqualification and Termination of Permit: CANN-0070-2019
2640 Broad St., 93401): NHC SLO, LLC
Dear Ms. Garcia,
This letter is to inf01m you that NHC SLO, LLC (NHC) is automatically disqualified from
activating, obtaining or holding a Commercial Cannabis Operator Permit (Operator Permit) to
conduct commercial cannabis activity located at 2640 Broad St. and the Operator Permit issued to
NHC is hereby immediately terminated, and/or shall not be permitted to be activated, pursuant to
San Luis Obispo Municipal Code (SLOMC) Sections 9.10.070, Subsections C.4 and D, as well as
the e xpress terms of the Operator Permit application submitted by NHC.
Please be advised that the business is not permitted to operate in any form from the date of
this notice.
This action is the result of NHC~s submission of false or misleading information in obtaining and
maintaining the Operator Permit, as set forth below, which results in automatic disqualification
from the City's permitting process and precludes NHC from obtaining or maintaining an Operator
Permit to operate a cannabis business in the City.
By their own terms, neither the SLOMC nor the terms of the application submitted by NHC, allow
appeals of automatic disqualifying events (versus suspensions or revocations for infractions
involving an active permit) because such events undermine the integrity of the C ity's process and
constitute irreparable violations, which act as an absolute bar to obtaining or holding a permit in the
City.
Notwithstanding that there is no formal appeal process because automatic disqualification is self-
executing and ministerial in natme, you may address your responses to this notice and action to
the City Manager, in writing, and you may request an in-person meeting to occur no later
than end of business on October 15, 2021 if you believe the City's regulatory or factual
determinations are in error. Your failure to provide a response and/or present a legal or factual
basis for any claim of error will constitute a waiver of any objections to this action. Purs uant to
SLOMC Section 9.10. l 00 A, absent your presentation of information that the City Manager
concludes warrants reconsideration, this shall be the fina l action of the C ity and not appealable.
Your subseq uent recourse wou ld be to pursue a writ action in Superior Court.
000119
Because of the public nature of the criminal plea and related bases of the action herein , and the clear
public interest in transparency related to the criminal misconduct of Mr. Dayspring in public
processes, the City considers this notice and any subsequent responses you may provide to be public
records subject to disclosure under the California Public Records Act. Similarly, please be advised
that any subsequent in-person meeting requested with the City will be recorded and those
recordings or transcripts thereof will similarly be considered disclosable public records, subject to
possible redaction to protect otl1erwise ex.empt protected personal information (e.g ., social security
numbers , banking information, or personal financial information) not related to Mr. Dayspring 's
admitted criminal misconduct.
ReguJatory Basis For Action:
Section 9.10.070 of the San Luis Obispo Municipal Code provides:
A]n applicant shall be disqualified from applying for, or obtaining , a commercial cannabis
operator permit if .... The applicant made one or more false or misleading statements or
omissions in the appJication process. (SLOMC § 9.10.070 C.4)
Duration and A ctivation of Permit. [ ... J Each commercial cannabis operator permit must
be activated within twelve months of issuance. 1
The pennit is activ ated by the issuanc o f a use permit for the commerc ial
cannabi. activity pursuant to Section !17. _Q _ g, together with all other applicable ity
permits and state licenses , and the commercial cannabis operator thereafter opening and
continz~ously operating the commercial cannabis activity. Failure to timely activate the
permit shall be deemed abandonment of the permit and the permit shall automatically
lapse. (SLOMC § 9.10.070(D) [ emphasis added].)
Section 9.10.170 of the San Luis Obispo Municipal Code provides:
The commercial cannabis business shall operate all times in compliance with all applicable
state and local laws, regulations, and any specific , additional operating procedures or
requirements which may be imposed as conditions of approval of the commercial cannabis
operator permit or use permit or state license(s). Nothing in this chapter shall be constrned
as authorizing any action which violates state law or local law with respect to the operation
of a commercial cannabis activity.
Section 9.10.200 of the San Luis Obispo Municipal Code provides:
1 In this case, COVlD related extensions on the activation date were granted by the City Council for
all affected cannabis businesses, resulting in a mandatory activation date for NHC of October 22 ,
2021. NHC 's permit was not activated prior to the date of this notice
000120
The responsible person and any entity to whom a commercia l cannabis operator permit is
issued pursuant to this chapter shall be responsible for all viol ations of the regulations and
ordinances of the City of San Luis Obispo committed by the permittee or any employee or
agent of the permittee, which violations occur in or about the premises of the commercial
cannabis business, even if the responsible person is not present. Violations by an employee
or agent may result in the tenuination or nonrenewal of the permit by the city. [ emphasis
added]
As it relates to NHC's land u se permit, the City's Municipal Code provides as follows :
No Vested Right to Operate. No person shall have any entitlement or vested right to operate
a cannabis business solely by virtue of licens ing under these (land use) regulations.
Operation of cannabis activity(ies) requfres both the approva l of a conditional use permit
and a commercial cannabis operator permit under Chapter [j]1 which is a revocable
pri vilege and not a right in the city. The applicant bears the burden of proving that all
qualifications for licensure have been satisfied and continuously mciintained prior to
conducting a cannabis business at an otherwise allowed location within the city. (SLOMC §
17.86.080 E.2 [c larification and emphasis added])
Finally, and for absolute clarity, NHC's application for an Operator Permit, signed by Mr.
Dayspring on behalf of N HC and its owners and managers (inc luding Ms. Garcia), expressly
reiterates the intent of the SLOMC and provides:
Applicants providing false or misleading information in the permitting process will result
in rejection of the application and/or nullification or revocation of any issued permit."
Factual Basis For Action :
On January 29, 20 19, NHC submi tted to the City a s igned application for a retai l storefront from
NHC SLO, LLC acknowledging the application requirements and attesting to the truthfulness of the
information provided. At the time the City received the application, the owners listed on the
application were Helios Dayspring, Nicholas A n dre, Valnette Garcia, Kenneth Johnson and Antonio
Contreras.
At the time NHC's application was submitted, Mr. Dayspring was a primary principal and the
identified responsible party for NHC and the current controlling owner, Ms. Garcia, was identified
as an owner, general manager and integral part of the application team. Nick Andre was identified
as an additional responsible party for the business.
On March 28, 2019, NHC was issued a Contin gent Operator Permit. The issuance of a final
Operator Permit waa contingent on all applicants' truthful participation in and successful
comp letion of a comprehensive background check conducted by th e San Lui s Obispo Police
Department.
Between the period of March 28, 2019 and October 22, 20 19, all of the owners listed on NHC's
application were processed through the City's background check process. All the owners s igned
000121
documentation and stated during the background interviews that all of the information provided to
the City was true and correct, and acknowledged that any information omitted, not disclosed, or
found to be false , or misleading would subject the entfre application to disqualification for an
Operator Permit.
On October 22, 2019, the City issued N HC an Operator Permit based on applicants' representations
and the successful completion of the City's application and background check process. The owners
listed on the application were successfully passed through the City's background check based on the
information provided in the City's background check questionnaire, interviews with the San Luis
Obispo Police Department, and all other information supplied during the initial application,
backgroW1d check, and final permitting review process.
On July 27, 2021 , Mr. Dayspring entered into a plea agreement with the United States Attorney 's
Office for the Central District of California ("USAO") in which Mr. Dayspring admits:
1. He wilJfully made and subscribed to a materially false U.S Individual Income Tax Return, Form
10401 for the calendar year 2018.
2. He underreported his individual taxable income by approximately $9 million, collectively for
the tax years 2014, 2015, 2016, 2017, and 2018 , resul ting in a tax loss of in the agreed amount
of $3 ,438 ,793.
3. He committed Federal Program Bribery with CoW1ty Supervisor l , an elected position within
the County of San Luis Obispo. Beginning in or about the Fall of 2016 and continuing until on
or about November 2019, defendant paid County Supervisor 1 approximately $29,000 in
unreported cash payments. Defendant provided County Supervisor 1 this stream of benefits with
the W1derstanding that as opportunities arose, County Supervisor 1 would do, amongst other
things, the following: (a) vote on cannabis legislation benefiting his Cannabis Farms, (b)
advocacy of other public officials in support of cannabis legislation benefiting his Cannabis
Fanns, and (c) disclose non~public County information concerning cannabis-related issues, all
ofwhich benefitted Helios Dayspring and Helios Dayspring's businesses.
4. He conducted an attempted bribery scheme for Mayor 1 in September 2017. Mayor l was the
City's mayor, an elected position within the City. As the City's mayor, Mayor 1 voted on
matters appearing before the City Council including matters that affected the Grover Beach
Dispensary.
Within the City's background questionnaire submitted under penalty of perjury, returned dated
April 9 , 2019 , and during the background interview on May 14, 2019, Mr. Dayspring was asked
directly the following questions:
I. Have you ever spent money for illegal purposes (for example: illegal drugs, prostitution, to
purchase fraudulent documents, etc.)?
2. Have you ever committed any of the following crimes? ... P. Forgery (falsifying any type of
document, check certificate, license, currency, etc.)?
3. Have you been involved in any matter regarding a tax lien, tax fraud, or evasion of taxes?
Each of the applicant team members, including Mr. Dayspring, also;
000122
1. Signed an acknowledgement that all information provided in the background questionnaire and
background interv iew is true and correct.
2. Signed an acknowledgement in the b ackground questionnaire, during the background interview,
that any infonnation omitted, not disclosed, or found to be false is subject to disqualification for
a Cannabis Operator Permit.
fn responses to the relevant questions outlined above, neither Mr. Dayspring nor any other member
of the applicant team, disclosed Mr. Dayspring's past and/or ongoing involvement in the bribery or
attempted bribery of elected officials, and/or his willfully false tax filing, and/or his illegally
underreported taxable income and/or other fraudulent tax activities.
The dates of involvement in the bribery or attempted bribery of elected officials, and/or the willful
false tax filing, and/or illegally underreported taxable income, as admitted in tbe plea agreement,
confirms that Mr. Dayspring provided the City with false or misleading information in NHC 's
application, background and/or permitting review p roc ess.
Conclusions:
Mr. Dayspring has admitted in a federal plea agreement to criminal misconduct, which, in effect,
also admits that he provided "false or misleading information in the permitting process". If Mr.
Dayspring had not omitted or actively concealed his criminal misconduct from the City in the
application, background and pennitting process, NHC's application for an Operator Permit would
have been rejected and/or NHC would have been automatically disqualified fro m obtaining an
Operator Pennit. NHC 's concealment of misconduct and provision of false or misleading
information results in the automatic disqualification, termination, nullification and/or revocation of
the Operator Permit issued.
Following issuance of the Operator Permit to N HC , and with full knowledge of his own criminal
misconduct and concealment, Mr. Dayspring maintained express ownership, ongoing control of,
and operational affi liation with NHC and its permitted premises at all relevant times and in all
relevant activities on site and with the City at least until October 30, 2020. Specifically, from the
date of application, and throughout the background and final operator and land use permitting
processes, and continuing through the building permit and ongoing inspection processes, Mr.
Oayspting knew that he had engaged in criminal tax and bribery activities and, therefore, was not
qualified to hold, and had wrongfully obtained, an operator permit based on false and misleading
information. With that knowledge, he continued to direct and control the operations and premises
associated with the cannabis business, which also con stitutes a clear violation of the SLOMC
sections referenced above. The illegal conduct in which he admittedly e ngaged related to his
cannabis businesses is also dis qualifying under state law.
The C ity verifi ed that the transfer of ownership complied with the SLOMC, as between Mr.
Dayspring and Ms. Garcia, which took place October 30, 2020. However, Mr. Dayspring's
admitted ongoing pattern and practice of criminal misconduct in the City Operator Permit
application, background and pennitting process, as well as on the premises of and in association
with the cannabis business and activities is imputed to the business entity as provided in Section
9.10.200. Thus, automatic disqualification, termination , nullification and/or revocation of the
000123
cannabis business permit issued to NHC is compelled by the SLOMC, irrespective of Mr.
Dayspring's continuing involvement.
The truthful and successful completion of the City's application process, including the application,
background check, and permitting review process by all the interest holders li sted on NHC's
application was a substantial bas is for NHC being granted an Operator Permit. All responsible
parties, employees and agents were, at alJ times after issuance of permits, re quired to be and remain
in compliance with the laws governing cannabis business operations, purs uant to Section 9 .10.170.
Pursuant to Section 9.10.200, all responsible parties, and the N HC entity, of which Ms. Garcia is
now the controlling owner, and at all t imes has held a manage ment and equity interest, are
responsible for Mr. Oayspr ing's violations while holding an operator permit and operating the
cannabis business in the City. Likewise, several other members of the original applicant t eam
remain involved with the NHC entity to which Mr. Dayspring's actions are imputed by the
SLOMC.
Finally, as of the date of this notice, NHC's permit has not been activated as required by SLOMC,
Section 9.10.070 and, because the stated misconduct automatically disqualifies NHC from obtaining
and lawfully maintaining an Operator Permit, the SLOMC does not permit NHC to activate and
obtain the benefits of the cu1Tently issued permit or to initiate retail cannabis business operations in
the City.
Because Mr. Dayspring's admitted criminal misconduct at the time o f application and continuing
thereafter, and because the current owners/interest holders of the business and the business entity
itself are respon sible under City regulation for Mr. Dayspring 's violations, NHC's Operator Permit
is hereby determined to be n ullified, revoked and/or terminated, as provided by the provisions set
forth above.
000124
Exhibit 3
000125
LAW OFFICES
R E E T Z, F O X & B A R T I , E T T LLJ>
Via E-Mail & U.S. Mail
Greg Hermann
Deputy City Manager
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 9340 I
2.hermmm(@,slocity.o r g
116 EAST SOLA STREET
SANTA BARBARA. CAUfiORNlA 93J0l
TELEPHONE: (805) 965-0523 FAX: (805) 564-8675
E-MAIL: frontdesk@reetzfo1<.com
1MPROPER ATTEMPTED DISQUALIFICATION AND TERMINATION OF PERMIT:
CANN-0070-2019 (2640 BROAD ST., 93401): NHC SLO LLC
Dear Mr . Hermann,
My office has been retained for the purpose of litigating NHC SLO LLC's ("N HC" or
lhe "Company") claims against the City of San Luis Obispo ("City") and potentially certain
individuals regarding the City's unj\ateral and wrongful efforts to terminate NHC's above-
referenced permit. On October 6, 2021, our client received a letter ("your Letter") penned by
you on behalf of the City wrongfully purp01ting to terminate NHC' s Commercial Cannabis
Operator Permit On October 7, 2021, I sent you a demand fo r preservation of evidence.
YOUT Letter pm-porting to terminate my client's Commercial Cannabis Operator
Pe11nit for retail sales at 2640 Broad Street miss tates both the applicable ordinances and
regulations, as well as the facts. As invited by yow-Letter we request an in-person m eeting
on October 15, 202 1, at 9:00 a.m., with participation by Attorney Mark Beck via Zoom or
speaker phone, to discuss these issues and hopefully resolve this dispute short of filing a
formal complaint.
Before addressing specifics, I would like to draw yom attention to the City of Grover
Beach's handling of the identical issues facing San Luis Obispo. Grover Beach conducted an
investigation which affirmed that Mr. Dayspring is no longeI an owner and has n o further
affiliation with the business. Grover Beach examined Natw·al Healing Center's operations
since 2018 and found the business operated wjtb.in the stringent ordinances and regulations
establi shed by the City and St.ale. The City th en closed its investigation.
In response to your Letter:
l. The Cjty 's stated factual detem,inations aJe enoneous. You have attempted to
disqualify and terminate NH C's permit based on the alleged conduct of one of its fonner
members, who was neither th e legal "applicant" nor the permit holder.
000126
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page2
As the application form makes clear, NHC was the applicant, and is the operator
permit holder. This limited liability company is an independent legal entity recognized by
the State of California with registration number 201834710403. No individual was the
applicant, nor did any individual ever hold the relevant permit.
NHC is not Helios Dayspring. Mr. Dayspring is merely a former member of NHC
who no longer holds any position with the Company or any ownership interest in it. While
your Letter asserts that Mr. Dayspring's circumstances violate the "intent" of the applicable
City ordinances, you have failed to set forth any facts which suggest that there has been an
actual violation of any of the express provisions of such ordinances. There are millions of
dollars at stake here, and reading between the lines to establish some subjective measure of
intent and punish my client for the sins of a former owner flies in the face of the City's actual
ordinances, as well as the legal rights and reasonable expectations of my client.
While Mr. Dayspring was a principal of NHC when the original application was filed,
the City is well aware that he left the Company and transferred all of his membership interest
approximately one year ago, in October 2020. He has not held any position with the
Company since that time.
2. Mr. Dayspring is not a principal in NHC and has no ownership or position in
it. The City cannot now enforce claims based on Mr. Dayspring because City accepted his
withdrawal as principal from the Company and its operator permit. On October 29, 2020, the
City Attorney's Office on behalf of the City acknowledged the transfer of all of Mr.
Dayspring's former membership interest in NHC to Valnette Garcia had been accomplished
in conformance with the City's Municipal Code, thereby accepting that Mr. Dayspring's
interest in NHC had been unconditionally transferred to Ms. Garcia. By this action, the City
amended the operator permit to withdraw Mr. Dayspring as a principal and approved Ms.
Garcia as the new owner and manager. Ms. Garcia had already been approved as an owner
and principal as a result of the vetting which followed the original application ofNHC for an
operator permit.
By approving Mr. Dayspring's transfer to Ms. Garcia, combined with the City's
continued encouragement to proceed with the timely construction at 2640 Broad Street and
commencement of retail operations, the City effectively waived any claims based on Mr.
Dayspring's conduct and/or is estopped to now deny NHC's ability to open and operate the
commercial cannabis storefront.
3. Based on my review, City's understanding and recitation of the facts is
inaccurate. 1
1 We believe this may be a conscious effort by individuals within the City because this is not the frrst
occurrence of egregious error. Previously, a report made regarding Mr. Dayspring's interview with the San
Luis Obispo Police Department included references to a number of"statements" which were utilized as a basis
000127
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page 3
a) In particular, we note that the materials submitted by Mr. Dayspring on March 29,
2019, to the Police Department contained extensive disclosures about his past conduct.
Contrary to the claims within your Letter, Mr. Dayspring answered "yes" to the disclosure
questions 1, 2, 3, 4, 5B, and 6.
Question 1: Have you ever spent money for illegal purposes (for example:
illegal drugs, prostitution, to purchase fraudulent documents etc.)?
Question 2: Have you ever used/possessed illegal drugs?
Question 3: Have you ever been placed on court probation (either formal or
iriformal)?
Question 4: Have the police ever been called to your home for any reason?
Question 5B: Have you ever committed any of the following crimes -Battery
use offorce or violence upon another)?
Question 6: Are you involved in any criminal or civil litigation or any
litigation involvingfraud at this time?
The City was aware that Mr. Dayspring admitted that he spent money for illegal
purposes, used or possessed illegal drugs, had been placed on court probation, that police had
been called to his home, that he had in the past committed a battery, and that he was then
involved in litigation involving fraud. All of those written disclosures were made prior to the
City issuing NHC the permit, and none of those disclosures now support your efforts to
terminate the permit.
b) According to your Letter, the City is asserting that Mr. Dayspring committed
forgery. Forgery is defined in California by Penal Code Section 470 which states: "Every
person who, with the intent to defraud, knowing that he or she has no authority to do so,
signs the name of another person or of a fictitious person to any of a specific list of items is
guilty of forgery." There is no allegation or indication made by you that Mr. Dayspring
signed any names other than his own to any document.
c) With respect to your suggestion that false statements were made as to whether
Mr. Dayspring had been involved in "any matter" regarding a tax lien, tax fraud or evasion of
taxes, City does not refer to any evidence that any such "matter" involving Mr. Dayspring
existed at the time of the relevant disclosures. Mr. Dayspring's plea agreement indicates that
for denying the issuance of the pennit. A subsequent review of the relevant recording served to establish that
such "statements" were never made by Mr. Dayspring.
000128
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page4
he underreported his personal taxes for several years but the investigation "matter" did not
occur until long after submission of his background questionnaire in April 2019. Only
following the issuance of the FBI's search warrants did Mr. Dayspring's taxes become a
matter".
The relevant question was "Have you been involved in any matter regarding a tax
lien, tax fraud or evasion of taxes?" As of April, 2019, there were no matters regarding tax
liens, tax fraud, or evasion that existed.
4. Prior to the receipt of your Letter, NHC was set to begin business operations
at 2640 Broad Street on October 22, 2021, in compliance with the operator permit that the
City improperly seeks to terminate. To the extent your actions have or may delay the actual
opening and commencement of retail sales, it will be solely the City who will be responsible
for that delay, and under no circumstances will any court allow the City to take advantage of
its own misdeeds.
If the Company's ability to open is delayed, it will be because of City's efforts to
unilaterally terminate NHC's permit, which is clearly based upon the City's improper
understanding, and/or interpretation of its own ordinances, as applied to a number of
falsehoods you have raised related to NHC's permit and operations. Obviously, the operator
permit is extremely valuable, and NHC is not about to accept efforts to unilaterally destroy
its investment of time and resources without just cause or right.
NHC Grover Beach's dispensary operations are now the single largest sales tax
revenue generator in the City of Grover Beach, actually exceeding the sales tax revenue
generated by the local Vons Grocery Store. NHC's operations at 2640 Broad Street will no
doubt generate significant sales tax revenue for the City as well. Valnette Garcia has seven
and one-half years' experience in the industry and five years cannabis compliance experience
in San Luis Obispo County. She has done an extraordinarily good job managing the
operations in Grover Beach and Morro Bay, and we expect even greater success here in San
Luis Obispo.
Following Ms. Garcia's acquisition of Mr. Dayspring's interest in NHC, and
notwithstanding the rumors and reports of Mr. Dayspring's personal activities, the City
continued to encourage NHC to meet their commercial cannabis store opening deadline for
approximately one additional year (from October 2020 to October 2021).
Your most recent last minute and unsupported effort to now prevent NHC from
opening and operating the cannabis retail store will significantly and negatively impact
NHC's financial condition. If we are forced to litigate, NHC will hold the City responsible
for NHC's resultant damages. Based on Ms. Garcia's established operations in Grover
Beach and Morro Bay, these losses are not speculative and the damages to the Company are
both readily ascertainable and significant.
000129
REETZ, FOX & BARTLETT LLP
Greg Hermann
October 14, 2021
Page 5
5. The City has violated its own regulatory scheme. Section 9.10.170 of the
Municipal Code provides that the commercial cannabis business shall operate at all times in
compliance with all applicable state law and local laws, regulations, etc. Once again, this
ordinance is not directed at individuals but rather at the Company. The Company, as the
Operator Permit holder, remains in compliance with Section 9.10.170.
states:
Responsible parties are subject to Section 9.10.200 of the Municipal Code which
the responsible person and any entity to whom a commercial cannabis
operator permit is issued pursuant to this chapter shall be responsible for all
violations of the regulations and ordinances of the City of San Luis Obispo
committed by the permittee or any employee or agent ofthe permitee, which
violations occurred in or about the premises of the cannabis business, even
if the responsible person is not present." [emphasis added.]
This section expressly establishes the City's oversight of the entity, its employees and agents.
By its express provisions, the City's oversight is limited to "violations [which] occur in or
about the premises of the commercial cannabis business." NHC has not commenced
operation yet and it is accordingly impossible for violations to have occurred in or about the
premises of the commercial cannabis business. The Company is entitled to the proper
application of the law.
6. Finally, notwithstanding your recitation that the termination determination is
not appealable, the applicable legal process for challenging the City's conduct with regard to
the Company's commercial cannabis operator permit is set forth in Section 9.10.1 00B of the
Municipal Code.
A decision of the city to reject an application for renewal, or to revoke or
suspend a commercial cannabis operator permit, is appealable to the city
manager. An appeal must be filed with the city manager within 10 working
days after the renewal has been denied, suspended or revoked. A decision
ofthe city manager or his or her designee is appealable to the City Council
in accordance with Chapter 1.20." [emphasis added.]
Section 9.10.090 of the Municipal Code articulates the penalty for violation of this
Chapter. "Upon a finding by the City of a first permit violation within any five-year period,
the permit shall be suspended for 3 0 days."
By this letter we hereby request an appeal to the City Manager. This letter shall also
constitute a notice of appeal to the City Council pursuant to Section 1.20.030 of the
Municipal Code to the extent required.
000130
Exhibit 4
000132
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12/30/2020 1 :33 PM
JEFFREY V. DUNN, Bar No. 131926
jeffrey.dunn@ bbklaw.com
DANIELL. RICHARDS, Bar No. 315552
daniel.richards@ bbklaw.com
BEST BEST & KRIEGER LLP
18101 Von Karman Avenue
Suite 1000
Irvine, Cal ifornia 92612
Telephone: (949) 263-2600
Facsimile: (949) 260-0972
J. CHRISTINE DIETRICK, Bar No. 206539
cdietrick@sloci ty .org
CITY OF SAN LUIS OBlSPO
CITY ATTORNEY'S OFFICE
Attorneys for Defendant
City of San Luis Obispo
Electronically
FILED: 03 /19 /21
San Luis Obispo Superior Comt
by: Landrum, Marlys
EXEMPT FROM FILING FEES PURSUA T
TO GOV ERNME T CODE SECTIO 6103
SUPERIOR COU RT OF THE STATE OF CALIFORNIA
COUNTY OF SAN LUIS OBISPO
SAN LUIS OBlSPO WELLNESS CENTER
CORP., a California corporation ,
Plaintiff,
V.
CITY OF SAN LU IS OBISPO,
Defendant.
1 -
Case No. 20CV-0035
WRAPQ~i:D] JUDGMENT DENYING
PETITION FOR WRIT OF MANDATE
PROPOSED] JUDGMENT 000133
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On December 9, 2020 , the above captioned matter was heard in Department 9 of the San
Luis Obispo County Superior Court, the Honorable Tana L. Coates presiding. John R. Armstrong
and James A. Murphy appeared on behalf of Petition San Luis Obispo Wellness Center, Corp.
Petitioner"). Christine Dietrick, Jeffrey V. Dunn, and Daniel L. Richards appeared on behalf of
Respondent City of San Luis Obispo ("City").
At the December 9, 2020 hearing, the Court adopted its tentative decision ("Decision") a
copy of which is attached hereto as Exhibit A and is incorporated by reference as though fully set
forth herein. After considering the administrative record, all pleadings on file in this action , the
briefs submitted by Petitioner and the Ci ty, and oral argument made by counsel, and for the
reasons set forth in the Court's Decision,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:
1. The Petition for Writ of Mandate of Petitioner San Luis Obispo Wellness Center,
Corp. is DENIED in its entirety.
2 . Final judgment is entered against Petitioner and in favor of the City. Thi s
judgment constitutes the final j udgment of the Court in this action for all purposes.
3. As the prevailing party, the City shall recover, and is hereby awarded, its costs of
suit as permitted by law .
Dated: 03 /19 /21
HON~S
JUDGE OF THE SUPE RfOR COURT
2 -
PROPOSED] JUDGMENT 000134
EXHIBIT
1
San Luis Obispo Wellness Center, Corp. v. City of San Luis Obispo, 20CV-0035
Hearing: Petition for Writ of Administrative Mandamus
Date: December 9, 2020
San Luis Obispo Wellness Center, Corp. (“Petitioner” or “SLO Wellness”) filed its Verified
Petition for Writ of Mandate against the City of San Luis Obispo (“Respondent” or the “City”) on
January 17, 2020.
Petitioner desired to obtain a Commercial Cannabis Business Operators Permit (“Permit”) from
the City. After the City initially awarded Petitioner sufficient points to put it in line for a Permit,
Petitioner was disqualified under San Luis Obispo Municipal Code section 9.10.070(C)4, which
provides for automatic disqualification if the applicant made one or more false or misleading
statements or omissions in the application process.
Petitioner now petitions pursuant to Code of Civil Procedure section 1094.5 for administrative
mandamus. The Petition seeks a writ of mandate with the following relief:
1. That the Court issue a peremptory writ in the first instance commanding Respondent to
reverse its denial and rejection of Petitioner’s cannabis permit application, and to order the
City to exercise its discretion in a rational, non-abusive manner such that Petitioner may
be granted a business permit to operate a lawful cannabis business within the City of San
Luis Obispo;
2. That the Court, alternatively, first issue an alternative writ commanding Respondent to
show good cause why it should not grant a cannabis business permit to Petitioner, and
thereafter issue a peremptory writ commanding Respondent to issue such permit if it is
unable to show good cause for the denial of Petitioner’s permit application; and
3. For costs of this proceeding and for such other and further relief as the Court deems just
and proper, including reasonable attorney fees as may be allowed by law.
The Administrative Record in this matter was lodged with the Court (the “Record” or “AR”). The
City filed a Request for Judicial Notice in support of its opposition; Petitioner did not object to this
Request and the Court grants the Request for Judicial Notice (“RJN”).
I. Background Facts
Petitioner submitted an application for a cannabis Permit dated January 29, 2019 (the
Application”), to operate under the name Elemental Wellness. (AR0001-182.) The Application
states that the principals and officers of the business are to be Randolph Dale (President and
Primary Principal) (“Dale”), 73%, Matt Quaglino (Community Development Director)
Quaglino”), 9%, Gasper Guarrasi (Chief Financial Officer and Chief Operating Officer)
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Guarrasi”), 9%, Jonathan Martines (Secretary) (“Martines”), 3%, Alexis Serna (Treasurer)
Serna”), 3%, and Colin S. McDonald (Director) (“McDonald”), 3% (collectively the
Principals”). (AR0009-10, AR0046.)
Under San Luis Obispo Municipal Code section 9.10.070, an aspiring cannabis operator must
submit an application to the City. Then the application is judged pursuant to the City of San Luis
Obispo Cannabis Business Operator Permit Scoring Guidelines, which include points for local
community involvement and social equity. (AR0715-716; RJN, Exh. D.)
On March 28, 2019, the City informed Petitioner that the Application had scored sufficiently to
move forward in the process. (AR0183-184.) Petitioner was notified that the top three scoring
applicants were to be issued contingent operator permits, and that the issuance of official Permits
would be subject to the applicants’ successful completion of a comprehensive background check.
AR0183.) The Principals were required to submit a background questionnaire and participate in
follow-up interviews with members of the San Luis Obispo Police Department (“SLOPD”).
AR0183-184.)
Quaglino, McDonald, and Serna were local and low-income applicant team members whose
participation was key to the ranking and scoring of the Application. (AR0688.) The Petitioners
submitted the Background Packet provided by SLOPD. (AR0185-191.)
SLOPD interviewed the disclosed Principals of Petitioner. (AR0286-587.) After the background
check, the Chief of Police recommended that Petitioner be disqualified due to false statements and
omissions as part of the process. (AR0211-216; AR0590-0591.) Petitioner was given a chance to
respond to the recommendation, and to have a meeting with the City Manager, Derek Johnson
Johnson”) and the City Attorney, Christine Dietrick, Esq. (“Dietrick”). (AR0211-277; AR0592-
685.) On August 13, 2019, Dietrick, Johnson, and outside counsel, held an in-person hearing at
City Hall with Petitioner, its counsel, and representatives of Petitioner’s consultant, Elemental
Wellness, San Jose, (“Elemental”) to allow Petitioner to address the recommendations to
disqualify Petitioner. (AR0686.)
The City’s final decision disqualifying Petitioner form the application process was dated October
22, 2019 (the “Decision”). (AR0686-694.) In the Decision, City Manager Derek Johnson
Johnson”) accepted as sufficient for purposes of his final determination Petitioner’s clarification
of some of the issues identified by the Chief of Police. (AR0687.)
However, Johnson did not find Petitioner’s written or in person responses adequate to address, or
credible to explain, several of the other potentially disqualifying findings and recommendations of
the Chief of Police. (AR0687.) These include:
1. Misleading omissions or misrepresentations in the application regarding the status,
involvement and roles of applicants and other non-applicant representatives and corporate
and management control; and
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2. False responses to background application questions and/or follow up questioning
regarding background information by Marines and Dale.
AR0688-0689.)
As to the omissions and misrepresentations related to the status, involvement and roles of applicant
and non-applicant representatives, the Decision stated that:
The background process and subsequent meeting leads me to the conclusion that
the team proposed was advanced to “check the boxes” to unfairly maximize points
in the scoring and ranking process in a misleading way. As a result of the series of
choices made by the Applicant, the Applicant did not participate fairly and
forthrightly in the established process which deprived the City of the opportunity
to actually understand, vet and score the application based on the team that is
actually proposing to be the cannabis business operator in our community.
AR0694).
As to the false responses to background application questions, Johnson found that:
While it may have been the case that I could have weighted truthful responses and
complete information in a manner that could have led to a recommendation to
proceed with permitting, failure to provide complete and truthful responses in
regulatory processes is always material and relevant.
AR0691.)
Again, while forthright answers to the questions posed may well not have
influenced my decision making, knowingly false answers do, and I find the
responses and subsequent information from the meetings to be automatic
disqualifiers pursuant to section 9.10.070.C.4 of the Municipal Code.
AR0692.)
The City ultimately disqualified Petitioner pursuant to Section 9.10.070(C)(4) of the City’s
municipal code. (AR0694.) That section is titled “Grounds for Automatic Disqualification” and
provides that “an applicant shall be disqualified from applying for, or obtaining, a commercial
cannabis operator permit if…the applicant made one or more false or misleading statements or
omissions in the application process.” (San Luis Obispo Mun. Code, § 9.10.070(C)(4); AR0715-
716.)
In late 2019, the City issued commercial cannabis operator Permits to Natural Healing Center,
LLC and Megan’s Organic Market SLO. (RJN, Exhs. A, B.) Following conclusion of the final
administrative appeal processes and final notice of disqualification to Petitioner, the City granted
a third and final commercial cannabis operator permit to the previously fourth ranked applicant,
SLOCal Roots LLC. (RJN, Exh. C.)
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II. Standard
The caption of Petitioner’s Petition states that it seeks a writ of mandate pursuant to Code of Civil
Procedure sections 1085, 1086, and 1094.5. However, Petitioner’s opening brief clarifies that it
petitions for administrative mandamus pursuant to Code of Civil Procedure section 1094.5.
Code of Civil Procedure section 1094.5 “requires the court to look to the administrative record to
ascertain whether the agency has proceeded without or in excess of its jurisdiction; whether there
was a fair hearing; or whether there was any prejudicial abuse of discretion.” (Smith v. County of
Los Angeles (1989) 211 Cal.App.3d 188, 198.)
Here, Petitioner argues that the City’s decision was a prejudicial abuse of discretion because the
findings were not supported by the evidence. Abuse of discretion is established if the Court
determines that the findings are not supported by substantial evidence light of the whole record.
Code Civ. Proc., § 1094.5(c); Wesley Investment Co. v. County of Alameda (1984) 151
Cal.App.3d 672, 679 [decision must be upheld if supported by substantial evidence]; Bixby v.
Pierno (1971) 4 Cal.3d 130, 143, fn. 10 [substantial evidence test requires the trial court to review
the entire record]; Smith v. County of Los Angeles, supra, 211 Cal.App.3d at p.198 [court must
deny the writ if there is any substantial evidence in the record to support the finding].)
Substantial evidence has been defined as “relevant evidence that a reasonable mind might accept
as adequate to support a conclusion.” (California Youth Authority v. State Personnel Bd. (2002)
104 Cal.App.4th 575, 584.) In the context of the California Environmental Quality Act, the
legislature characterizes substantial evidence as “enough relevant information and reasonable
inferences from this information that a fair argument can be made to support a conclusion, even
though other conclusions might also be reached.” (Smith v. County of Los Angeles, supra, 211
Cal.App.3d at p. 199.)
Substantial evidence must be of ponderable legal significance. Obviously, the word cannot be
deemed synonymous with any evidence. It must be reasonable in nature, credible, and of solid
value; it must actually be substantial proof of the essentials which the law requires in a particular
case.” (Department of Parks & Recreation v. State Personnel Bd. (1991) 233 Cal.App.3d 813, 830
citations omitted].)
Nonetheless, “[t]his standard of review is highly deferential, and [the court] must resolve all
conflicts in the evidence and draw all inferences in support of the administrative findings. A review
for substantial evidence tests only whether there is substantial evidence to support the decision,
not whether other facts in the record contradict that evidence. ‘Substantial’ refers to the quality,
not the quantity of the evidence presented.” (JMS Air Conditioning & Appliance Service, Inc. v.
Santa Monica Community College Dist. (2018) 30 Cal.App.5th 945, 967 [citations omitted].)
Under the substantial evidence test, the agency's findings are presumed to be supported by the
administrative record and… it is [petitioner's] burden to show they are not…[The] findings come
before us with a strong presumption as to their correctness and regularity.”
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Donley v. Davi (2009) 180 Cal.App.4th 447, 456.)
III. Discussion
Petitioner argues that it has been denied due process and a fair tribunal in its proceedings, that the
City did not render a fair and impartial decision, and that Petitioner is due equal protection under
the law and the City’s decision must not be arbitrary. Petitioner argues that the City’s final decision
to disqualify Petitioner was not based on an objective rational basis but was arbitrary and
capricious. Petitioner further argues that the Administrative Record, taken as a whole, does not
substantially support the City’s decision to disqualify SLO Wellness from the application process.
Code Civ. Proc., § 1094.5(c).)
Petitioner contends that individually and objectively, none of the circumstances of allegedly false
statements, or alleged misleading omissions or representations cited in the City’s Decision
objectively and rationally support disqualification for intentional, material fraud. Petitioner argues
that none of the criteria cited by the City was material to the application or a reliable, objective
indicator of Petitioner’s character for honesty; but rather, were based on an honest
misunderstanding regarding the point of the questions the police were asking.
In opposition, the City argues that the City’s determination that Petitioner made one or more false
or misleading statements or omissions in the application process is supported by substantial
evidence.
a. False or Misleading Statements or Omissions by Martines
The City argues that Martines knowingly lied to the City and Detective Walsh by stating that the
police had never been called to his home for any reason, when the San Luis Obispo Sheriff’s Office
had responded to a call of a domestic dispute at his house six days before his interview. (AR0216,
AR0400). Martines later argued he had not disclosed it because he “it was handled verbally and
he] didn’t think it needed to be mentioned. That’s – it is a personal matter.” (AR0633.) He stated
that he “just thought it was a quick thing. It was handled verbally and it wasn’t even anything
serious.” (Ibid.)
Petitioner argues that this was an innocent and reasonable misunderstanding, and that such police
contact would not be disqualifying. Nonetheless, the City argues that this was a false statement or
omission, subjecting Applicant to automatic disqualification.
b. False or Misleading Statements or Omissions by Dale
Dale is listed as the Primary Principal on the Application. The City argues that Dale did not
disclose federal and state tax liens (AR0591), and that in Dale’s interview, he was asked to confirm
that he had never been involved with a tax lien, and he answered “no”, and that he had “paid late,
but paid”. (AR0471.) The City later learned that Dale had federal and state tax liens recorded
against him in the past. (AR0590-591.) Those liens had been released, but from 2004 until 2019,
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the City argues it is undisputed that Dale was “involved in” matters regarding tax liens, which he
did not disclose. (AR0593.) The City cited the denial and omission of those liens as a false
statement or omission, and grounds to disqualify Petitioner.
Petitioner argues that the liens were discoverable via a public records check, and that the tax liens
are immaterial given the insubstantial amounts and attenuation in time. Petitioner further argues
that at around the same time as Dale was questioned regarding whether he had been involved with
any liens, Dale had disclosed that he suffered a traumatic brain injury and was still coping with
impaired cognitive function (AR418-420). Petitioner argues that Dale’s statement that he “paid
late” should have triggered the detective to inquire further and clarify that answer.
Petitioner further argues that the detective was aware of Dale’s handicap and prior request for
accommodations under the Americans with Disabilities Act (“ADA”). Petitioner contends that
Dale requested that his sister, Joanie Dale, who is his attorney-in-fact, be included in all
communications, but the City proceeded with Dale’s interview without Ms. Dale present.1
In opposition, the City notes that a statement that an individual paid their taxes late is indicative
that the individual may have been subject to penalties, not that an individual has been subject to
numerous tax liens over a decade, such that further questioning was warranted or necessary.
Moreover, the onus is on the applicant to be truthful. Additionally, to the extent that Petitioner
argues one of the tax liens was recorded in error (AR0593) the City argues that could have been
easily explained if it had been disclosed, which it was not.
As to Joanie Dale and the power of attorney, City notes that Dale is the majority owner of SLO
Wellness, per the Application. (AR0009.) However, as noted above, Dale suffers from a traumatic
brain injury and has executed a power of attorney giving his sister, Ms. Dale, broad legal authority
to control Dale’s affairs. (AR0588-589, AR0691.) The City argues that Ms. Dale could therefore
make every major decision on behalf of SLO Wellness, and yet was not mentioned in the
Application, and was not subject to a background check. The Application was not scored based
on her ownership or operational qualifications, which the City argues was a misleading omission
of crucial information. (AR0691.)
1 Petitioner argues that an ADA accommodation was made and denied. However, while there is a letter from
Petitioner’s counsel in the Record stating that such a request had previously been made (AR0221-AR0222), the
actual request is not reflected in the Record. As to that request, the Decision states as follows:
The Applicant's response correspondence also suggests that there was some request to the Police Department for
and/or failure to provide an ADA accommodation to Mr. Dale. Review of the conversation between Ms. Dale and
Police Department personnel regarding the Power of Attorney and Mr. Dale's need for assistance clearly
demonstrate that to be a false contention. No such request for an ADA accommodation was made or denied. The
explanation offered for the failure to disclose or explain Ms. Dale's role in the application materials was that there
was a concern that private medical information or other private details related to Mr. Dale might be publicly
disclosed. That is a concern that was not raised with the City in advance of the application or scoring and ranking
process. If it had been, the concern could easily have been addressed through permissible redactions of such
information under the Public Records Act.” (AR0691)
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c. Management and Control of SLO Wellness
The Decision concluded that during the one-on-one interviews many of the principals had limited,
conflicting and otherwise incomplete information which demonstrated that they collectively did
not understand the complete financial, management and corporate operational team as described
in the Application, leading the City Manager to conclude that the team lacked the wherewithal to
open a retail cannabis shop in the City. (AR0688.)
Petitioner argues that analysis is not supported by the Record. Petitioner cites a letter from its
counsel to the City responding to the SLOPD’s initial recommendation for disqualification.
AR0217-220.) Petitioner contends that each Principal accurately identified Petitioner by its
corporate name, their respective role in the Application, and accurately stated their percentage of
ownership interest.
Petitioner further argues that the SLOPD inquiry into the qualifications of the Principals is outside
the scope of the Background Packet. Detective Walsh confirmed to Devon Julian from Elemental,
that the purpose of the interviews was not to broadly address the qualifications of the individuals
for the permit. (AR0585.) Petitioner argues that SLOPD acted outside the scope of the background
interview, and therefore Petitioner was unfairly misled that its business qualification would be
scrutinized.2
The City argues that interviews with other Principals revealed that Petitioner had made false or
misleading statements concerning their roles, and the overall structure and management of SLO
Wellness. The City argues that the perhaps most concerning misleading statements and omission
involved the control and involvement of Elemental, from San Jose, and the relatively insignificant
involvement and knowledge of local disclosed Principals. (AR0692-694.)
2 Petitioner argues that the most “absurd” and “irrational basis” for disqualifying the Applications was that three
of the six Principals listed on the Application did not attend the hearing. Petitioner argues that it was never
communicated that attendance of all of the Principals was mandatory. The Decision states that its “conclusions
are further supported by the fact that Matt Quaglino, Colin McDonald, and Alexis Serna, key local and low-
income Applicant team members whose participation was key to the ranking and scoring of the original
application, did not attend the in-person meeting. The absence of those team members followed scheduling
accommodations made by the City, as requested by the Applicant, to facilitate team attendance.” (AR0688-
689.)
However, that fact was not in of itself a grounds for disqualification, but was cited in support of the City’s
concerns that Petitioner “did not substantively address many of its concerns regarding the disconnect between
how the application represented the experience, knowledge, and operational involvement of the principal
Applicants and their apparent lack of knowledge of the most basic structure of the business and their intended
financial, operational and management roles, as well as relationships between the listed Applicants and the
Elemental Wellness San Jose team.” (AR0688.)
The City argues that the absence of these individuals was not disqualifying, but was probative of their lack of
involvement in the actual operation of SLO Wellness.
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As to the local Principals, McDonald, who was identified in the Application as a Director having
a three percent ownership interest and being a “principal and brand ambassador to the local
community”, expressed uncertainty as to his role, and his awareness as to how he became a three
percent owner. (AR0010, AR0020, AR0046, AR0313, AR0314, AR0378.)
Serna was also identified as a three percent owner who would “spearhead[] the philanthropic
endeavors” of SLO Wellness, and is listed as Treasurer for SLO Wellness. (AR0010, AR0019,
AR0046.) However, Serna stated in her interview that she was not sure what her role is, that she
hadn’t “really spoken with the guy” and that she thought she might be working in the storefront or
delivering. (AR0289-290.) She did not indicate that she was aware of her role at the company or
her ownership interest. (AR0290-293.)
The City further argues that three individuals affiliated with Elemental in San Jose, Joe LoMonaco,
Tommy Le and Devon Julian, were not disclosed as principals, owners, or operators, and therefore
no background interviews were conducted. However, the City contends that it became clear that
these individuals were the genesis of the Application and could control the finances and day to day
management and operation of the business. (AR0615-629.)
Although Elemental purports to just be Petitioner’s consultant, the City contends that the facts
show that Elemental intended to apply for a permit, but when the scoring guidelines were released
Elemental realized that it could not compete given lack of local ownership. Therefore, Elemental
assembled a team of local cannabis enthusiasts who would lend their names as principals for
scoring purposes, while Elemental prepared the Application and would in fact control major
decisions, staffing and day-to-day operations. (AR0630, AR0668-670.)
The City concluded that the real team behind the Application turned out to be Elemental, and the
City did not have the opportunity to conduct background checks on any of the Elemental members
of the team or to score Petitioner’s Application based on that team.
Petitioner argues that Elemental is simply a consultant, and was not a primary principal, manager
or financial contributor required to be disclosed in the Application. Rather, it argues that Elemental
was simply a vendor, not even Petitioner’s agent.
Petitioner acknowledges that at the August hearing, representatives of Elemental confirmed their
original intention was to directly apply for the Permit, but the final published permitting
requirements attributing points for local and low-income principals severely impacted their ability
to submit a high-scoring application. (AR0664.) This led to their decision to pivot to a consulting
role for an applicant team they would put together. (AR0665.)
However, Petitioner argues that Elemental is not a manager of Petitioner, but that it wrote the
Application with the full intent of being a consultant. (AR0668.) Elemental’s term sheet with
Petitioner contemplated provision of services including “California-complaint Standard Operating
Procedures, industry know-how, operational consulting, and industry contacts.” (AR0282.)
Further, consistent with statements made during the hearing that Elemental would be bringing its
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industry-respected brand to the City (AR0626, AR0664, AR0665, AR0678), the term sheet also
contemplated a Property License Agreement for the licensure of the “Elemental” intellectual
property (AR0282.) Petitioner claims that a reasonable and objective person would under
understand from a plain reading of the term sheet that the future services contemplated thereunder
were not intended to take over management and control of Petitioner’s business operations, and
that the use of the terms “management agreement” and “management services” were simply for
convenience. (AR0282.)
Petitioner argues that the City ignores the compensation provision of the term sheet, which
provides that:
As consideration for Management Services and IP Licenses, Elemental shall
receive a portion of gross profits to be negotiated by the Parties. For the avoidance
of doubt, it is the intent of the Parties that Elemental shall be disclosed as having a
Financial Interest’ in the License3, but not an ‘Owner’ of the License as such terms
are defined in the Medical and Adult-Use Regulation and Safety Act, as amended,
and regulations promulgated thereunder (collectively “MAUCRSA”).
AR0282)
Petitioner further argues that the MAUCRSA defines an owner to include an individual who will
be participating in the direction, control or management of the person applying for a license. (16
Cal. Code Reg., § 5003, et seq.) Petitioner explains that the express intent of the parties was to not
provide the consulting services in a manner that would make it an owner, and that therefore
Elemental did not need to be disclosed.
d. The City’s Opposition
The City points out here that the gravamen of Petitioner’s position is not that the Principals were
dishonest, but that the false and misleading statements and omissions were not material or
fraudulent. The City argues that the relevant provisions of the San Luis Obispo Municipal Code
are unambiguous insofar that an applicant shall be disqualified if the applicant made one or more
false or misleading statements or omissions in the application process. (San Luis Obispo Mun.
Code, § 9.10.070(C) [emphasis added].) There is no requirement that the City show materiality or
fraud. The City further argues that although there is no ambiguity to the standard, if there was, the
City is entitled to substantial deference in its own interpretation of the municipal code. (See, e.g.,
Terminal Plaza Corp. v. City and County of San Francisco (1986) 186 Cal.App.3d 814, 825
interpretation of resolution a matter of law, but while court not bound by construction of the
resolution given by the city, that construction is entitled to great weight and should be followed
unless clearly wrong]; Communities for a Better Environment v. State Water Resources Control
Bd. (2003) 109 Cal.App.4th 1089, 1107.)
3 In reviewing the Application, the Court could not find that Elemental Wellness, San Jose, or any of its
representatives were disclosed in the Application as having a financial interest.
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The City argues that each of the disqualifying false statements and omissions set forth above is
supported not just by substantial evidence, but by uncontroverted evidence. Petitioner only argues
that the City should not have required this information, or that false statements were immaterial,
or were not intentionally fraudulent, or that the underlying information would not be disqualifying
if disclosed. Petitioner did not have the authority to decide what requested information to disclose,
as the municipal code does not give discretion to applicants to choose what to disclose and keep
hidden but does provide for automatic disqualification for false statements and omissions.
AR0715.)
Moreover, the City maintains that even if the misstatements or omissions needed to be material,
that hiding the involvement of Elemental as operators was not immaterial. The merit criteria used
in evaluating applications was based upon defined policy objectives to permit cannabis operations
in a manner that would promote local community hiring, support, investment and benefits, as well
as equity factors to include principals with at or below local median household income. (RJN, Exh.
D.)
The City contends that Petitioner’s Application was not fairly scored based on the qualifications
of the individuals who would actually be running the business. The key investor, Guarassi,
explained that he chose to invest in SLO Wellness because Elemental could provide him with a
management structure that “he believed in” based on what they had been doing in San Jose.
AR0671-672.)
The City argues that the series of false statements and omissions made to hide the involvement of
Elemental in order to game the system justifies disqualification under any standard of materiality,
and undeniably satisfies the automatic disqualification for any false statement or omission
mandated by the San Luis Obispo Municipal Code.
e. Ability of Petitioner to Obtain Relief it Seeks
Finally, the City argues that Petitioner is not beneficially interested in the writ and cannot obtain
the relief it seeks, because even if the City’s decision is overturned, the City can no longer issue a
commercial cannabis operator permit to SLO Wellness.
Under the City’s municipal code, the City can only issue up to three permits. (San Luis Obispo
Mun. Code, § 17.86.080(E)(10)(b)(ii); RJN, Exh. E.) The City has now issued all permissible
permits, and Petitioner took no steps to prevent this outcome. For example, Petitioner did not seek
a temporary restraining order or permanent injunction preventing the City from issuing
commercial cannabis operator permits; seek a stay of the City’s decision; or join as a party the
other applicants. The City argues that those applicants are indispensable parties. (Code Civ. Proc.,
389.) The City therefore argues Petitioner’s claim is moot.
In reply, Petitioner argues that it has a valid beneficial interest, and that the City should not have
issued the permit to SLOCal Roots, LLC, or alternatively it should have issued a conditional permit
until final resolution of this action. Petitioner argues it does not lack standing because the City
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prematurely awarded its permit to a third-party following initiation of this action.
Petitioner further argues that it requests alternative relief in its petition. In the first instance, the
Petition requests the Court issue a peremptory writ commanding the City to reverse its
disqualification and issue a permit to Petitioner. Alternatively, the Petition requests the Court to
issue an alternative writ commanding City to show good cause why it should not grant a permit to
Petitioner, and thereafter issue a peremptory writ commanding City to issue such a permit if unable
to show good cause for Petitioner’s disqualification.
Petitioner also contends that it did not fail to join necessary and indispensable parties, as the
Petition does not demand the revocation of a permit issued to a third party, and that resolution of
the validity of the City’s review and disqualification of Petitioner’s application will provide
complete relief to the named parties. Petitioner argues that it is not specifically challenging the
issuance of any permits to any other applicant; but rather is challenging only the legitimacy of the
City’s review and denial of Petitioner’s Application. Petitioner argues that should it prevail, the
consequence of prematurely or unconditionally issuing a permit to another applicant can be
addressed between the City and that applicant.
IV. Findings and Conclusion
The Court has reviewed the Record as a whole and all documents contained therein.
The Court finds that there is substantial evidence in the Record, when reviewed as a whole, that
supports the City’s Decision. The Court finds substantial evidence in the Record that Petitioner
made false and misleading statements and omissions as part of the application process, subjecting
it to automatic disqualification under the San Luis Obispo Municipal Code.
Petitioner’s false and misleading statements for which the Court finds substantial evidence include
Martines’ denial that police had been called to his home for any reason, as well as Dale’s denial
of having any involvement as to tax liens, and omission of his sister’s broad power of attorney
over his affairs. The Record does not show that the false statements or omissions were simply
misunderstandings but tends to show that applicants chose to withhold information. The municipal
code does not provide applicants with the discretion to decide if the information sought is material
and should be provided, nor mandate that the City must find specific fraudulent intent prior to
disqualification. Rather, the municipal code provides plainly that a false or misleading statement
or omission in the application process is grounds for automatic disqualification. (San Luis Obispo
Mun. Code, § 9.10.070(C)(4).)
Moreover, the Court agrees that although Elemental purports to be a “consultant”, there is
substantial evidence that it in fact intended to control the management and operations of Petitioner,
and that the purported local principals and officers of the business were unclear of their roles and
were not the actual intended operators of the business. The Court finds that there is substantial
evidence to disqualify Petitioner on the grounds that the Application contained misleading
statements and omissions regarding the operation, management and control of Petitioner that were
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material to the scoring of the Application. The San Luis Obispo Municipal Code does not require
that the statements or omissions be material in order to subject an applicant to automatic
disqualification.
Each of the false or misleading statements or omissions above, for which the Court finds there was
substantial evidence, were adequate grounds for the City to disqualify Petitioner. Because the
Court finds that Petitioner is not entitled to any relief, it need not decide whether the other
applicants were necessary parties or whether Petitioner may be awarded either of its requested
alternative forms of relief.
Petitioner’s petition for writ of administrative mandamus is denied.
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PROOF OF SERVICE
LAW OFFICES OF
BEST BEST & KRIEGER LLP 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 PROOF OF SERVICE At the time of
service I was over 18 years of age and not a party to
this action. My business address is 18101 Von Karman
Avenue, Suite 1000, Irvine, California
92612. On December
30, 2020, I served the following document(s): PROPOSED] JUDGMENT DENYING PETITION FOR WRIT
OF MANDATE By fax transmission. Based on an agreement of the parties to accept
service by fax transmission, I faxed the documents to the persons at the fax numbers listed below.
No error was reported by the fax machine that I
used. A copy of the record of the fax transmission, which I printed out,
is attached. By United States mail. I enclosed the documents in
a sealed envelope or package addressed to the persons at the
addresses listed below (specify
one): Deposited the sealed envelope with the United States Postal
Service, with the postage fully prepaid. Placed the envelope for collection and
mailing, following our ordinary business practices. I am readily familiar with
this business's practice for collecting and processing correspondence for mailing. On
the same day that correspondence is placed for collection and mailing, it
is deposited in the ordinary course
of business with the United States Postal Service, in a sealed envelope with postage
fully prepaid. I am a resident or employed in the county
where the mailing occurred. The envelope or package was placed in the mail at
Irvine, California. By personal service. At ____ a.m./p.m., I personally delivered the
documents to the persons at the addresses listed below. (1) For a party represented by an
attorney, delivery was made to the attorney or at the attorney's office
by leaving the documents in an envelope or package clearly labeled to identify the attorney being
served with a receptionist or an Individual in charge of the office. (2) For a party,
delivery was made to the party or by leaving the documents at the party's residence with
some person not less than 18
years of age between the hours of eight in the morning and six in
the evening. By messenger service. I served the documents by placingthem in an
envelope or package addressed to the persons at the addresses listed below
an
d providing them to a professional messenger service for service. A Declaration
of Messenger is attached. By overnight delivery. I enclosed the documents in an
envelope or package provided by an overnight delivery carrier and addressed to
the persons at the addresses listed below. I placed the envelope or package for
collection and
overnight
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2 -
PROOF OF SERVICE
LAW OFFICES OF BEST BEST & KRIEGER LLP 18101
VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 ONLY BY ELECTRONIC TRANSMISSION. Only by emailing
the document(s) to the persons at the e-mail address(
es). This is necessitated during the declared National Emergency and public health orders
in multiple California counties due to the Coronavirus (COVID-19) pandemic because this office
will be working remotely, not able to send physical mail as
usual, and is therefore using only electronic mail. No electronic message
or other indication that the transmission was unsuccessful was received within a reasonable
time after the transmission. We will provide a physical copy,
upon request only,
when we return
to the office
at the conclusion of
the national emergency.John R.
Armstrong James A. Murphy
Horwitz & Armstrong, APLC 14
Orchard, Suite
200 Lake
Forest, CA 92630-8313 Telephone: (949)
540-6540 Facsimile: (
949) 540-6578 jarmstrong@horwitzarmstrong.com jmurphy@horwitzarmstrong.com Attorneys for Petitioner San Luis Obispo Wellness Center, Corp.
I declare under penalty of
perjury under the laws of the State of
California that the
above is true and
correct.
Exhibit 5
000150
During inspection of the loading bay, it was identified that a manual locking system needed
to be incorporated into the roll-up door system and that the electrical motor alone could not
serve as the only manner of locking the roll-up door.
On the exterior of the building, I identified the need to install the roof access ladder security
cover, which locks in place , keeping unauthorized individuals from accessing the roof. On
the same corner of the bu ilding there was a break in the perimeter fence of the property that
needs to be instaUed . There were several additional cameras and lights on the exterior of
the building, shown as required on existing plans, that still needed to be installed.
As we were completing the site visit, Valnette asked when her staff could begin b ringing
inventory into the location . I emphasized with Valnette that NHC S LO's operators permit
had been terminated and , as such, no inventory could be brought into the location. I want
to re-emphasize that currently NHC SLO does not have an active operator permit and
cannot bring inventory on sight or engage in any cannabis business operations on the site.
Craig, I also noted that you mentioned multiple times during our on-site visit having
discussions with "Helios" regarding the project, as recently as the morning of the same day
preceding our onsite meeting. Additionally , following our meeting on 10/12/21 , I received
the updated plans from Craig Mccarroll on behalf of NHC. There was no communication in
the email other than the attached s ingle page "Security Plan" page, which does
appear to reflect the changes as discussed by me and Craig Smith during the site
inspection. However., I noted on the plans they are titled "NATURAL HEALING CENTER
HELIOS DAYSPRING" and are dated 11 Oct 2021 .
Please be advised that it is our understanding that, irrespective of the inactive/terminated
City Operator Permit statu s , Mr. Dayspring's should not be actively or passively managing
or directing the operations of any state licensed cannabis business for which he does not
have local authorization. NHC has conveyed to the City that Mr. Dayspring is no longer
affiliated with the ownership or management direction of the NHC in the City and he
recently was required to surrender his employee credentials as well. While the City does
not directly enforce state regulations, we do fee l obligated to report this apparent activity to
the state so that they can evaluate the appropriateness of any continuing business
involvements between NHC, LLC and Mr. Dayspring.
Sincerely,
Sergeant Chad Pfarr
000152
1 John Armstrong
Armstrong Law Group
2 23232 Peralta Drive
3 Suite 102
Laguna Hills, CA 92653
4 Tel. 949-942-6069
Cell. 949-390-4307
5 Attorneys for Petitioner /Plaintiff
6 NHC SLO, LLC
john@armstronglawgroup.co
Electronically
FILED: 01I2aI2022
San Luis Obispo Superior Court
By: Miller, Victoria
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN LUIS OBISPO
11 NHC SLO, LLC, )
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Petitioner and Plaintiff, )
versus
15 CITY OF SAN LUIS OBISPO; CITY )
COUNCIL OF AND FOR THE CITY )
16 OF SAN LUIS OBISPO; AND DOES )
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1-10, INCLUSIVE, )
Defendants and
Respondents.
Case No.: 21CV-0734
Assigned to: Judge Rita Federman
EX PARTE APPLICATION
FOR TEMPORARY
RESTRAINING ORDER AND
ORDER TO SHOW CAUSE
WHY A PRELIMINARY
INJUNCTION SHOULD NOT
ISSUE AGAINST THE CITY OF
SAN LUIS OBISPO;
MEMORANDUM;
SUPPORTING
DECLARATIONS OF
VALNETTE GARCIA and
JOHN ARMSTRONG
Dept.: 2
Time: 8:30a.m.
Date: 01-31-2022
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PLAINTIFF'S EX P ARTE APPLICATION
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
INJUNCTIVE AND DELCARATORY RELIEF
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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1. Petitioner and Plaintiff NHC SLO, LLC (“Petitioner” or “NHC”) seeks
relief against Respondent and Defendant, the City of San Luis Obispo
Respondent” or “the City”), arising from the City’s unilateral
termination of NHC’s retail Cannabis Operator Permit,1 which the City
terminated without a hearing in violation of the City’s own Ordinances,
and before NHC was open to the public for business. This has put NHC’s
State Cannabis License in jeopardy since a local license is required to
maintain the State license, and it will take 12-14 months to re-instate
NHC’s State license, at which time NHC will run out of funding and not
be able to open its cannabis dispensary for such unnecessary delay from
the City’s improper conduct.
2. Granting Ex Parte Relief will maintain the Status Quo Ante in that,
Ordering the City to reinstate NHC’s City Cannabis License will not by
itself allow NHC to operate, but will prevent irreparable harm to NHC, as
NHC needs additional City sign offs before it can open its doors to the
public even if its City Cannabis Permit is reinstated immediately.
3. Notice of this Ex Parte Application was originally by email and
telephonically on January 20, 2022, more than 24 hours before hearing
on this Ex Parte Application, Petitioner/Plaintiff’s Counsel of Record,
John Armstrong, by calling the City Attorney, J. Christine Dietrick, City
Attorney, at Phone: (805) 781-7140, and by emailing copies of
Summons, Verified Petition/Complaint, and this Ex Parte Application to
attorney@slocity.org, the Respondent/Defendant City Attorney’s public
1 To lawfully operate a cannabis business, the City of San Luis Obispo first requires a “Cannabis
Operation Permit” from the City. To legally operate thereafter, such Permit holder must acquire a
license from the State of California’s Department of Cannabis Control (formerly the Bureau of
Cannabis Control). Hence, when the word “permit” is used, reference is made to City’s Cannabis
Operator Permit, and “license” refers to the California State cannabis license. California case law
uses the words “permit” and “license” interchangeably as they both designate a governmental body’s
grant of permission to engage in a regulated form of business.
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
INJUNCTIVE AND DELCARATORY RELIEF
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email address posted on the City of San Luis Obispo’s website (judicial
notice of such website hereby requested). (See attached Armstrong Decl.)
4. The City was later given notice that the date and time for this Ex Parte
had changed to this coming Monday, January 31, 2022 before 10:00 am
of January 28, 2022. (Armstrong Decl.)
5. The Verified Complaint on file with this Court contains most, if not all of
the administrative record, as the City failed and refused to hold or
conduct a hearing before unilaterally revoking NHC’s Cannabis Business
Permit in violation of the City’s own Ordinances regulating how the City
may revoke a Cannabis Business Permit once issued.
6. Respondent/Defendant is the City of San Luis Obispo, an incorporated
City, and respondent/defendant the City of Council of and for the City of
San Luis Obispo are the duly elected officials in charge of making
executive and legislative decisions for Respondent/Defendant City.
7. Respondent/Defendant City improperly revoked Petitioner/Plaintiff
NHC’s Cannabis Business Permit before it opened for business, which
revocation is has put NHC’s California State cannabis license at risk.
8. From the City’s improper revocation of the license, NHC is in immediate
threat of irreparable harm since NHC cannot open to the public to sell
cannabis without both the local City Permit and State Cannabis License
and without sign offs to all City approvals—the additional delays of
having to start the State Licensing process from scratch in addition to the
delays from the City’s refusal to allow NHC to move forward towards
opening to the public will put NHC out of business, since NHC
reasonably anticipated being able to complete the final sign off process
after having obtained both the local City Permit and State License.
9. The issuance of a temporary restraining order preserving the status quo
is warranted.
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
INJUNCTIVE AND DELCARATORY RELIEF
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10.This Application is made on the grounds that the Plaintiff is
entitled to the relief demanded, and on the further ground that great and
irreparable injury will result to Plaintiff and its business before the
matter can be heard on notice and it would be extremely difficult to
ascertain the amount of compensation which would afford adequate
relief.
11.This application is based on Plaintiffs’ Verified Petition and
Complaint fille in this action, including the attached Exhibits thereto, the
attached declarations supporting this ex parte application, and any other
testimony or evidence that is presented at the time of hearing.
Dated: January 27, 2022 ARMSTRONG LAW GROUP
John Armstrong, attorneys for
Plaintiff/Petitioner NHC SLO, LLC
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MEMORANDUM
1.Introduction
This Ex Parte Application seeks the immediate reinstatement of
Plaintiff/Petitioner NHC SLO, LLC’s (“NHC”) Cannabis Business Permit,
which the City of San Luis Obispo unilaterally revoked without a hearing and in
violation of the City’s own City Ordinance regarding how the City may revoke
such cannabis business permits.
This Ex Parte Application seeks to maintain the Status Quo Ante in that
immediate reinstatement of NHC’s cannabis business permit does not by itself
allow NHC to open to the public, but does allow NHC to continue with the
process of completing the remaining the City sign offs needed to open, and
prevents the immediate and irreparable loss of the NHC’s California State
Cannabis Dispensary License, which is in immediate danger of being revoked
by the State at any time because of the City wrongfully and improperly revoked
NHC’s permit, which revocation results in the State’s revocation of the license
it granted to NHC to operate, since local authorization is a requirement to get
and maintain a State cannabis license. Thus, the Status Quo Ante must be
maintained until this Court can decide this dispute on the merits.
As set out in Ms. Garcia’s supporting declaration, NHC will run out of
funding before it could get such State license reinstated by the time this
litigation is concluded.
Accordingly, before NHC sustains irreparable harm for something that will
cause no harm to the City, NHC seeks immediate judicial relief by this
Emergency Ex Parte Application.
2.Statement of Facts from Verified Petition and Complaint
The City of San Luis Obispo (the “City”) issued a retail Cannabis Operator
Permit to NHC (the “Permit”) , as was confirmed in letters from the City, true
and correct copies of which are attached as Exhibits A and B to the Verified
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Petition/Complaint. (All references to Exhibits are the Exhibits attached to and
incorporated to the Verified Petition/Complaint, so that there are not
duplicated here, and so reference to the Original, Verified Petition and
Complaint should be had in regarding this Ex Parte Application.)
The State of California’s Bureau of Cannabis Control (now Department of
Cannabis Control) also conformed Respondent City’s issuance of the Cannabis
Operator Permit to Petitioner, in that under the California State Cannabis
Regulations, the State must confirm with the local jurisdiction that a valid local
cannabis permit/license exists before issuance of the State Cannabis license,
which State license Petitioner obtained on or about June 25, 2021.
A true and correct copy of the California Department of Cannabis Control’s
request to the City to confirm Petitioner’s local cannabis permit is attached as
Exhibit C to the Verified Petition.
A true and correct copy of Petitioner’s State Cannabis License is attached as
Exhibit D attached to the Verified Petition.
A condition precedent of Petitioner’s obtaining its California state cannabis
license was the State’s confirmation from the City of San Luis Obispo that
Petitioner had a valid, local, retail cannabis permit, and that such permit was
in good standing with the City. (See 16 Cal. Code Regs., § 5002(c)(28)[State
must confirm with local jurisdiction validity of local cannabis authorization
before issuing State cannabis license].)
That the State of California issued Petitioner a State Cannabis License is by
itself presumptive evidence that the City granted Petitioner a Cannabis Permit.
The issuance of an actual Permit is more than a tentative approval of a
cannabis application,” which is what the City has argued to justify its failure to
comply with its own City Ordinance regulating the revocation of issued
Cannabis Permits, by using its Ordinance that regulates, by its clear and
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INJUNCTIVE AND DELCARATORY RELIEF
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express terms, only Cannabis Permit “Applications,” but which does not
expressly apply to issued cannabis permits.
In sum, the City cites and relies on the Ordinance applicable only to
Applications, where the City has admittedly much broader powers and
discretion to terminate applications, as opposed to its Ordinances regulating
issued cannabis permits, which clearly and expressly restrict the City’s powers
to terminate issued permits.
At all times relevant before the existing dispute, City officials represented
that had acquired a valid cannabis retail permit from the City to both the State
of California and to Petitioner.
Petitioner is informed and believes that plaintiff/petitioner NHC’s landlord
has spent approximately $4.1 million dollars building out the retail cannabis
facility at 2640 Broad Street, San Luis Obispo, California (the “Premises”), and
the building owner made significant improvements to the property to meet the
City’s required specifications for its tenant, Petitioner, which construction was
an express obligation of the Landlord under the terms of Petitioner’s lease.
On October 6, 2021, shortly before the final construction “punch list” items
were completed at the Premises, the City informed NHC that its retail cannabis
permit was being terminated immediately and without a hearing, due to
alleged "fraud in the application process," despite no City Ordinance allowing
for such termination of an issued cannabis permit.
This “termination letter” expressly acknowledges that the City issued
Petitioner a “Cannabis Operator Permit,” in that is begins by informing
Petitioner that its City Cannabis Operator Permit is “terminated.”
A true and correct copy of this letter is attached as Exhibit E (the
Termination Letter”) to the Verified Petition.
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INJUNCTIVE AND DELCARATORY RELIEF
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The Termination Letter’s stated grounds for terminating the Permit were
that Helios Dayspring, a former member of NHC 2[] had settled various
criminal charges that had recently been brought against him, whereby his plea
bargaining admitted to certain criminal conduct that was not disclosed during
NHC’s Cannabis Permit Application to the City of San Luis Obispo.
Specifically, the City wrote:
Subject: Notice of Automatic Disqualification and
Termination of Permit: CANN-0070-2019
2640 Broad St., 93401): NHC SLO, LLC
Dear Ms. Garcia,
This letter is to inform you that NHC SLO, LLC (NHC) is
automatically disqualified from activating, obtaining or
holding a Commercial Cannabis Operator Permit (Operator
Permit) to conduct commercial cannabis activity located at
2640 Broad St. and the Operator Permit issued to NHC is
hereby immediately terminated, and/or shall not be
permitted to be activated, pursuant to San Luis Obispo
Municipal Code (SLOMC) Sections 9.10.070, Subsections C.4
and D, as well as the express terms of the Operator Permit
application submitted by NHC.
Please be advised that the business is not permitted
to operate in any form from the date of this notice.
This action is the result of NHC's submission of false or
misleading information in obtaining and maintaining the
Operator Permit, as set forth below, which results in
automatic disqualification from the City's permitting process
and precludes NHC from obtaining or maintaining an
Operator Permit to operate a cannabis business in the City.”
2 Mr. Daysping had transferred his interest Valnette Garcia with the City’s written approval one-year
earlier, and so presently has no interest in the cannabis business or permit, other than as the
landlord/property owner, and neither the California State Cannabis Laws or Regulations nor the
City’s Ordinances have a requirement that that property owners cannot have a criminal record or
must do anything other than confirm their consent to allowing a cannabis business to operate on their
property.
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In response to this notice of termination, NHC provided information to the
City that its concerns regarding Mr. Dayspring were irrelevant, reminding the
City that Mr. Dayspring was no longer a member of NHC, and, because
the City had already issued NHC the Permit (meaning that NHC’s cannabis
permit application had already ripened into a Permit), the City’s permit
revocation procedures under the applicable municipal code were required to
be followed, as opposed to the Municipal Code sections regulating cannabis
applications, which applications do not trigger vested rights.
NHC’s correspondence further pointed out to the City that the
misrepresentations cited in the Termination Notice were inaccurate, as stated
by the City. A true and correct copy of NHC’s response is attached as Exhibit
F to the Verified Petition.
At the time of the issuance of the Permit Mr. Dayspring was not a member
or owner of NHC , as his interests had previously been transferred to Ms.
Valnette Garcia, with the City’s written consent. Ms. Garcia had no criminal
past—nor were there any other circumstances that would disqualify her or
Petitioner NHC from operating a retail operation under the Permit.
Since the issuance of the Permit NHC has spent $520,982 in preparing to
open the retail cannabis business.
Additionally, without the ability to open for business with the Permit, NHC
anticipates that it will remain liable under its current lease with the landlord,
which as a term of 5 years at an initial monthly rental of $55,000 per month.
3. NHC has no available means of meeting this lease obligation
withoutbeing able to operate with the Permit and should NHC default
on that obligation NHC anticipates that it will be liable for the
Landlord’s cost and expense of improving the Premises, over
of $4,000,000.00 which will result in the financial destruction
of NHC.
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A true and correct copy of the Petitioner’s Lease is attached as Exhibit G to
the Verified Petition.
In response to Petitioner’s Response to the City’s Termination Letter of
October 6, 2021, the City Manager sent Petitioner a “Memorandum of
Decision” on October 19, 2021, “re-affirming” the City’s Termination of
Petitioner’s City Cannabis Permit.
A true and correct copy of the City’s Memorandum of Decision is attached as
Exhibit H to the Verified Petition.
In the City’s Memorandum, it cited San Luis Obispo City Ordinance §
9.10.070.C.4 as the grounds upon which the City was terminating Petitioner’s
Cannabis Permit.
This Ordinance, however, merely grants the City to disqualify a person’s
cannabis application: It does not apply to issued and cannabis permits, which
are expressly governed by a different City Ordinance.
Nonetheless, the City’s Memorandum of Decision, while expressly
recognizing that the City issued Petitioner Cannabis Permit [“On October 6,
2021, NHC was served with notice that actions of NHC SLO LLC resulted in
the automatic nullification of your Commercial Cannabis Operator Permit
Operator Permit)”], cited San Luis Obispo Ordinance, § 9.10.070.C.4 as the
legal basis for the “automatic” “termination” of Petitioner’s Cannabis Permit
stating that “…pursuant to Section 9.10.070.C.4 of the Municipal Code, NHC’s
permit remains automatically disqualified and terminated”. (See attached
Exhibit H to the Verified Petition)
San Luis Obispo Ordinance § 9.10.070, subpart C provides in pertinent part
as follows:
C. Grounds for Automatic Disqualification. In addition to any
other reason that may be established by the city council as a basis for
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disqualification, an applicant shall be disqualified from applying for,
or obtaining, a commercial cannabis operator permit…..”
The above provision does not allow for termination of an issued Cannabis
Permit in the City’s sole discretion. Under the above referenced City
Ordinance, the City only has discretion to deny a cannabis
permit applicant from applying or obtaining a permit. Once a cannabis
application has ripened into a cannabis permit, the Ordinance governing
cannabis applications no longer applies to permit holders by its express terms.
This result is further compelled in that the City has a different and separate
Ordinance regulating when and how a cannabis permit holder may have its
cannabis permit “revoked.”
It is not identical to the Ordinance given the City admittedly broader
discretion to disqualify cannabis permit applicants’ applications: As set out
below, the Ordinance governing Cannabis Permit holders restricts the City’s
discretion to Terminate Cannabis Permits by requiring a Permit holder to
operate unlawfully.
Since Petitioner was never given the chance to operate, it cannot have its
Permit “terminated” or “revoked” under the City’s own Ordinance.
San Luis Obispo Ordinance, § 9.10.090 governs “Suspension or Revocation”
of City Cannabis Permits.
Section 9.10.090 of the San Luis Obispo Code provides as follows:
9.10.090 Suspension or revocation of permit.
In addition to any other penalty authorized by law, a
commercial cannabis operator permit may be suspended or
revoked if the city finds, after notice to the permittee and
opportunity to be heard, that the permittee or his or her
agents or employees have violated any condition of the
permit imposed pursuant to, or any provision of, this chapter.
r
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A.Upon a finding by the city of a first permit violation within
any five-year period, the permit shall be suspended for thirty
days.
B.Upon a finding by the city of a second permit violation
within any five-year period, the permit shall be suspended for
ninety days.
C.Upon a finding by the city of a third permit violation
within any five-year period, the permit shall be
revoked. (Ord. 1647 § 4 (Exh. A (part)), 2018)”
The City Ordinance governing the revocation of a cannabis operator
permit does not allow the City to terminate an issued Permit for misstatements
or misinformation in the cannabis license application process.
Nor does the City Ordinance governing the suspension of revocation of
City Cannabis Permits allow “termination” of an issued Cannabis Permit
without fair notice and a fair hearing.
Rather, by its express terms, revocation of a Permit is limited to active
misconduct by the licensee in the operation of the permit. (See S.L.O. City
Ordinance 9.10.090, "Suspension of revocation of permit.")
Because the City is not following its own set of rules that it created is the
reason why Petitioner/Plaintiff NHC now seeks relief here.
4.The Court Should Grant A Temporary Restraining Order to
Preserve the Status Quo
a.The Court May Grant A Temporary Restraining Order Ex
Parte
A temporary restraining order may be obtained on an ex parte basis where
i]t appears from facts shown by affidavit or by the verified complaint that
great or irreparable injury will result to the applicant before the matter can be
heard on notice.” (Code Civ. Proc., § 527(c)(1).)
In determining whether to issue a temporary restraining order, the trial
court considers two related factors:
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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1) the likelihood that the moving party will prevail on the merits of its case
at trial, and
2) the interim harm that the moving party is likely to sustain if the
restraining order is denied as compared to the harm that the non-moving
party is likely to suffer if the court grants a preliminary injunction.
Church of Christ in Hollywood v. Superior Ct. (2002) 99 Cal.App.4th 1244,
1251; Cal. Code Civ. Proc., §§ 526, 527.)
The latter factor involves consideration of such things as the inadequacy of
other remedies, the degree of irreparable harm, and the necessity of preserving
the status quo.’ [Citation.]” (14859 Moorpark Homeowner’s Assn. v. VRT
Corp. (1998) 63 Cal.App.4th 1396, 1402, quoting Abrams v. St. John’s
Hospital & Health Center (1994) 25 Cal.App.4th 628, 636.)
The general purpose of a temporary restraining order and preliminary
injunction is to preserve the status quo. (Harbor Chevrolet Corp. v.
Machinist’s Local Union 1484 (1959) 173 Cal.App.2d 380, 384; Grothe v.
Cortlandt Corp. (1992) 11 Cal.App.4th 1313, 1316.)
The “status quo ante” for purposes of a temporary restraining order or
preliminary injunction means the “last actual peaceable, uncontested status
which preceded the pending controversy.” (United Railroads of San Francisco
v. Super. Ct. (1916) 172 Cal. 80, 87 (emphasis added); Voorhies v. Greene
1983) 139 Cal.App.3d 989, 995.)
The phrase “irreparable harm” is “used in expressing the rule that an
injunction may issue to prevent wrongs of a repeated and continuing character,
or which occasion damages estimable only by conjecture and not by any
accurate standard.” (People ex rel. Gow. V. Mitchell Brothers’ Santa Ana
Theater (1981) 118 Cal.App.3d 863, 871.) The more likely it is that the party
seeking a preliminary injunction will ultimately prevail, the less severe must be
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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the harm that they allege will occur if the injunction does not issue. (Integrated
Dynamic Solutions, Inc. v. VitaVet Labs, Inc. (2016) 211 Cal.Rptr.3d 873.)
Petitioner/Plaintiff will suffer irreparable injury if a temporary restraining
order is not granted.
The City’s wrongful revocation of Petitioner’s Cannabis Permit is a violation
of a public duty that simply cannot be monetarily compensated and is the very
definition of irreparable harm. (See Jauregui v. City of Palmdale (2014) 226
Cal.App.4th 781, 809 [“It has been said that an unconstitutional statute or a
statute valid upon its face but unconstitutionally applied may be enjoined.”]
conc. opn. by Mosk, J.]; citing Financial Indem. Co. v. Superior Court (1955)
45 Cal.2d 395, 402; Downing v. Cal. State Board of Pharmacy (1948) 85
Cal.App.2d 30, 36.; see also Cal. Admin. Mandamus (CEB 2021) §§ 1.18-1.19
at pp. 1-17 to 1-18 [injunction and declaratory relief, and similar equitable
remedies available in a mandamus action to preserve the status quo, and
prevent harm pending final judgment].)
Only a temporary restraining order will halt this ongoing and continuing
intrusion into Petitioner’s vested right to sell licensed cannabis to the public.
b. An Injunction Is Permitted Where A Valid Statute Is
Unconstitutionally Applied
If a statute is both valid and the challenged action is authorized by such
statute, then an injunction is not proper. However, as is here, when a valid
statute is unconstitutionally applied, an injunction is proper despite Civil Code,
section 3423(d) and Code of Civil Procedure, section 526(b)(4). (Robbins v.
Superior Court (1985) 38 Cal.3d 199, 212, 213.)
An injunction is proper here as the City’s revocation “Order” has exceeded
the City’s s powers under its own Municipal Code to revoke Petitioner’s
Cannabis Permit.
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
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5. An Order to Show Cause Re Preliminary Injunction Should Also
Issue
Importantly, the Temporary Restraining Order requested is for a temporary
period only until such time as a hearing on a preliminary injunction can occur.
A party requesting a preliminary injunction may give notice of the request to
the opposing or responding parry either by serving a noticed motion under
Code of Civil Procedure section 1005 or by obtaining and serving an order to
show cause (“OSC”). An OSC must be used when a temporary restraining order
TRO”) is sought. (Calif. Rules of Court, rule 3.1150.)
Petitioner/Plaintiff NHC further requests a full hearing on a Preliminary
Injunction for the same reasons and under the same authorities as set forth
herein, and requests that an Order to Show Cause be issued along with the
TRO to afford Defendant the opportunity to show why they should not be
restrained and enjoined in the same manner for the remainder of this
litigation.
6. Conclusion
The City’s revocation Order is improper and has caused NHC an immediate
threat of irreparable harm. NHC seeks maintain the status quo ante by this
Application. Granting the requested relief will cause no harm to the City’s
interest in preventing NHC from opening to the public until the legal issues
raised in the Verified Complaint/Petition are resolved based on the Order
submitted herewith.
ARMSTRONG LAW GROUP
Dated: January 27, 2022 ________________________
John Armstrong, attorneys for
Plaintiff/Petitioner NHC SLO, LLC
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VERIFIED PETITION FOR WRIT OF MANDAMUS AND COMPLAINT FOR
INJUNCTIVE AND DELCARATORY RELIEF
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DECLARATION VALNETTE GARCIA
1.I, Valnette Garcia, declare as follows.
2.I am the managing member and owner of Petitioner/Plaintiff NHC SLO,
LLC in this action, and am authorized to make this verification on its
behalf.
3.I verified NHC SLO, LLC’s Verified Petition and Complaint for Writ of
Mandate, Prohibition, Or Both, And For Declaratory Relief with its
attached Exhibits, and know its contents, and say the that the facts stated
therein are true, and each and every exhibit is a true and correct copy of
what each attached Exhibit purports to be, and that I have personal
knowledge of same. This Verified Pleading with its Exhibits supports this
Ex Parte Application and should be read with it.
4.Additionally, I have read the NHC SLO, LLC’s instant Ex Parte
Application and know its contents, and have personal knowledge of the
facts stated therein and say they are true.
5.I have been involved in other local cannabis licenses and California State
business licenses, and from experience, if a local license is lost, this
results in the State revoking its State license, and if the State license is
not promptly reinstated, then the application process with the State
starts all over again, and presently it is taking 12-14 months for the State
to approve new cannabis business licenses from submission, which is
significant because you cannot lawfully open a cannabis business without
both local and State authorization.
6.If NHC SLO, LLC does not have its local cannabis permit reinstated to
prevent the loss of its existing issued State cannabis, NHC SLO, LLC
presently faces the immediate threat of irreparable harm because its
cannot wait for 12-14 months to get its State license reinstated after
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resolving this litigation with the City, as the company will run out of
money by then and forced to close.
7. Moreover, it is likely that NHC, SLO will prevail because the City failed to
follow its own Ordinances and Laws regarding when and how an issued
cannabis business permit may be revoked in revoking NHC SLO , LLC's
license.
8 . And, the City will not suffer harm even if the Court orders the immediate
reinstatement of the Cannabis Business Permit, since, before NHC SLO,
LLC can open its doors to the public, it must still get City sign offs from
the City Police, City Fire Department, City Planning, etc., before opening
its doors to the general cannabis consuming public. That is,
reinstatement of the City's Cannabis Business Permit will simply allow
the local authorization process to continue, and NHC SLO, LLC will agree
that even if all sign offs are granted, that it will not open its doors to the
public without court approval or without the City's stipulation that it may
do so.
9 . Granting Ex Parte Relief, including, without limitation, setting an Order
to Show Cause Hearing why a Preliminary Injunction Should Not Issue is
also in the public interest, in that the State of California has deemed
cannabis business "essential services" to be open to the public during this
pandemic as cancer patients, and other persons have recognized medical
needs for cannabis .
10. I declare that the foregoing declaration is true under penalty of
perjury under the laws of California , except to matters of opinion, which I
believe to be true.
Dated: January 20, 2022
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DECLARATION OF JOHN ARMSTRONG
1. I, John Armstrong, declare as follows in support of NHC SLO, LLC’s
instant Ex Parte Application.
2. I called the City’s Attorney’s Office about the date, time, location, and
substance of this Ex Parte Application, before 10:00am the business day
before the hearing on this Ex Parte Application.
3. I also emailed the instant Ex Parte Application and supporting papers,
including a copy of the Verified Complaint/Petition with the supporting
Exhibits cited in this Ex Parte Application on January 20, 2022, as well
as a copy of this Court’s Zoom instructions for hearings for the Ex Parte,
and a copy of the Proposed Order on the Ex Parte Application, and re-
sent the updated papers with new hearing date of January 31, 2022.
4. I declare under penalty of perjury under the laws of California that the
foregoing is true and correct and that I signed this declaration at my
office in Orange County, California on January 27, 2022.
John R. Armstrong, declarant
000170
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY
AVENUE, 5TH FLOORRIVERSIDE,
CALIFORNIA 92502JEFFREY V. DUNN, Bar No.
131926 jeffrey.dunn@bbklaw.
com DANIEL L. RICHARDS,
Bar No. 315552 daniel.
richards@bbklaw.com
BEST BEST & KRIEGER
LLP 18101 Von Karman
Avenue Suite 1000 Irvine,
California 92612 Telephone: (949) 263-
2600 Facsimile: (949) 260-0972 Attorneys for Defendants and Respondents City
of San Luis Obispo and City
Council of and for the
City of San Luis Obispo
EXEMPT FROM FILING FEES PURSUANT TO GOVERNMENT
CODE SECTION 6103 SUPERIOR COURT
OF THE STATE
OF CALIFORNIA COUNTY
OF
SAN LUIS OBISPO NHC SLO, LLC,
Petitioner and Plaintiff, v. CITY OF SAN LUIS
OBISPO; CITY COUNCIL OF AND FOR
THE
CITY OF
SAN
LUIS OBISPO; AND DOES
1-10, INCLUSIVE,
Defendants and Respondents. Case No.
21CV-0734 Judge: Rita Federman DEFENDANTS
CITY OF SAN LUIS OBISPO AND
CITY COUNCIL OF AND
FOR THE CITY OF SAN LUIS
OBISPO’S OPPOSITION
TO PLAINTIFF NHC
SLO, LLC’S EX PARTE APPLICATION
FOR TEMPORARY
RESTRAINING ORDER AND ORDER
TO SHOW CAUSE RE: PRELIMINARY
INJUNCTION Date:
January
31,
2022 Time: 8:30 a.m.
Dept:
TABLE OF CONTENTS
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BEST BEST & KRIEGER
LLPATTORNEYS AT LAW18101VON KARMAN AVENUE,
SUITE 1000IRVINE, CALIFORNIA 92612I. INTRODUCTION .............................................................................................................. 5 II. STATEMENT OF FACTS ................................................................................................. 6
A. Helios Dayspring’s Criminal Conduct and
NHC’s Misrepresentations ................. 8 1.
Spending Money for
Illegal Purposes ....................................................... 10 2. Falsification of Documents .......................................................................
10 3. Perjury ....................................................................................................... 10 4. Tax Fraud and Tax
Evasion ...................................................................... 11 B. Falsehoods in NHC’s Cannabis Operator Application ......................................... 11
C. False Statements in
Connection with Transfer to
Valnette Garcia ....................... 12 D. Subsequent History ............................................................................................... 13 III. LEGAL ARGUMENT ...................................................................................................... 13 A. Plaintiff Fails to
Make a Showing of a Need for Ex Parte Relief......................... 13
B. Plaintiff Does Not Seek to Maintain the Status Quo............................................. 15
C. Plaintiff is not Likely to Succeed on the Merits .................................................... 16
1. Plaintiff’s Disqualification was authorized by the Municipal Code ......... 16
2. Plaintiff’s Disqualification was Authorized
by NHC’s
Agreement ..........
TABLE OF AUTHORITIES
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BEST BEST &
KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE
1000IRVINE, CALIFORNIA 92612State Cases Alvarez v.
Eden Twp. Hosp. Dist. (1961) 191 Cal.App.2d 309 ................................................................................................................ 16
Am. Bd. Of Cosm. Surgery v.
Med. Bd. Of California (2008) 162 Cal.App.4th 534 ............................................................................................................... 16
Avco Cmty. Devs., Inc. v.
S. Coast Reg'l
Com. (1976) 17 Cal.3d 785 ..........................................................................................................................
17 Bennett v. Lew (1984) 151 Cal.
App. 3d 1177 ............................................................................................................ 19 Carrancho v.
Cal. Air Res. Bd. (2003) 111 Cal.App.4th 1255 ............................................................................................................. 16 Communities
for a Better Envt. v. State
Water Resources Control Bd. (2003) 109 Cal.App.4th 1089 ............................................................................................................. 17 Fibreboard Paper Prod. Corp.
v. E. Bay Union
of Machinists, Loc. 1304, United Steelworkers
of Am., AFL-CIO (1964) 227 Cal.
App.2d 675 ................................................................................................................ 19 People v.
Mobile Magic Sales, Inc. (1979) 96
Cal.App.3d 1 ...................................................................................................................... 16 Shoemaker v.
Cty. of
Los Angeles 37 Cal. App. 4th 618 (1995)....................................................................................................
16
TABLE OF AUTHORITIES
continued)
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BEST BEST &
KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN
AVENUE, SUITE 1000IRVINE, CALIFORNIA 92612State Statutes Code Civ.
Proc. § 1085 ................................................................................................................. 16 Municipal Code § 9.10.070(
C)..................................................................................................
9, 17 Municipal Code § 17.86.080(E)(
2) ............................................................................................... 18 Rules Cal. Rules of Court Rule
3.
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BEST BEST &
KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502I. INTRODUCTION In 2019, NHC SLO, LLC (“
Plaintiff” or “NHC”), led and owned by its Chief Executive Officer, majority
owner (88 percent), sole manager, and primary principal, Helios Dayspring, applied for one
of a limited number of Commercial Cannabis Operator Permits (“
Cannabis Permit”) in the City of San Luis Obispo (“City”). As the City later learned, NHC
and Mr. Dayspring concealed and failed to disclose in the application process–
as required – Dayspring’s shocking history of criminal and fraudulent conduct, which included
bribing elected officials to obtain favorable treatment in his various cannabis enterprises and committing felony
tax evasion. Prior to the public learning of the federal government’s criminal indictment of
Dayspring, but clearly during a period of time that such information was known
to Dayspring and presumably his NHC affiliates, he transferred his ownership to his long-time business
and romantic partner, Valnette Garcia.1 It is this transfer also made without disclosure
of Dayspring’s criminal and fraudulent conduct) that NHC now argues precludes the
City from terminating a Cannabis Permit originally approved only because of NHC’s
and Dayspring’s multiple, knowing, and material misrepresentations and omissions upon which Dayspring actively induced
the City to rely on in the application review and contingent permit issuance process.
In other words, a contingent operator permit was issued to NHC only because of Dayspring’s
and NHC’s fraud; and, but for Dayspring’s misrepresentation and concealment of material information
in Dayspring’s and NHC’s sole
control, no permit, contingent or otherwise, could have been obtained.Plaintiff’s ex
parte application for mandatory injunctive relief – mandating the City to hand it a Cannabis Permit that was
procured by fraud, and further requiring the City to cooperate as Plaintiff seeks further City approvals –
should be denied for many reasons. Simply stated, it is not and cannot be the law that the
City can be compelled to be an unwilling and unwitting instrument of fraud and to perpetuate the
operation of the fruits of that fraud in the City. Plaintiff fails to
demonstrate any irreparable harm or immediate danger, much less the 1 RJN Ex. C [Affidavit of
Surety in Dayspring’s federal criminal case, obligating Garcia to guarantee
his
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502extreme and certain
harm necessary to justify mandatory injunctive relief. Moreover, the present and irreparable harm to the public
integrity of the City’s cannabis permitting process and the legitimate cannabis business
operators and prospective applicants into the City’s process
is manifest and should not be validated by this court. Plaintiff fails to show a likelihood
of success on the merits. The City’s Municipal Code expressly
warns applicants that misrepresentation and omissions will result in automatic disqualification, and
NHC and each of its principals contractually agreed that misrepresentation and
omissions would lead to their disqualification and Cannabis Permit nullification. Here, NHC’s representations
of Dayspring’s history of legal compliance (and in particular compliance with taxation
laws) and his numerous lies in his background check application constitute false or misleading
statements and/or omissions of material information that was within the sole and
exclusive knowledge and control of Dayspring and the NHC applicant.Finally, injunctive relief is an
equitable remedy, and the equities do not favor an order requiring an award of a permit that was procured
by fraud to a party with unclean hands, and a permit that would
financially benefit Dayspring and his applicant partners and affiliates, despite his bribery of public officials,
tax fraud, and fraudulent procurement of a City cannabis
permit. The public interest
does not favor such an outcome. II. STATEMENT OF FACTS In January of 2019, NHC
applied for one of a limited number of Cannabis Permits available in the City. (Pet. Ex.
A at NHCSLO000026.) When NHC applied for a Cannabis Permit in 2019, Helios Dayspring
was the Chief Executive Officer, majority owner (88 percent), sole manager, and principal of NHC. (Declaration
of Michael Codron [“Codron Decl.”] Ex. A at p. 1; Ex. B at p. 29.) He
signed the application submitted by NHC. (Id. at p. 5.) NHC’s
merits-based application emphasized the expertise, and history of regulatory compliance of Dayspring as a reason why
the City should choose NHC to receive one of the limited number of permits. (Codron Decl. Ex. B at,
e.g., p. 11.) He was one of two people designated as “Responsible Parties” in the
NHC application. (Codron Decl. Ex. A at pp. 1–2.) On the strength of
its
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502selected as one of the few
applicants allowed to move forward in the approval process. The remaining steps included a
background check, and obtaining a number of other local permits. Notably, NHC’s Cannabis Permit
would not become active until “the issuance of a use permit for the
commercial cannabis activity.” (Pet. Ex. E at NHCSLO000038, citing Municipal Code section 9.10.070; see also
Request for Judicial Notice [“RJN”] Ex. 1.) The Municipal Code also provides that the City’s issuance
of Cannabis Permits creates no vested right to operate a cannabis business under the
City’s dual permitting structure. (Pet. Ex. E at NHCSCLO000040, citing Municipal
Code section 17.86.080; see also RJN Ex. 2.)As the City
later learned, however, prior to (and apparently continuing through) the submission of this
application and the permitting process, Dayspring engaged in a concealed pattern of fraudulent
and criminal conduct – specifically, conduct involving the operation of Mr.
Dayspring’s cannabis enterprises. (Pet. Ex. H at NHCSLO00078–107). Once the City became
aware of and conducted its due diligence regarding the significance of these concealments
and misrepresentations under the City’s permitting process, the City notified Plaintiff that
it was automatically disqualified from activating, obtaining, or holding a Cannabis Permit on October 6, 2021. (
Pet. Ex. E.) Following an opportunity provided to NHC to review and present any information
or argument to the City Manager that NHC deemed relevant, held on October 14th,2 the
City sent a final memorandum of decision affirming the automatic disqualification on October 19, 2021. (
Pet. ¶ 25 & Ex. H.). The basis for the disqualification was NHC’s
misrepresentations and omissions and ongoing concealment throughout the City’s application and permitting
process concerning the criminal
activities of its CEO, owner, landlord, and principal, Helios Dayspring. Plaintiff’s argument presented by
legal counsel prior to the City’s final determination in the automatic termination and revocation
process, and here, is that Dayspring’s interest in NHC was transferred to his
fellow applicant and business and romantic partner, Valnette Garcia, on October 20, 2020,
before knowledge of Dayspring's various felonies became public knowledge 2 The petition ignores the October 14,
2021 hearing, but the hearing was memorialized in the City Manager’s memorandum of decision. (
See Pet. Ex. H at NHCSCLO000063.) A recording of the hearing is
available
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502and known to the City. (See, e.g., Pet at 4:25–
28, id. at ¶ 20, Pet. Ex. F at NHCSLO000046; RJN Ex. 3 [Affidavit of Surety
in Dayspring’s federal criminal case, obligating Garcia to guarantee Dayspring’s
release bond and identifying herself as Mr. Dayspring’s “
girlfriend.”].) However, Plaintiff alleges and acknowledges that Dayspring remains the landlord/property” owner of the building at
which NHC hopes to operate, and thus remains in a position to both exercise
substantial control over the operation and to benefit financially from NHC’s operation. (See, e.g., Pet. at p. 4
fn. 2 [Mr. Dayspring . . . has no interest in the cannabis business or permit, other
than as a landlord/property owner.”]; ¶ 12 [“[NHC’s] landlord Dayspring] has spent approximately $
4.1 million dollars building out the retail cannabis facility. 22 [“NHC anticipates that it
will remain liable under its current lease with the landlord Dayspring], which as [sic] a term of 5 years at
an initial monthly rental of $55,000 per month.3”]; 23 [“NHC anticipates that it will be
liable for the Landlord’s [Helio Dayspring’s] cost and expense of improving the premises, over
of [sic] $4,000,000.00 . . . .”]; ¶ 61 [“Petitioner and its landlord [Dayspring] spent
money in reliance on the permit, undertaking expensive and extensive renovations
of [Dayspring’s] property . . . .”]; Pet. Ex. H at NHCSLO0000148 [Memorandum signed by Sargeant Chad
Pfarr, dated October 8, 2021, memorializing discussion with NHC staff who indicated that
they had had numerous recent conversations with Dayspring regarding the cannabis store, despite his
purported divestiture of interest. Also noting that
updated NHC plans were entitled “Natural Healing Center Helios Dayspring.].)
A. Helios Dayspring’s Criminal Conduct and NHC’s Misrepresentations The City’s decision was
based in substantial part on the criminal conduct of Dayspring. First, as Dayspring has admitted, he committed
federal program bribery, in violation of 18 U.S.C. 666(a)(2). Dayspring
committed this felony by bribing an elected County Supervisor repeatedly from 2016 to 2019.
In 2017, Dayspring unsuccessfully attempted to bribe another
unnamed local mayor. (See Pet. Ex. H at NHCSLO00089–97.) 3 An amount seemingly
well over market value for comparable real estate, supporting an inference of a collusive
arrangement, especially given that the lease was entered by Dayspring and Garcia on July 29, 2021, a single day
after Dayspring’s plea agreement was filed on July 28, 2021. Compare Pet.
Ex.
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502From 2014
to 2018, Dayspring admitted that he fraudulently underreported his taxable income by approximately $9,000,000. (
Ibid.) For at least the calendar year 2018, he willfully, knowingly and intentionally submitted a
false tax return that was signed under penalty of perjury in other
words, Dayspring committed perjury. Despite an obligation to disclose, Dayspring failed to disclose any of this criminal
activity to the City in connection with his submission of NHC’s application or the
City’s subsequent extensive background check process during which he was provided ample
opportunity to disclose and explain any information pertinent to the application and
background process. (Declaration of Chad Pfarr [“Pfarr Decl.”] Ex. A.) As the City informed
Plaintiff, Municipal Code section 9.10.070(C) provides for automatic disqualification of an applicant
if the applicant “made one or more false or misleading statements or omissions
in the application process.” (Pet. Ex. E at NHCSLO000039 [citing Municipal Code § 9.10.070(C)]; see
also RJN Ex. 1.) In connection with NHC’s application, NHC also agreed and
acknowledged that disqualification and/or nullification would result in the event of false statements
or omissions in connection with its application. The Cannabis Permit Application, signed by
Dayspring on behalf of NHC, provided: “Applicants providing false or misleading information in
the permitting process will result in rejection of the application and/or nullification of any issued
permit.” (Codron Decl. Ex. A at p. 5 [emphasis added].) On
May 19, 2019, Dayspring submitted a signed cannabis background
check questionnaire. When signing this background check questionnaire, Dayspring acknowledged: I
acknowledge that by signing the documents contained in this Background Package, that all information
that I have provided is true and correct. I acknowledge that any information omitted,
not disclosed, or found to be false
is subject to disqualification for a Cannabis Business Operator Permit.” Pfarr Decl. Ex. A at p. 1.) As
part of this questionnaire, Dayspring was asked whether he had engaged in a variety of illegal
conduct. In a subsequent interview with Detective Suzie Walsh,4 He was asked a number of
follow up questions. In connection with filling out the questionnaire and in the subsequent
interview, the City determined following public disclosure of Dayspring’s 4 In connection with opposing this
application, the City had not yet had an opportunity to transcribe the interview with Detective Walsh,
but
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502criminal pleas, that Dayspring
made, at least, the following false
or misleading statements or omissions. (Id.
at pp. 4–6.) 1.Spending Money for Illegal Purposes Dayspring was asked whether
he had ever “spent money for illegal purposes.” He checked the “yes” box. (Id. at p.
4.) At his subsequent police interview, Dayspring clarified that this affirmative answer was only a reference
to illegal purchases of marijuana before it was legal to purchase in California. He did not, either
in response to the written question, or in response to verbal follow up questioning, disclose
the criminal misconduct that was the basis of his federal plea agreement. The
City later determined that this statement and related omissions constitute false and misleading statements
and omissions and that Dayspring spent money for the illegal purpose
of bribing an official. (
Pet. Ex. H at NHCSLO000065–66.) 2.Falsification of Documents Dayspring was asked whether
he had ever engaged in “forgery,” which was explained by the questionnaire to include,
for purpose of the questionnaire, “falsifying any type of document.” He ticked the “no” box.” (Pfarr Decl. Ex. A at
p. 5.) The City determined that the response to the questionnaire and
corresponding statement constitutes a false or misleading statement or omission and that Dayspring committed forgery, as
the term was used in the questionnaire,
by falsifying his tax returns. (Pet. Ex. H at NHCSLO000066.) Additionally, and
as a separate and independent ground for disqualification, the City found that any monies retained or gained
by Dayspring as the result of his fraudulent and/or underreported taxes, if spent for any
purpose other than the payment of taxes as required, would
also constitute
an illegal expenditure of money by Dayspring. (Ibid.) 3.Perjury In reviewing the
application/background forms, the City also noted that Dayspring was asked whether he had ever committed perjury. He
checked the “no” box. (Pfarr Decl. Ex. A at p. 5.) The City found that was a
false or misleading statement or omission. Dayspring pled guilty to submitting intentionally false
and fraudulent tax returns signed under penalty of
perjury,
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AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 925024.Tax Fraud and Tax Evasion Dayspring was asked whether he
had been involved “in any matter regarding a tax lien, tax fraud, or evasion of taxes.” He ticked the “no” box. (
Pfarr Decl. Ex. A at p. 6.) The City found that this statement
constitutes a false or misleading statement or omission. Dayspring had committed tax fraud and tax evasion in
2014, 2015, 2016, 2017, and 2018, as evidenced by
his federal plea agreement. (Pet. Ex. H. at
NHCSLO000066–68.) B. Falsehoods in NHC’s Cannabis Operator Application The City also determined that NHC
made a series of false or
misleading statements in its merit-based Cannabis Business Operators Application.
In the application, NHC proactively, voluntarily and affirmatively represented, that Dayspring had
a history of regulatory compliance, and compliance with taxation laws: When
other cannabis businesses were operating in the shadow without paying taxes,
Helios Dayspring raised the bar by implementing self-regulatory policies and complying with all tax laws,
evidence in his 8+ years of tax history and
his operations running with the highest standards in the industry. Codron Decl. Ex. B at p. 11.) The City found
this to be a false or misleading statement and that Helios Dayspring” had not “compl[
ied] with all tax laws.” (Pet. Ex. H at NHCSLO000068.) The City also found
that NHC’s omissions concerning the criminal conduct of Dayspring were misleading and likely
affected NHC’s score. (Pet. Ex. H at NHCSLO000068–70.) NHC’s application also
repeatedly stressed the experience and track record of success of Helios Dayspring and highlighted
this experience and history of success and compliance as a reason why the City should
select NHC for one of the few competitive Cannabis Permits available in the
City. An example of these representations included the following statement: Helios
has a wealth of knowledge in business development, entitlements,
and contract negotiations . . . Helios has also opened six different storefront dispensaries
in the Inland Empire and in Grover beach, gaining invaluable experience
in retail operations . . . Helios has connected all the dots from
cultivation, manufacturing, and retail, completing the seed to sale networks. . . . Helios Dayspring]
is an industry leader and is helping bring cannabis into
mainstream society . . . his experience
and dedication to our community is unmatched in the industry. Codron Decl. Ex. B at pp. 10–
11.)
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502wealth of Dayspring (wealth which was, at
least in part, the result of bribery and tax evasion): NHC has
ample access to funding. Primary principal Helios Dayspring will use personal funds
to build and operate the project. A person financial statement documenting $3.6 million in liquid
assets and $12.3 million in real estate equity is enclosed on
the following page. . . . Additionally, Helios
Dayspring has access to a 3 million loan if needed. Id. at p. 31.) The application
satisfied the “Property Control” merit criteria by indicating that the three APNs associated with the project “
are fully owned by Helios Dayspring.” (Id. at p. 30.) The City found that NHC likely would
not have received the score it did and would not have been allowed to move forward
had the City known of the substantial and ongoing criminal
history of Dayspring. (Pet. Ex. H at pp. NHSCLO000068–70.) The City also concluded
that Dayspring’s failure to disclose the substantial back taxes owed to the IRS on
his personal financial statements constituted a false or misleading statement or omission. (Id. at
NHCSLO000070.) This failure resulted in a substantial overstatement of the financial assets available to
NHC and Dayspring. (Ibid.) The City found that these were misleading omissions that
likely would have affected the outcome of the application process.
C. False Statements in Connection with Transfer to Valnette Garcia The City also concluded that
NHC made a number of false or misleading statements or
omissions in connection with the transfer of ownership to Garcia. The City
concluded that the circumstances surrounding Dayspring’s transfer of ownership to Garcia supported an inference that
Garcia and NHC knew or should have known of the criminal investigation of
Dayspring and potentially the forthcoming criminal charges at or around the time NHC and Dayspring undertook
to transfer his interest to Garcia. (Pet. Ex. H at NHCSLO000070–72.) The City concluded that
the failure to disclose these matters to the City in connection with the
transfer of ownership to Garcia constituted “a continuation and reaffirmation by NHC, Ms. Garcia and Mr.
Dayspring of the prior and ongoing pattern and practice of providing false or misleading
statements or omissions of highly relevant information to the City in order
to obtain and wrongfully maintain the Cannabis Operator Permit.” (Ibid.) In its final memorandum of decision,
the City also reiterated its limited role in the transfer of ownership to Garcia, in light of the
regulations
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502had already been through
the City’s background check process. The applicable process effectively required only a ministerial
acknowledgement from the City that the transfer
satisfies the facial requirements of the ordinance. (Id. at NHCSLO000071.) In its memorandum of decision,
the City also noted that, in each formal communication to NHC since the facts of the criminal
misconduct became known to the City, the City has advised that the City was conducting a separate
inquiry into the implications of the criminal plea and that any actions or communication
related to the construction permits should not be construed as related to the
Cannabis Permit considerations. (Id. at NHCSLO000072.) Finally, the City found that NHC had engaged
in misrepresentations in connection with the revocation process, in that NHC omitted or affirmatively
hid the fact that Dayspring remained NHC’s landlord, continuing to derive substantially
above market financial benefit from NHC, and his continuing involvement with NHC until “
caught” by the
City. (Pet. Ex. H at NHCSLO000072–74.) D. Subsequent History The City
issued its final memorandum of decision, re-affirming the automatic disqualification of NHC, on October
19, 2021. (Pet. Ex. H.) On January 7, 2022 – approximately three months later – Plaintiff served
the petition for writ of mandate. (Richards Decl. Ex. A.) Plaintiff then waited
an additional two
weeks to file the ex parte application. III. LEGAL ARGUMENT A. Plaintiff Fails to
Make a Showing of a Need for Ex Parte Relief5 Rule 3.1202(c) of the
California Rules of Court requires that an applicant “make an affirmative factual
showing in a declaration containing competent testimony based on personal knowledge of irreparable harm,
immediate danger, or any other statutory basis for granting
relief ex parte.” (Rules of Court, rule 3.1202(c).) The Garcia declaration
fails to make an “affirmative factual showing in a declaration containing
competent testimony based on personal knowledge of irreparable harm, immediate danger, or any other statutory
basis for granting relief ex parte.” (Ibid. [emphasis added].) The 5 The City also notes that the ex
parte application fails to indicate whether the City will oppose the application. (Rule of Ct. Rule 3.1204.)
This
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502only
reference to any potential harm is Garcia’s statement that: I]f a local license is lost, this
results in the State revoking its State license, and if the State license is not
then the application process with the State starts over again, and presently it is taking
12-14 months for the State to approve new cannabis
business licenses from submission, which is significant because you cannot lawfully open
a cannabis business without both local and state authorization. If NHC SLO, LLC does
not have its local cannabis permit reinstated to prevent the loss of its
existing issued State cannabis, NHC CLO, LLC presently faces the immediate threat of
irreparable harm because its [sic] cannot wait for 12-14 months to get
its State license reinstated after resolving this litigation with the City, as the company will
run out of money by then and forced to close.” Garcia Decl. ¶¶ 5–6.) This
statement fails to make an affirmative factual showing of irreparable harm or immediate danger for a number
of reasons. It also fails to acknowledge that any adverse impacts upon NHC lay squarely at the
feet of Ms. Garcia’s “former” business partner and current boyfriend and landlord, Helios Dayspring
and his criminal conduct, for which neither the City nor its
residents should be held to account or compelled to remedy. First, Garcia fails to
make any showing of harm based on personal knowledge. She indicates that, in her opinion, the state will revoke a
State License if a local license is lost and not promptly reinstated,
but does not describe any personal knowledge underlying this apparent belief. Garcia does
not identify any statute or regulation mandating such immediate revocation. Garcia does not describe
any communications with or notification from the state of California demonstrating the
revocation is imminent, or any other evidence of imminent revocation. Second, Garcia fails
to demonstrate that any purported revocation is imminent. She opines that the State of California will, at some
point, revoke NHC’s state permit, but does not explain whether she believes this will occur
tomorrow, next week, next month, or six months from now. In short,
Garcia fails to demonstrate that the alleged harm is imminent. Third, any purported harm is purely monetary (
in the form of lost profits), and not the sort of irreparable harm or
danger that can support the extraordinary remedy of injunctive relief. Garcia opines that her business will “run
out of money,” but does not prove this conjecture with any documentary evidence or
reasoned analysis. Garcia does not describe NHC’s cash reserves, expenditures, assets, whether any
losses could be mitigated, or any other particular that could establish imminent bankruptcy.
Garcia
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502interested party that failure to issue
a temporary restraining order will ruin her business. She also fails to acknowledge that the
vast majority of any imminent harm results from purported financial obligations of NHC owed to
Dayspring as the result of his improvements to and contractual obligations associated with
his continuing role as landlord. These purported
harms are as practically meritless as they are legally insufficient. Finally, to the extent there is a
danger of “imminent” harm (harm that could occur before a notice motion could be heard) it is
entirely of Plaintiff’s own creation. Plaintiff waited months to seek the present relief. The City
first informed Plaintiff that its’ license was revoked on October 6, 2021. (Pet. ¶ 13.) Following a meeting
held on October 14th,6 the City sent a final memorandum of decision
affirming the automatic termination on October 19, 2021. (Pet. ¶ 25 & Ex. H.) Plaintiff then waited
until January 7, 2022 – approximately three months - to file and serve the petition for writ of
mandate on Defendant. (Richards Decl. Ex. 1.) Plaintiff then waited until January 21, 2022 – an additional two
weeks – to first attempt to file the ex parte application. Armstrong Decl. ¶ 3.) Plaintiff then waited
an additional week to re-notice the ex parte hearing, apparently due to some logistical
hurdle. (Id.) If there were immediate danger, Plaintiff had ample time to seek a preliminary injunction after
filing a regularly noticed motion. To the extent there is any immediate danger (which Plaintiff
has not shown) it is of Plaintiff’s own making.
B. Plaintiff Does Not Seek to Maintain the Status Quo Contrary to Plaintiff’s
argument, the relief sought would not maintain the “status quo.” App. at pp. 12–14.) The “
status quo” is that Plaintiff was automatically disqualified more than three months ago. Instead,
Plaintiff seeks mandatory injunctive relief; an order requiring the City to “immediately
reinstate NHC’s Cannabis Business Permit” and to further “reasonably cooperate” with NHC’s efforts to
seek further licensure. (Compare Proposed Order at ¶¶ 2–3 with People v. Mobile Magic Sales, Inc. (1979) 96
Cal.App.3d 1, 13 [“The purpose of mandatory relief is to compel the performance of a substantive
act or a change in the relative positions of the parties.”].) In order to
obtain mandatory injunctive relief, a party bears an extremely heavy 6 The petition ignores the October 14,
2021 hearing, but the hearing was memorialized in the City Manager’s memorandum of decision. (
See Pet. Ex. H at NHCSCLO000063.) A recording of the hearing is
available
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502burden. (See, e.g., Alvarez v. Eden Twp. Hosp.
Dist. (1961) 191 Cal.App.2d 309, 312 [“The rule is well established that a
mandatory preliminary injunction is rarely granted (citation) and it has been held that a very urgent
case is required to justify a mandatory preliminary injunction and that a clear case of prospective
injury is indispensable.”]; Shoemaker v. Cty. of Los Angeles, 37 Cal. App. 4th 618, 625 (1995) [“
The granting of a mandatory injunction pending trial is not permitted except
in extreme cases where the right thereto is clearly established.”].).
C. Plaintiff is not Likely to Succeed on the Merits Plaintiff's underlying claim
seeks a writ of mandate challenging the City’s automatic disqualification of Plaintiff.
Plaintiff's challenge is properly reviewed as petition for ordinary mandamus because no hearing was required
by law, (Code Civ. Proc. § 1085; Am. Bd. Of Cosm. Surgery v. Med. Bd. Of California (2008) 162
Cal.App.4th 534, 547.) The standard of review in ordinary mandamus is highly
deferential. (See Carrancho v. Cal. Air Res. Bd. (2003) 111 Cal.App.4th 1255, 1265 [“
Mandamus may issue to correct the exercise of discretionary legislative power, but only if the action taken is
so palpably unreasonable and arbitrary as to show an abuse of discretion as
a matter of law. This is a highly deferential test.”].) Plaintiff’s challenge involves
the interpretation of the Municipal Code, and the City is entitled to deference in its interpretation
of its municipal code. (See, e.g., Communities for a Better Envt. v. State Water Resources
Control Bd. (2003) 109 Cal.App.4th 1089, 1107 [Courts extend considerable
deference to an administrative agency's interpretation
of . . . the regulatory scheme which the agency implements or enforces.”].)
1.Plaintiff’s Disqualification was authorized by the Municipal Code Municipal Code section 9.10.
070(c) provides that “an applicant shall be disqualified from applying for, or obtaining,
a commercial cannabis operator permit if . . . The applicant made one or more false
or misleading statements or omissions in the application process.” Section 9.10.070(d) provides a permit is “activated
by the issuance of a use permit for the commercial cannabis activity . . . together with
all other applicable city permits and state licenses, and the
commercial
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502cannabis activity.” (Cite.)7 As
Plaintiff admits, it has not complied with the requirement of Section 9.10.070(d),
and the Cannabis Permit is not active. (Garcia Decl. ¶ 8.) Until the Cannabis Permit is
active, Plaintiff has no operative permit, and may still be disqualified from . . . obtaining”
the Cannabis Permit under Section 9.10.070(c). This interpretation comports with
the general law of vested rights, which provides substantially greater protections once a business
has obtained necessary land use entitlements and begins to operate Avco Cmty. Devs., Inc. v. S.
Coast Reg'l Com. (1976) 17 Cal.3d 785, 797). Plaintiff’s claim that it had
a “vested right” to operate a commercial cannabis is without merit. A Cannabis Permit, and especially one that is
not yet active, is merely a step in the process. An aspiring cannabis operator must
also obtain a conditional use permit and a variety of approvals from “the City Police, City Fire
Department, etc.” (Garcia Decl. ¶ 8; see also RJN Ex. 2 Municipal § 17.86.080(E)(1)(a)].)
To the extent funds have been spent to undertake “expensive and extensive renovations of [
the] property,” those funds were expended by Plaintiff’s landlord, Helios Dayspring, during a period of time
when he was inarguably aware that he had engaged in, and concealed on an
ongoing basis from the City, disqualifying criminal misconduct. (Pet. at ¶¶ 61, 23.) Further, the
Municipal Code warns applicants that licensure creates no vested right: No person shall have
any entitlement or vested right to operate a cannabis business solely
by virtue of licensing under these regulations. Operation of cannabis activity(ies) requires both
the approval of a conditional use permit and a commercial cannabis operator permit under
Chapter 9.10, which is a revocable privilege and not a right in the city.
The applicant bears the burden of proving that all qualifications for licensure
have been satisfied and continuously maintained prior to conducting a
cannabis business at an otherwise allowed location within the city. RJN Ex. 2 [Municipal Code § 17.86.
080(E)(2)].) Plaintiff made numerous false statements in
the application process, any one of which would mandate disqualification.
2.Plaintiff’s Disqualification was Authorized by NHC’s Agreement 7 Notably, section 9.10.080,
governing renewals, provide that an application for renewal of a commercial cannabis operator permit “shall
be rejected” if any of the following exists: “Any of the grounds for disqualification for prequalification
set forth in Section 9.10.070(C).” (RJN Ex. 1.) As discussed above, Section 9.
10.070(C)(4) provides for automatic disqualification if “the applicant made one or
more misleading statement or omissions in the application process.” NHC made numerous misleading statements
or omission in the application process. If NHC were to activate its permit, any
attempt
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502In connection with
its application for a Cannabis Permit, NHC contractually agreed that any false or
misleading representation or omission would result in disqualification and revocation of
permit, and waived any inconsistent rights in the Municipal Code. In
NHC’s original commercial cannabis application form, NHC acknowledged that: Applicants providing false
or misleading information in the permitting process will result in rejection of the application
and/or nullification or revocation of any issued permit.” (Codron Decl. Ex. A at p. 5 [emphasis added].)8 This
is evidence of the City’s interpretation of its own ordinance, NHC’
s acknowledgement and agreement with this interpretation, and an independent contractual agreement and
waiver of any broader rights provided by the Municipal Code. NHC and Dayspring
provided false or misleading information in the permitting process by failing to disclose Dayspring's crimes,
representing that he had a history of legal and tax compliance, and by falsely indicating that
Dayspring had not engaged in a variety of crimes and other bad acts. As NHC agreed,
this merits “rejection of the application and/or nullification or revocation of any issued
permit.” (Codron Decl. Ex. A
at p. 5 [emphasis added].) D. Plaintiff has Unclean Hands Injunctive relief is an
equitable remedy, and equitable defense such as unclean hands can weigh against the issuance of such equitable
relief. (See, e.g., Fibreboard Paper Prod. Corp. v. E. Bay Union of Machinists,
Loc. 1304, United Steelworkers of Am., AFL-CIO (1964) 227 Cal.App.2d 675, 727 [“It cannot be
questioned that the defense of unclean hands may be urged against a party seeking the aid of equity
by way of an injunction.”]; Bennett v. Lew (1984) 151 Cal. App. 3d 1177, 1186 [“Plaintiff's
hands are rendered unclean within the purview of the maxim by any form of conduct that, in the
eyes of honest and
fair-minded men, may properly be condemned and pronounced wrongful.”].) NHC’s success in the early stages
of the process is because of NHC and Dayspring’s knowing misrepresentations, made with
the intent that the City rely upon the representations, and 8 Similarly, the
background check form, submitted by Helios Dayspring, Valnette Garcia, and others involved with NHC, required
each individual to attest that “all information I have provided is true and correct. I acknowledge that
any information omitted, not disclosed, or found to be false
is
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW3390UNIVERSITY AVENUE, 5TH FLOORRIVERSIDE, CALIFORNIA 92502the City did in fact rely upon
the misrepresentations to its detriment – the City would not have issued a Cannabis Permit had NHC not
lied about Dayspring’s criminal conduct of, e.g., bribing government officials related to cannabis
operations. NHC only proceeded as far as it did because of fraud. NHC has unclean hands, and
equity should not allow it to profit from its fraud. Further, Dayspring’s girlfriend,
Garcia has never shown or represented that she did not know of Dayspring’s forthcoming
indictment when she received his transfer of ownership, and it strains credulity to believe that she had
no such knowledge, given Garcia's and Dayspring’s close personal relationship
and because the transfer was, apparently, for no consideration. (Declaration of Christine Dietrick Ex. A at pp. 3–4,9 RJN
Ex. 3.) In other words, NHC now relies on the success of
its wrongful misrepresentations and concealment of criminal misconduct to contend that the City
is precluded from taking action based on its dishonest conduct. Finally, despite Dayspring’
s purported divestiture of interest in NHC, Plaintiff alleges he is still the landlord and stands
to reap substantial financial benefit from the operation of a cannabis enterprise. (Pet. at 4:
25–28.) Dayspring’s undeniably unclean hands weigh against the issuance of an injunction that would inure
to his benefit and that of his fellow applicant and longtime business and romantic
partner, Ms. Garcia. The public interest would be disserved by mandatory injunctive relief and the
public should not be force to permit, facilitate and advance the unjust enrichment of a
cannabis company and an individual who has bribed public officials, evaded tax accountability for
his profits, and fraudulently manipulated a public process to obtain a contingent permit
to which
they clearly had and have no legitimate claim. IV. CONCLUSION For all of
the aforementioned reasons, the application should be denied
in
full. Dated:January
28, 2022 BEST
BEST & KRIEGER LLP By: JEFFREY
V. DUNN DANIEL L. RICHARDS Attorneys for Defendants and Respondents 9 See also Codron Decl. Ex. B at p.
29 [
PROOF OF SERVICE
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON
KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA 92612Proof of Service By Overnight Delivery I am a citizen of the
United States and employed in Orange County, California. I am over the age of eighteen years and not
a party to the within-entitled action. My business address is 18101 Von Karman
Avenue, Suite 1000, Irvine, California 92612. On January 28, 2022, I deposited with Federal
Express, a true and correct copy of the within document(
s): DEFENDANTS CITY OF SAN LUIS OBISPO AND CITY COUNCIL OF
AND FOR THE CITY OF SAN LUIS OBISPO’S
OPPOSITION TO PLAINTIFF NHC SLO, LLC’S EX
PARTE APPLICATION FOR
TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE:
PRELIMINARY INJUNCTION in
a sealed envelope, addressed as
follows: John Armstrong Armstrong
Law Group 23232 Peralta
Drive, Suite
102 Laguna Hills, CA
92653 Tel. 949-942-6069 john@armstronglawgroup.co Attorneys for Petitioner/Plaintiff Following
ordinary business practices, the envelope was sealed and placed for collection by Federal Express on this date,
and would, in the ordinary course of business,
be retrieved by Federal Express for overnight delivery on this date. I declare under penalty of perjury
under the laws of
the State of California that the above is
true and
correct.
1 -
EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON
KARMAN AVENUE, SUITE
1000IRVINE, CALIFORNIA 92612JEFFREY V. DUNN, Bar
No. 131926 jeffrey.
dunn@bbklaw.com DANIEL L.
RICHARDS, Bar No. 315552 daniel.richards@bbklaw.
com BEST BEST &
KRIEGER LLP 18101 Von
Karman Avenue, Suite 1000
Irvine, California 92612 Telephone: (949) 263-2600 Facsimile: (
949) 260-0972 Attorneys for Defendants and Respondents City of San
Luis Obispo and City Council of and for
the City of San Luis
Obispo EXEMPT FROM FILING FEES PURSUANT TO
GOVERNMENT CODE SECTION 6103 SUPERIOR
COURT OF THE
STATE OF CALIFORNIA
COUNTY
OF SAN LUIS OBISPO NHC SLO,
LLC,Petitioner and Plaintiffs, v. CITY OF SAN
LUIS OBISPO; CITY COUNCIL OF AND
FOR
THE CITY
OF
SAN LUIS OBISPO; AND
DOES 1-10,
INCLUSIVE, Defendants and
Respondents. Case No.
21CV-0734 Judge: Rita
Federman EVIDENTIARY OBJECTIONS TO
DECLARATION OF VALNETTE GARCIA IN SUPPORT
OF OPPOSITION TO
PLAINTIFF NHC SLO, LLC’S
EX PARTE APPLICATION
FOR
TEMPORARY RESTRAINING ORDER AND
ORDER TO SHOW CAUSE RE:
PRELIMINARY INJUNCTION
Date:
January
31, 2022 Time: 8:30 a.
m.
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EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE,
SUITE 1000IRVINE, CALIFORNIA 92612EVIDENTIARY OBJECTIONS TO THE DECLARATION OF VALNETTE GARCIA Defendants and Respondents City of
San Luis Obispo and City Council of and for the City of San
Luis Obispo (“Defendants”) hereby submit evidentiary objections to the Declaration of Valnette Garcia in Support of
Plaintiff and Petitioner NHC SLO, LLC’s Ex Parte Application for Temporary
Restraining Order and Order to Show Cause regarding Preliminary Injunction as follows, and concurrently moves
to strike
the identified matters to the extent the Court sustains these objections.
Obj.
No.
Material Objected To Grounds for
Objection Ruling on the Objection
1.The facts stated [in
NHC SLO, LLC’
s Verified Petition and
Complaint for Writ of Mandate, Prohibition,
Or Both, And For Declaratory Relief]
are true, and each and
every exhibit is a
true and correct copy of what
each attached exhibit
purports to be, and that
I have personal
knowledge of
same.” 3, p.
16:6–12.) Lacks
Foundation (Evid. Code § 403);
Lacks personal
knowledge. Evid. Code §§
403, 702.); Hearsay (
Evid. Code §§
1200
et
seq.);
3 -
EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA
92612Obj.
No.
Material Objected To Grounds for Objection
Ruling on the Objection
2.I have
been involved in other
local cannabis licenses and California State business
licenses, and from experience, if
a local license is lost, this
results in the State revoking
its State license,
and if the State
license is not promptly reinstated, then
the application process with the State
starts all over again, and
presently it is
taking 12-14
months for the
State to approve
new cannabis business licenses
from submission, which
is significant because you
cannot
lawfully open a cannabis business without
both local and
State authorization.”
5, p. 16:
16–16:23.) Lacks
Foundation (Evid. Code § 403);
Lacks personal
knowledge. Evid. Code §§
403,
702.); Hearsay (Evid. Code §§
1200 et
seq.); Speculative (Evid. Code 702.);
Assumes facts (Evid. Code 402-405.);
Opinion on Issue of Law See
Summers v. A.
L. Gilbert Co. (1999) 69
Cal.App.4th
1155, 1178 (opinion
testimony on a question
of law is prohibited); Improper Legal Argument
See Marriage of Heggie 2002) 99
Cal.App.4th 28, 30 fn. 3);
Cal Prac Guide Civ
Pro. Before Trial
Ch. 9(
I)-B declarations
limited
to
facts,
not
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EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA
92612Obj.
No.
Material Objected To Grounds for Objection
Ruling on the Objection 3.
If NHC SLO, LLC does
not have its local cannabis
permit reinstated to prevent
the loss of its
existing issued State cannabis,
NHC SLO, LLC presently faces
the immediate threat of irreparable harm because
its[sic] cannot wait
for 12-14 months
to get its State license reinstated
after resolving this litigation with the City,
as the company
will run out of money by
then and forced
to close.”
6, p. 16:
24–17:2.) Lacks
Foundation (Evid. Code §
403);
Lacks personal knowledge. Evid.
Code §§ 403,
702.)
Speculative (
Evid.
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EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA
92612Obj.
No.
Material Objected To Grounds for
Objection Ruling on the
Objection 4.Moreover, it is
likely that NHC, SLO
will prevail because the City
failed to follow its
own Ordinances and Laws
regarding when and how
an issued cannabis business
permit may be revoked in revoking
NHC SLO, LLC’
s license.”
7, p. 17:
3–17:6.) Lacks
Foundation (Evid. Code § 403);
Lacks personal
knowledge. Evid. Code §§
403,
702.); Hearsay (Evid. Code §§
1200 et
seq.); Speculative (Evid. Code 702.);
Assumes facts (Evid. Code 402-405.);
Opinion on Issue of Law See
Summers v. A.
L. Gilbert Co. (1999) 69
Cal.App.4th
1155, 1178 (opinion
testimony on a question
of law is prohibited); Improper Legal Argument
See Marriage of Heggie 2002) 99
Cal.App.4th 28, 30 fn. 3);
Cal Prac Guide Civ
Pro. Before Trial
Ch. 9(
I)-B declarations
limited
to
facts,
not
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EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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2
3
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA
92612Obj.
No.
Material Objected To Grounds for Objection
Ruling on the Objection 5.And,
the City will
not suffer harm even
if
the Court orders the immediate reinstatement
of the Cannabis
Business Permit . . .”
8, p. 17:7–
17:8.)
Lacks Foundation (Evid.
Code § 403); Hearsay (Evid.
Code §§ 1200 et seq.); Lacks
personal knowledge. Evid. Code §§ 403, 702.);
Opinion on Issue of Law See
Summers v. A.
L. Gilbert Co. (1999) 69
Cal.App.4th
1155, 1178 (opinion
testimony on a question
of law is prohibited); Improper Legal Argument
See Marriage of Heggie 2002) 99
Cal.App.4th 28, 30 fn. 3);
Cal Prac Guide Civ
Pro. Before Trial
Ch. 9(
I)-B declarations
limited
to
facts,
not
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EVIDENTIARY OBJECTIONS TO DECLARATION OF VALNETTE GARCIA
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA
92612Obj.
No.
Material Objected To Grounds
for Objection Ruling
on the Objection 6.Granting
Ex Parte Relief, including,
without limitation, setting
an Order to Show Cause Hearing why
a Preliminary Injunction Should Not Issue
is also in
the public interest,
in that the State of California
has deemed cannabis business “
essential services” to be open
to the public
during this pandemic as
cancer patients, and other persons have
recognized medical needs for cannabis.”
9, p. 17:17–17:22.)
Opinion on Issue of Law See
Summers v. A.
L. Gilbert Co. (1999) 69
Cal.App.4th
1155, 1178 (opinion testimony
on a
question of law
is prohibited);
Hearsay (Evid. Code §§
1200 et seq.); Lacks
Foundation (Evid. Code §
403); Lacks personal knowledge.
Evid. Code §§ 403, 702.); Improper Legal Argument
See Marriage of Heggie 2002) 99
Cal.App.4th 28, 30 fn. 3);
Cal Prac Guide Civ
Pro. Before Trial
Ch. 9(
I)-B declarations
limited
to facts, not
legal
arguments)); Impermissible Legal Conclusion (
Evid. Code
310.);
Speculative (
Evid. Code 702.); Assumes facts (Evid. Code 402-
405.).
Sustained:______ Overruled:______Dated:
January 28, 2022
BEST BEST & KRIEGER LLP By:
JEFFREY V. DUNN DANIEL L. RICHARDS Attorneys for
Defendants and Respondents City of San Luis Obispo and
City Council of and
for
PROOF OF SERVICE
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2
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON
KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA 92612Proof of Service By Overnight Delivery I am a citizen of the
United States and employed in Orange County, California. I am over the age of eighteen years and not
a party to the within-entitled action. My business address is 18101 Von Karman
Avenue, Suite 1000, Irvine, California 92612. On January 28, 2022, I deposited with Federal
Express, a true and correct copy
of the within document(s): EVIDENTIARY OBJECTIONS TO DECLARATION
OF VALNETTE GARCIA IN SUPPORT OF OPPOSITION TO
PLAINTIFF NHC SLO, LLC’S EX PARTE APPLICATION
FOR
TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE:
PRELIMINARY INJUNCTION in
a sealed envelope, addressed as
follows: John Armstrong Armstrong
Law Group 23232 Peralta
Drive, Suite
102 Laguna Hills, CA
92653 Tel. 949-942-6069 john@armstronglawgroup.co Attorneys for Petitioner/Plaintiff Following
ordinary business practices, the envelope was sealed and placed for collection by Federal Express on this date,
and would, in the ordinary course of business,
be retrieved by Federal Express for overnight delivery on this date. I declare under penalty of perjury
under the laws of
the State of California that the above is
true and
correct.
1 -
REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF OPPOSITION TO PLAINTIFF’S EX PARTE
APPLICATION FOR TRO AND OSC RE: PRELIMINARY INJUNCTION
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON
KARMAN AVENUE, SUITE
1000IRVINE, CALIFORNIA 92612JEFFREY V. DUNN, Bar
No. 131926 jeffrey.
dunn@bbklaw.com DANIEL L.
RICHARDS, Bar No. 315552 daniel.richards@bbklaw.
com BEST BEST &
KRIEGER LLP 18101 Von
Karman Avenue, Suite 1000
Irvine, California 92612 Telephone: (949) 263-2600 Facsimile: (
949) 260-0972 Attorneys for Defendants and Respondents City of San
Luis Obispo and City Council of and for
the City of San Luis
Obispo EXEMPT FROM FILING FEES PURSUANT TO
GOVERNMENT CODE SECTION 6103 SUPERIOR
COURT OF THE
STATE OF CALIFORNIA
COUNTY
OF SAN LUIS OBISPO NHC SLO,
LLC,Petitioner and Plaintiffs, v. CITY OF SAN
LUIS OBISPO; CITY COUNCIL OF AND
FOR
THE CITY
OF
SAN LUIS OBISPO; AND
DOES 1-10,
INCLUSIVE, Defendants and Respondents. Case
No. 21CV-0734 Judge:
Rita Federman REQUEST FOR JUDICIAL NOTICE
IN SUPPORT OF
OPPOSITION TO PLAINTIFF
NHC SLO, LLC’S EX PARTE
APPLICATION FOR
TEMPORARY RESTRAINING ORDER AND
ORDER TO SHOW CAUSE RE:
PRELIMINARY INJUNCTION
Date:
January
31, 2022 Time: 8:30 a.
m.
Dept: 2
ELECTRONICALLY
2 -
REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF OPPOSITION TO PLAINTIFF’S EX PARTE
APPLICATION FOR TRO AND OSC RE: PRELIMINARY INJUNCTION
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BEST BEST &
KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA 92612I. INTRODUCTION Defendants and Respondents City
of San Luis Obispo and City Council of and for the City of San Luis
Obispo (“Defendants”) respectfully request that the Court take judicial notice of the documents below pursuant
to California Evidence Code sections 451 and 452 in support of the Defendants’
Opposition to Plaintiff’s Ex Parte Application for
Temporary Restraining Order and Order
to Show Cause Regarding Preliminary Injunction. II. AUTHORITY FOR JUDICIAL NOTICE A court may
take judicial notice of official acts of local governments and legislative enactments of any public entity (Evid.
Code § 452(b–d)) and facts and propositions that are not reasonably subject to
dispute and are capable of immediate and accurate determination by
resort to sources of reasonably indisputable accuracy. (Evid. Code § 452(h).). Local ordinances
and resolutions are properly subject to judicial notice. (Union of Med. Marijuana Patients, Inc. v. City
of Upland (2016) 245 Cal.App.4th 1265, 1269 fn. 2.) There is
a rebuttable presumption that certified copies of public documents are true, correct, and authentic. (
See Evid. Code. §§ 1530 et seq.; Ambriz v. Kelegian (2007) 146 Cal.App.4th
1519, 1530 [“Respondents offered nothing to overcome the presumption that these copies of official records
were true and correct copies, as certified by a city official.”].) The documents
for which judicial notice are sought are relevant to establishing the relevant provisions of the
San Luis Obispo Municipal Code and to establish that Valnette Garcia represented to a federal
court
that her and Helios Dayspring are
in an intimate personal relationship. III. DOCUMENTS TO BE JUDICIALLY NOTICED 1.
San Luis Obispo Municipal Code Chapter 9.10, “Cannabis Regulations,” available online at https://sanluisobispo.municipal.
codes/Code/9.10. A true and correct copy of this document is attached hereto as
Exhibit 1. (Evid. Code § 452; Richards Decl. ¶ 2; (Union of Med. Marijuana Patients, Inc. v. City of Upland (
2016) 245 Cal.App.4th
1265,
3 -
REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF OPPOSITION TO PLAINTIFF’S EX PARTE
APPLICATION FOR TRO AND OSC RE: PRELIMINARY INJUNCTION
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA 926122. San
Luis Obispo Municipal Code Section 17.86.080, “Cannabis,” available online at https://sanluisobispo.municipal.codes/
Code/17.86.070. A true and correct copy of this document is attached hereto as
Exhibit 2. (Evid. Code § 452; Richards Decl. ¶ 3; (Union of Med. Marijuana Patients, Inc. v. City of Upland (
2016) 245 Cal.App.4th
1265, 1269 fn. 2 [local laws proper subject of judicial notice].) 3. Affidavit of
Surety (No Justification), filed in the matter United States of America v. Helios
Raphael Dayspring, aka “Bobby Dayspring” United States District Court for the Central District of California Case No.
2:21-cr-00343-AB. This document is available on PACER by accessing ECF No. 16 in the above
entitled matter. A true and correct copy of this document is attached hereto as Exhibit
3. (Evid Code § 452(d); Evid. Code § 1220 [hearsay exception for statement by party opponent, here
Valnette Garcia];
People v. Lee (2011) 51 Cal.4th 620, 651.) IV. CONCLUSION For
the foregoing reasons, Defendants respectfully request
that this Court take judicial notice of Exhibits
1
to 3. Dated:
January 28, 2022
BEST BEST & KRIEGER LLP By:
JEFFREY V. DUNN DANIEL L. RICHARDS Attorneys for
Defendants and Respondents City of San Luis Obispo and
City Council of and
for
EXHIBIT 1
000202
Office of the City Clerk
990 Palm Street, Sa n Luis Obispo, CA 93401 -3 21 8
805.781.7100
h.1c1tv urn
CERTIFICATION
I, Teresa Purrington, City Clerk, do hereby certify under penalty of perjury the attached
document is a true and correct copy of the original now on file in my office.
WITNESS MY HAND AND THE SEAL OF THE CITY OF SAN LUIS OBISPO.
DATED: _ ____,;J=a=nu=a=ry----=2=5.--=2==0=2=2 ___ _
Teresa Purrington, City Clerk
City of San Luis Obispo
000203
Ch . 9.10 Cannab is Regulations I San Luis Obispo Municipal Code Page 1 of 16
Sections:
9 .10.010
9 .10.020
9 .10.030
9 .10.040
9 .10.050
9 .10.060
9 .10.070
9.10.080
9.10.090
9.10.100
9.10.110
9 .10.120
9 .10.130
9 .10.140
9 .10.150
9 .10.160
9 .10.170
9 .10.180
9 .10.190
9.10.200
9.10.210
9 .10.220
9 .10.230
9 .10.240
9 .10.250
9 .10.260
9 .10.270
9 .10.280
9 .10.290
Chapter 9.10
CANNABIS REGULATIONS
Purpose and intent.
Definitions.
Personal cultivation limited.
Commercial cannabis/city permit and state l i ce nse r equired.
Regulations and fees.
Display and production of per mits.
Commercial cannabis operator permit application procedures a nd requirements.
Renewal of permit.
Suspension or revocation of permit.
Appeal.
Right to occupy and to use property for commercial cannabis activity.
Pr ohibition on transfer of commercial cannabis operator permits.
Records and reports.
Inspection and enforcement.
Outdoor commercial cannabis cultivation and activities prohibited.
Indemnification, insurance, reimbursement, consent.
Compliance with laws.
Permit violation.
Permit compliance monitoring.
Permit hol der responsible for violations by employees or agents.
Consumption or use prohibited on site and in publ ic-Cannabis event prohibited.
Concurrent alcohol o r tobacco sales or service prohibited.
Minors.
Sale of cannabis products or cannabis accessor ies by vending machine prohibited.
Security and public safety measures.
Limitations on city's liability.
Fees deemed debt to city.
Violation and penalties.
Sever ability.
The San Luis Obispo Municipal Code is current through Or dinance 1702, passed November 15, 2021.
000204
Ch. 9.1 O Cannabis Regulations I San Luis Obfspo Municipal Code Page 2 of 16
9 .10.010 Purpose and intent.
A. It is the primary purpose and intent of this chapter to protect the health, safety, and welfare of the residents
of the city of San Luis Obispo from the negative impacts of illegal commercial and noncommercial cannabis
activity, and of state authorized cannabis activity, by enforcing city ordinances, rules and regulations consistent
with applicable state law, including, but not limited to, the Compassionate Use Act, the Medical Marijuana Program
Act, the Adu lt Use of Marijuana Act, and the Medicinal and Adult Use of Cannabis Regulatory and Safety Act.
B. This chapter is not intended to, and shall not be construed to, prohibit or interfere with any right, defense or
immunity under Health and Safety Code Section 11362.S (the Compassionate Use Act}, or under Health and Safety
Code Section 11362.7 et se(1. (the Medica l Marij uana Program Act).
C. This chapter is not intended to, and shall not be construed to, prohibit or interfere wrth any right, defense or
immunity of any person twenty-one years of age or o lder relating to the adult personal possession or cultivation of
cannabis or marijuana consistent with the provisions of the Control, Regulate and Tax Adult Use of Marijuana Act
and the Medicinal and Adult Use of Cannabis Regulatory and Safety Act.
D. Nothing in this chapter shall be construed to authorize the cultivation, possession or use of marijuana for any
purpose inconsistent with state or local law.
E. Any reference to California statutes includes any regulations promulgated thereunder and Is deemed to
include any successor or amended version of the referenced statute or regulation. (Ord. 1647 § 4 (Exh. A (part)},
2018)
9 .10.020 Defin itions.
A. State-Defined Terms. Words or terms used in this chapter that are defined words or terms in Business and
Professions Code Section 26001 or Health and Safety Code Section 11362.7 (the "Statutes") shall have the
meanings ascribed to them in the Statutes as they now read, oras they may be amended to read. These state-
defined words and terms include, but are not limited to, "cannabis," "cannabis accessories," "cannabis
concentrate," "cannabis products," "commercial cannabis activity," "cultivation," "delivery," "distribution," "license,"
live plants," "manufacture," "operation," "person," ''premises," "sell," ''sale," "to se ll." Some of these terms are also
set forth in Chapter 17 .156. In t he event of conflict in the definitions, the definitions in Chapter 17 .156 shall
control; provided the terms defined in subsection_!:! of this section shall control over any other definition.
B. City-Defined Terms. The following words or terms used in this chapter have t he following meanings:
1. "Commercia l cannabis business" means any person or entity engaging in any business, operation or
activity which is commercial cannabis activity under state law in the city.
2. "Commercial cannabis operator permit" means a permit required by the city of San Luis Obispo pursuant
to this chapter to conduct commercial cannabis activity or a commercial cannabis business in the city.
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021 .
000205
Ch. 9.10 Cannabis Regulations I San Luis Obispo Municipal Code Page 3 of 16
3. "Responsible party(ies)" shall be one or more individuals who have ah ownership interest in a commercia l
cannabis activity and are designated to be personally responsible for compliance with all terms and conditions
of the commercial cannabis operator permit, all other permits required by the city, and all ordinances and
regulations of the city. Any person having an ownership interest of more than fifty percent in a commercia l
cannabis activity shall be designated a responsible party on the application. If no individual owns more than
fifty percent of a commercial cannabis activity, the individual owning the largest share shall be a responsible
party, and if multiple individuals have the same percentage interest, each one shall be a responsible party.
More than one individual can be designated a responsible party.
4. "Cannabis event" means a public or private event where compensation is provided or exchanged, either
directly or indirectly or as part of an admission or other fee for seNice, for the provision, hosting, promotion
or conduct of the event where consumption of cannabis is part of the activities . (Ord. 1647 § 4 (Exh. A (part)),
2018)
9 .10.030 Personal cultivation limited.
A. Maximum Six Plants Outdoors per Parcel. It shall be unlawful for any person to plant, cultivate, harvest, dry,
process, maintain, possess or store outdoors, more than six live canhabis plants on any parcel containing one or
more private residences. This limitation on outdoor personal cannabis activities appl ies per parcel, regardless of
the number of residents in each private residence, and regardless of the number of residences on the parcel. This
limitation applies to cannabis live plants for either adult recreational use or medicinal purposes. Outdoor personal
cultivation shall comply with applicable provisions of Section 17.86.080.
B. Maximum Six Plants per Private Residence, Indoors and Outdoors. It shall be unlawful for the cumulative total of
cannabis plants per private residence, indoors and outdoors, to exceed six cannabis live plants, regardless of
number of persons residing in the private residence. This limitation applies to cannabis live plants for either adult
recreational use or medicinal purposes. Any live cannabis plahts grown indoors sha ll comply with applicable
provisions of Section 17.86.080.
C. No Outdoor Cultivation on Parcel without Private Residence. It shall be unlawful for any person to plant, cultivate,
harvest, dry, process, maintain, possess or store any cannabis live plants outdoors on a parcel that does not have
a private residence used for residential dwelling purposes by the person cultivating the cannabis live plants.
D. Neighborhood Impacts of Personal Cultivation. There shall be no exterior evidence of cannabis cultivation
occurring at the property visible by normal unaided vision from a public place or the public right-of-way and any
outdoor cultivation shall comply with provisions of Section 17 .86.080(0). Personal cultivation of cannabis, for
recreational adult use or for medicinal purposes, shall not create odors, dust, heat, noise, light, glare, smoke or
other impacts to people of normal sensitivity living, working or lawfully present in the vicinity of the personal
cultivation site. Impacts that cross the nearest property line of any other parcel, beyond that parcel on which the
personal cultivation is conducted, or that are visible or noticeable with normal unaided vision, from a public place
or the public right-of-way, or from any separately owned, leased or controlled private residence or business on the
same parcel as the private residence responsible for the personal cultivation, are unlawful.
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021 .
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Ch. 9.10 Cannabis Regulat ions I San Luis Obispo Municipal Code Page 4 of 16
E. No Hazardous Personal Cultivation. Personal cultivation, harvesting, drying, or processing of cannabis, for
recreational adult use or m edicinal purposes, that uses or stores haza rdous or toxic chemicals or materials,
creates hazardous or t oxic products or wastes, or uses volatile processes or other methods or substances that
pose a significant ris k t o public health or safety, is prohibited and unlawful. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.040 Commercial cannabis/city permit and state license required.
A. City Commercial Cannabis Operator Permit Required. No person shall engage in commercial cannabis activity or
have an ownershi p interest in, operate, or manage a commercial cannabi s business without obtaining and
continuously mainta i ning a commercial cannabis ope rator permit pursuant to this chapter.
B. Commercial Cannabis Operator Permit and State License(s) Required. It shall be unlawful for any person to own,
conduct, manage, operate, engage or participate i n, or work or vol unteer at a commercial cannabis activity or
commercial cannabis business that does not have a valid commercia l cannabis operator permit issued pursuant to
this chapter and other city permits or licenses required by this code, in addition to the appropriate license(s)
required by st at e law to conduct the commercial cannabis activity. Any commercial cannabis business or
commercial cannabis activity conducted without all requ ired city and stat e permits and licenses is prohibited a nd
unlawful and is hereby declared to be a publ ic nuisance. (Ord . 1647 § 4 (Exh. A (part)), 2018)
9.10.050 Regulations and fees.
The city council shall by resolution or ordinance adopt such forms, fees, regulations and procedures as are
necessary to implement this chapter with respect to the application and qualification for, and the selection, future
selection, investigation, process, issuance, renewal, revoca t ion, and suspe nsion of, commercial cannabis operator
permits. (Ord. 1647 § 4 (Exh . A (part)), 20 18)
9.10.060 Display and production of permits.
A. Dual Permits Posted and Visible. A copy of the commerc ial cannabis operator permit issued by the city of Sa n
Luis Obispo pursuant to t his chapter, together w ith a copy of the appropriate state license(s) for the commercial
cannabis activity being conducted, shall be posted a nd readily visible to the public at all times, at each location
where commercial cannabis activity occurs.
B. Production of Originals for Inspection . Any owner, operator, employee or person in charge of a commercial
cannabis activity shall produce for inspection and copyi ng, upon request of a city inspector, code enforcement
officer, or city police officer during normal operating hours, the original of the cu rrent and valid city of San Luis
Obispo commer cial cannabis operator permit and the appropriate, curre nt and valid license(s) of the state of
Ca lifornia for the commercial cannabis activity(ies) or commercial cannabis business(es) being conducted. (Ord.
1647 § 4 (Exh. A (part)), 2018)
The San Luis Obispo Munici pal Code is current through Ordinance 1702, passed November 15, 2021.
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Ch. 9.1 o Cannabis Regulations I San Luis Obispo Municipa l Code Page S of 16
9 .10.070 Commer cial can n abis operator permit application procedu res
and requirements.
A. Application. A person shall apply for a commercial cannabis operator permit by submitting an application t:i
the city during the annual application period or any other period established by the city manager. The city council
w i ll, by resolution, adopt criteria by which all applications will be reviewed, applicants qualified and, in the case of
retail and cultivation busi nesses, also ranked. Those applicants that are selected will have the opportunity to apply
for a use permit as outlined in Section 17.86.080. Each application sha ll designate at least one responsible party. If
a person is not selected to receive a commercial cannabis operator permit, the person may reapply during the
next annual application period or any subsequent application period established by the city manager.
8. Application Submittal Time Frame. A person may only submit one application per permi t type, per application
period, for a commercial cannabis operator permit, during the ann ual application period designated by reso l ution
of the city council or any subsequent application period established by the city manager. An applicant who is
unsuccessful in any appl ication period may submit a nother application in any subsequent application period. The
commercial cannabis operator permit will be valid for twelve months. Once a permit is obtained, the appl icant can
apply annually for renewal. There is no guarantee that an applicant will receive a commercial cannabis operatcr
permit in the first instance. Due to limitations on the number of certain permits, even a highly ranked applican: for
a retai l or cultivation permit may not receive a commercial cannabis operator permit and even an applicant wro
receives a commercial cannabis operator permit is not guaranteed that any subsequent, required land use permit,
as outlined in Section 17.86.080, will be approved.
C. Grounds for Automatic Disqualification. In addition to any other reason that may be established by the city
council as a basis for disqualification, an applicant shall be disqualified from applying for, or obtaining, a
commercial cannabis operator permit if:
1. The applicant fails to timely file an application during the annual application period.
2. The responsible party refuses to sign the application and agree to be personally responsible for
compliance, and personally liable for failure to comply, with the provisions of this chapter.
3. The applicant, or any of its officers, directors or owners, or any person listed ln the appl ication, has be~m
convicted of a felony or offense referenced in Business and Professions Code Section 26057; or has been
subject to fines, penalties, or sanctions for cultivation or productlon of a controlled substance on public or
private lands or for unauthorized commercial cannabis activities as specified in Business and Professions
Code Sect ion 26057; or has had a commercial cannabis li cense suspended or revoked by the state of
California o r any city or county in any state, within the three years preceding the date the application is filed,
or is ineligible to apply for a state cannabis license. No person who has been convicted of such a felony or
offense, or subject to such fines, penalties, sanctions, suspension or revocation, may be engaged (actively or
passively) in the operation, management or ownership of any commercial cannabis business. A conviction
within the meaning of this chapter means a p lea or verdict of guilty or a conviction or diversion following a
plea of nolo contendere.
4. The applicant made one or more false or misleading statements or omissions in the application process.
The San Lu is Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021.
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Ch. 9.10 Cannabis Regulations I San Luis Obispo Municipal Code Page 6 of 16
5. Any person listed on the application is a licensed physician making patient recommendations for medical
or medicina l cannabis pursuant to state law.
6. Ahy persoh listed in the application is less than twenty-one years of age.
D. Duration and Activation ofPermit. Each commercial cannabis operator permit issued pursuant to this chapt~r
shall expire twelve months after the date of its activation. The permittee may apply for renewal prior to expiration
in accordance with this chapter. Each commercial cannabis operator permit must be activated within twelve
months of issuance. The permit is activated by the issuance of a use permit for the commercial cannabis activity
pursuant to Section 17 .86.080, together with a ll other applicable city permits and state licenses., and the
commercial cannabis operator thereafter opening and continuously operating the commerci al cannabis act ivitf.
Failure to timely activate the permit shall be deemed abandonment of t he permit and the permit shall
automatically lapse. (Ord. 1673 §§ 1, 2 (Exh. A), 2020; Ord. 1647 § 4 (Exh. A (part)), 2018}
9 .10.080 Renewal of permit.
A. Renewal Application Fifing Deadline. An application for renewal of a commercial cannabis operator permit shall
be filed at least sixty calendar days, but not more than one hundred twenty calendar days, prior to the expirati::>n
date of the permit with the city manager or his/her designee. All commercial cannabis operator permits shall have
an expiration date of June 30th of each year. If the complete application and fees are timely submitted but the city
does not act to approve or reject the renewal prior to expiration, the permittee may continue to operate under the
expired permit until the city approves or rejects the application for rehewal.
B. Rejection of Renewal Application. An application for renewal of a commercial cannabis operator permit shall be
rejected if any of the following exists:
1. The commercial cannabis operator permit is revoked at the time of the applicati on or renewal.
2. The applicant conducted unpermitted commercial cannabis activ ities in the city or continued to conduct
formerly permitted commercial cannabis activities after expiration of the permit, other than as expressly
permitted by this section.
3. Any of the grounds for disqualificati on for prequaliflcation set forth in Section 9.10.070(C), or as
established by the city council, exist at the time of application for renewal, or the date of renewa l.
4. The permi ttee fails to re n ew any required stat e of California license(s), or the state revokes or suspen ds
the license. Revocation, terminati on, noni ssuance or suspension of a license issued by the state of California,
or any of its departments or divisions; shall immediately, concurrently revoke. terminate, or suspend,
respectively, the commercial cannabis operator perrnit. Such automatic suspension makes it illegal for a
commercial cannabis business or activity to operate within the city of San Luis Obispo until the state of
California, or its respective depa rtment o r division, reinstates or issues the state license.
An application for renewal of a commercial ca nnabis operator permit rnay be denied if any of the following exists:
1. The application is filed less t han sixty days before its expiration.
The San Luis Obispo Municipal Code is current through Ord i nance 1702, passed November 15, 2021.
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Ch. 9.1 O Cannabis Regulations I San Luis Obispo Municipal Code Page 7 of 16
2. The applicant has received an administrative citation for violating any provision of this code relating to its
commercial cannabis activity(ies) in the city during the last twelve months, and the administrative citation has
hot been resolved in the applicant's favor by the date of application for renewal. A pending, unresolved appea l
of an administrative citation shall not result in rejection of an otherwise timely and complete appl ication, but
resolution of an appeal in a manner that upholds the vlolatron against the applicant during the application
review period shall result In the immediate rejection of the application.
3. The commercial cannabis business has not been in regular and continuous operation in the three months
immediately prior to the renewal application.
4 . The commercial cannabis business fails to conform to the requirements of thi s chapter, any regulations
adopted pursua nt to this chapter, or the conditions i mposed as part of any use permit or zoning requirements
under Section 17.86.0 80.
5. The commercial cannabis operator permit is suspended at the time of application or renewal.
C. Effect of Rejection of Application for Renewal-Operations to Cease Pending Appeals. If a renewal application is
rejected, the commercial cannabis operator permit expires on the expiration date set forth in the permit, even if
an appeal has been filed. All commercial cannabis act ivities in the city under the expired permit must stop unti l a ll
appeals have been exhausted. A person or entity whose renewal application is rejected , and who loses his/her/its
appea l, must go through the annual commercia l cannabis business operator permit application process. (Ord.
1691 § 1, 2021; Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.090 Suspension or revocation of permit.
In addition to any other penalty authorized by law, a commercial cannabis operator permit may be suspended or
revoked ifthe city finds, after notice to the permittee and opportunity to be heard, t hat the permittee or his or her
agents or employees have violated any condition of the permit imposed pursuant to, or any provision of, this
chapter.
A. Upon a finding by the city of a first permit violation within any five-year period, the permit shall be suspended
for t hirty days.
B. Upon a finding by the city of a second permit violation within any five-year period, the permit shall be
suspended for ninety days.
C. Upon a finding by the city of a third permit violation within any five-year period, the permit shall be revoked.
Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.100 Appeal.
A. Qualification-Ranking of Retailers and Cultivators. A decision of the city t o not qualify an applicant for a
commercial cannabis operator permit, or to rank applica nts for retail or cultivation licenses, or to allow qualified
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021.
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Ch. 9.10 Cannabis Regulations I San Luis Obispo Municipal Code Page 8 of 16
applicants with the highest rankings the first opportunity to apply for a commercial cannabis operator permit,
shall be the final action of the city and not appealable.
B. Nonrenewa/, Revocation or Suspension. A decision of the city to reject an application for renewal, or to revoke or
suspend a commercial cannabis operator permit, is appealable to the city manager. An appeal must be filed with
the city manager withih ten working days after the renewal has been denied, suspended or revoked. A deci sion of
the city manager or his or her designee is appealable to the city council lh accordance with Chapter 1.20.
C. Effect of Suspension. During a period of license suspension, t he commercial cannabis business shall remove
from public view all cannabis and cannabis products, and shall not conduct any commercial cannabis activity.
D. Revocation-Notice to State. Pursuant to Business and Professions Code Section 26200(c), the city manager or
his or her designee shall promptly notify the Bureau of Cannabis Control within the Department of Consumer
Affairs upon the city's revocation of any local license, permit, or authorization for a state licensee to engage in
commercial cannabis activity within the city. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9 .10.110 Right to occupy and to use property fo r commerci al cannabis
activity.
As a condition precedent to the city's issuance of a commercial cannabis operator permit pursuant to th1s chapter,
any person intending to open and operate a commercial cannabis business shall provide evidence satisfactory to
the city of the applicant's legal right to occupy and use the proposed location for the proposed use, together with
the approval of a use permit from the city for cannabis activity at the location. In the event the proposed location
is owned by or to be leased from another person, the applicant for a permit under this chapter shall provide a
signed and notarized statement from the property owner agreeing to the operation of a commercial cannabis
business on the property. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10 .1 20 Pr ohibit ion on t rans f er of commercia l cannabis operat or permits.
A. Business Restriction to Location on Permit. It shall be unlawful for any person to transfer a commercial cannabis
operator permit to a location not specified on the permit, or to operate a commercial cannabis business at any
place or location other than that identified on the commercial cannabis operator permit issued pursuant to this
chapter.
B. Transfer or Assignment Prohibited. No person or entity shall encumber, mortgage, lien, hypothecate, give,
bequeath, sell, assign or transfer, by operation of law or otherwise, any portion of the ownership or control of a
commercial cannabis business or a commercial cannabis operator permit to any person w ho does not have a
commercial cannabis operator permit from the city prior to the effective date of ~my action described in this
sentence. The commercial cannabis operator permittee proposing such an action shall:
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021.
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Ch. 9.10 Cannabis Regulations I San Luis Obispo Municipal Code Page 9 of 16
1. Notify the city in writing of the proposed action, comply with applicable regulations and provide such
information as the city reasonably requests regarding the identity and qualifications of the persons involved,
and pay all applicable fees and charges; and
2. Provide proof that the proposed lender, lienholder, recipient, heir, buyer, assignee, transferee, or other
potential recipient of any portion of the ownership or control, at the time of the notice and effective date of
the proposed action, is qualified by the city to apply for a commercial cannabis operator permit; and the
proposed action is conditioned on the city issuing to t he person a new or amended commercial cannabis
operator permit.
3. Notify the city in writing within ten calendar days of the action becoming final with the names and contact
information of the new persons involved, together with a request that the city issue either a new or amended
commercial cannabis operator permit, as applicable.
C. Assignment Null and Void. Any attempt to transfer, sell, assign, g ive, or lien, or any transfer, sale, assignment,
gift or lien, of a commercial cannabis operator permit issued pursuant to this chapter, by operation of law or
otherwise, in violation of this chapter, is prohi bited. Any such action immediately voids, nullifies and terminates
the commercial cannabis operator permit, which shall be of no further force or effect. (Ord. 1647 § 4 (Exh. A (part)),
2018)
9.10.130 Records and reports.
A. City Access to Records. Subject to the Health Insurance Portability and Accountability Act (HIPAA) regulations,
each commercial cannabis business shall allow city of San Luis Obispo officials to have access to the commercial
cannabis business's books, records, accounts, and any and all data relevant to its permitted activities for the
purpose of conducting an audit, examination or inspection. Books, records, accounts, and any and all relevant
data will be produced no later than twenty-four hours after receipt of the city's request or within a reasonable
time as authorized in writing by the city.
B. Annual Audit. Each commercial cannabis business shall file with the city manager or his/her designee an audit
of its financial operations for the previous fiscal year, complete and certified by an independent certified public
accountant in accordance with generally accepted auditing and accounting principles. The audit shall include but
not be limited to a discussion, analysis, and verification of each of the records required to be maintained pursuant
to this chapter. The information contained in the audit shall be made available in standard electronic format which
shall be compatible with programs and software used by the city, and which can easily be imported into either
Excel, Access or any other contemporary software designated by the city manager.
C. Inventory Control System. All commercial cannabis businesses shall maintain an inventory control and reporting
system that accurately documents the present location, amounts, and descriptions of all cannabis and cannabis
products for all stages of the growing and production or manufacturing, laboratory testing and distribution
processes until sold or distributed. All commercial cannabis businesses shall maintain records of all sales or
transfers of cannabis and cannabi s products.
The San Lu is Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021.
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Ch. 9.10 Cannabis Regulat ions I San Luis Obispo Municipal Code Page 10 of 16
D. Employee Registry. Each owne r and/or operator of a commercial cannabis business shall maintain a current
register of the names and the contact information (including the name, address, and telephone number) of all
employees currently employed by the commercial ca nnabis business and shall disclose such register to any city of
San Luis Obispo official upon request.
E. Reporting and Tracking of Product and of Gross Sales. Each commercial cannabis business shall have in place a
point-of-sale tracking system to track and to report on all aspects of the commercial ca nnabis b usiness including,
but not li mited to, such matters as cannabis tracking, inventory data, and gross sales (by weight and by sale) and
shall ensure that such i nformation is compatible with the city's record keeping systems. The system must have the
capabil ity to produce historical transactional data for review by the city of San Luis Obispo. All information
provided to the city pu rsuant to this subsection shall be confidential and shall not be disclosed, except as may
otherwise be required under law.
F. Mainten ance of Records. All records required by this chapter shall be maintained by the commercial cannabis
business for a period of not less than seven years and shall oth erwise keep accurate records of all commercial
cannabis business activity and provide such records for inspection consistent with this code or any rules the city
council may adopt by resolution or ordinance. (Ord . 1647 § 4 (Exh. A (part)), 2018)
9.10.140 Inspection and enforcement.
A. Unscheduled Inspection during Business Hours . The city manager or his/her designee and any other city of San
Luis Obispo official or inspector charged with enforcing any provisions of this code may enter a commerci al
cannabis business at any time duri ng the hours of operation without notice for the purpose of inspecting the
commercial cannabis business for compl iance with the provisions of thi s code, the terms and conditions of the
commercial cannabis operator permit or any other city permit or state license, includ ing inspection of the
recordings and records maintained pursuant to this chapter or the applicable provisions of state law. The right to
inspect under thi s section includes the right to copy reco rdings and records.
B. Interference with Inspection. It is unlawful for any person w h o owns, operates, manages or is employed by, or
has any responsibility over the operation of, a commercial cannabis business to refuse to allow, or to impede,
obstruct, or interfere with, an inspection by the city, or the city's review or copying of recordings (including audio
and video re cordings) and records, or to conceal, destroy, alter or falsify any recordings or records.
C. Obtaining Samples . The city manager o r his/her designee or any other person charged with enforcing the
provisions of this chapter may enter the location of a commercial cannabis business at any time during the hours
of operation a nd without notice t o obtain samples of cannabis and cannabis products to test for law enforcement
and/or publ ic safety purposes. Any samples obtained by the city of San Luis Obispo shall be logged, recorded, and
maintained in accordance with city of San Luis Obispo police department standards for evidence. At all other
times, the city manager or his/her designee may enter the location of a commercial cannabis business to obtain
samples of cannabis upon reasonable notice, as otherwise authorized by law or pursuant to a warrant. (Ord. 1647
4 (Exh. A (part)), 20 18)
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021.
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Ch. 9.10 Cannabis Regulations I San Luis Obispo Municipal Code
9 .10.150 Outdoor commercial cannabis cultivation and activities
prohibited.
Page 11 of 16
A. Outdoor Commercial Cultivation Prohibited. Outdoor commercial cannabis cultivation, incl uding, but not limited
to, cultivation in greenhouses, hoop structures, and by mixed light (part daylight/part artificial light}, is prohibited
and unlawful. This section prohibits all outdoor commercial cannabis cultivation, including cultivation for profit or
not-for-profit cultivation, and including commercial cultivation for adult recreational use or medicinal purposes.
For purposes of this section, outdoor cultivation of cannabis by cooperatives is prohibited. All commercial
cannabis cultivation shall be conducted only inside a fully enclosed structure by a person or entity with a
commercial cannabis operator permit, a city use permit, and appropriate state license(s). See also Section
17 .86,080(E)(7)(c).
B. Outdoor Commercial Cannabis Activities Prohibited. Outdoor storage, harvesting, drying, processing, or
manufacturing of commercial cannabis or cannabis products is p rohibited and unlawful. (Ot'd. 1647 § 4 (Exh. A
part}}, 2018}
9 .10.160 Indemnification, insurance, reimbursement, consent.
As a condition of approval of any commercial cannabis operator permit issued pursuant to this chapter, the
permittee shall, at a minimum:
A. Execute an agreement to protect, indemnify, defend (at its sole cost and expense with counsel approved by
city}, and hold the city of San Luis Obispo and its officers, employees, attorneys, representatives, and agents
har mless from and against any and all claims, demands, losses, damages, injuries, costs, expenses (including
attorneys' fees}, fines, penalties, or liabilities arising from, related to or associated with: the issuance of a
commercial cannabis operator permit or use permit; the permitting or approving the operation of a commercia l
cannabis activity; the collection of any fees, taxes, or charges from a commercial cannabis business; the
commercia l cannabis business•·s or any of its owners', operators', managers', employees', or agents''violation of any
federal, state or local laws; the city's suspension, revocation or refusal to renew the commercial cannabis operator
permit.
B. Maintain insurance with standard city coverages and limits, but wh:h additiona l conditions thereon as deemed
necessary by the city attorney.
C. Reimburse the city of San Luis Obispo for any and all costs, expenses, attorney fees, fines, penalt ies and court
costs that the city of San Luis Obispo may be required to pay as a result of any legal challenge related to the city's
approval of a commercial cannabis operator permit pursuant to this chapter or any other city permit or the city of
San Luis Obispo's approval of the operation of a commercial cannabis activity. The city of San Luis Obispo may, at
its sole discretion, participate at its own expense in the defense of any such action, but such participation shall not
relieve the obligations imposed under this chapter.
The San Luis Obispo Mun icipal Code is current through Ord inance 1702, passed November 15, 2021.
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Ch. 9.1 o Cannabis Regulations I San Luis Obispo Municipa l Code Page 12 of 16
D. Consent to unscheduled inspections, production of records and recordings, and obtaining of samples of
cannabis and cannabis products by authorized city officials during normal operating hours as provided in this
chapter. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9 .1 0.170 Compliance with laws.
The commercial cannabis business shall operate all times in compliance with all applicable state and local laws,
regulations, and any specific, additional operating procedures or requirements which may be imposed as
conditions of approval of the commercial cannabis operator permit or use permit or state license(s). Nothing in
this chapter shall be construed as authorizing any action which violates state law or local law with respect to the
operation of a commercial cannabis activity. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.180 Permit violation.
Compliance with all local and state cannabis-related laws shall be a condition of a city commercial cannabis
operator permit and it shall be a violation of a commercial cannabis operator permit for a permittee or his or her
agents or employees to violate any local or state cannabis-related law. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9 .10.1 90 Permit compliance monitoring.
Compliance with this chapter shall be monitored by the San Luis Obispo police department, code enforcement
staff and/or any other d uly authorized agent of t he city. Any compliance checks pursuant to this chapter shall be in
addition to any under any other ordinances, regulations or permits. At least four compliance checks of each
cannabis retailer sha ll be conducted during each twelve-month period. At least two compliance checks of each
commercial cannabis business other than a retailer shall be conducted during each twelve-month period. The cost
of compliance monitoring shall be incorporated into the annual renewal fee. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.200 Permit holder responsible for violations by employees or agents.
The responsible person and any entity to whom a commercial cannabis operator permit is issued pursuant to this
chapter shall be responsible for all violations of the regulations and ordinances of the city of San Luis Obispo
committed by the permittee or any employee or agent of the permittee, which violations occur in or about the
premises of the commercial cannabis business, even if the responsible person is not present. Violations by an
employee or agent may result in the termination or non renewal of the permit by the city. (Ord. 1647 § 4 (Exh. A
part)), 2018)
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Ch. 9.10 Cannabis Regulations I San Luis Obispo Municipal Code Page 13 of 16
9.10.210 Consumption or use prohibited on site and in public-Cannabis
event prohibited.
A. It is unlawful for any person or entity:
1. To sell, give, exchange, dispense or distribute cannabis or cannabis products for on-site consumption, use
or sampling on any business premises; or
2. To consume or use cannabis or cannabis products, whether by smoking, vaping, inhaling, eating, drinking
or any other means:
a . In, on or about the premises of any commercial cannabis business;
b . In, on or about any publicly owned or operated property; any place open to or accessible by the
public; any place smoking is prohibited; or any place visible from any public place with normal unaided
vision;
c. In on or about any other business, club, cooperative or commercial event, regardless if open to the
public or only to members, ticket holders or event invitees;
d. Any location where an entry or other fee is charged to attendees or to the host or where a thing of
value or consideration is received or exchanged, directly or indirectly, for or related to the provision of
cannabis.
B. It is unlawful for any person to conduct a cannabis event in the city. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9 .10.220 Concurrent alcohol or tobacco sales or service prohibited.
A. No person shall dispense, serve, store, give away or consume, or cause or permit the sale, dispensing, serving,
giving away or consumption of alcoholic beverages or tobacco in or on the premises of a commercial cannabis
business.
B. No person shall conduct any commercial can nabis activity at any location where alcohol is sold or served.
Ord. 1647 § 4 (Exh. A (part)), 2018)
9 .10.230 Minors.
A. Minors shall not be allowed on the premises of a commercial cannabis business having either an "A" or "M"
license, or both, even if accompanied by a parent or guardian.
B. No person under twenty-one years of age shall be allowed on the premises of a commercial cannabis
business having either an "A" or "M" license or both.
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Ch. 9.10 Cannab is Regulations I San Lu is Obispo Municipal Code Page 14 of 16
C. Every entrance to an "A" or "M" licensed commercia l cannabis business shall be clea rly and legibly posted with
the following notice: "E NTRY ONTO THESE PREMISES BY PERSONS UNDER 21 YEARS OF AGE IS PROHIBITED BY
LAW. VALID PHOTO ID REQUIRED." Each letter of the notice must be at least two inches high and clearly visible.
D. No person, business, or other entity conducting a commercial cannabis activity with either an "A" or "M" state
license shall employ any person who is not at least t wenty-one years of age. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.240 Sale of cannabis products or cannabis accessories by vending
machine prohibited.
A. No person shall locate, install, keep, maintain or use, or permit the location, installation, keeping, maintenance
or use on his, her or its premises of, any cannabis vendi ng machine used or intended to be used for the purpose
of selling any cannabis products or cannabis accessories therefrom.
B. No person, business, or other entity shall sell, offer for sale, or display for sale any cannabis product by means
of a self-service display or vending machine. All cannabis products shall be offered for sale exclusively by means of
vendor/employee assistance.
C. "Vending machi ne" means any electronic or mechanical device or appliance the operation of which depends
upon the insertion of money, whether in coin or paper bill, or debit or credit card, or other thing representative of
value, which device or appliance dispenses or releases cannabis, cannabis product(s) and/or cannabis accessories.
Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.250 Security and public safety measures.
A. The city manager or his/her designee(s) is authorized to promulgate all regulations necessary to implement
the requirements and fulfill the purposes and policies of this chapter, including but not limited to enforcement,
background checks for applicants, approval and enforcement of a commercial cannabis activity security plan,
including audio and video recordings of operations, and verification of compliance.
B. Every commercial cannabis activity shall have a security plan approved by the chief of police or designee prior
t o issua nce of a city commercial cannabis operator permit.
C. Hours of Operation.
1. Retail Storefront. Retail storefront comme r cial cannabis business shall not operate between the hours of
eight p.m. and nine a.m.
2. Retail Non-Storefront (Delivery Services). Retail non-storefront (delivery services) commercial cannabis
business shall not operate between the hours of ten p.m. and six a.m.
3. Commercial Other than Retail. All commercial cannabis activity other than retail is prohibited between the
hours of ten p.m . and seven a.m. (Ord. 1647 § 4 (Exh. A (part)), 2018)
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Ch . 9.10 Cannabis Regulations I San Luis Obispo Municipal Code Page 15 of 16
9.10.260 Limitations on city's liability.
The city shall not be liable for issuing, or failing or refusing to issue, suspending, revoking or failing to renew a
commercial cannabis operator permit pursuant to this chapter or otherwise approving or disapproving the
operation of any commercial cannabis business pursuant to t his chapter. (Ord. 1647 § 4 (Exh. A (part}), 2018)
9.10.270 Fees deemed debt to city.
The amount of any fee, cost or charge imposed pursuant to this chapter shall be deemed a debt to the city of San
Luis Obispo that is recoverable in any court of compet ent jurisdiction. (Ord. 1647 § 4 (Exh. A (part)}, 2018}
9 .10.280 Violation and penalties.
A. Misdemeanor. Each violation of the provisions of this chapter shall be a misdemeanor and is punishable as
provided in Section 1.12.030; provided, that where the city attorney determines that such acti on woul d be in the
Interest ofjustice, he/she may specify in the accusatory pleading that the offense shall be an infraction. Any
violation of the provisions o f this chapter by any person is also subject to administrative fines as provided in
Chapter 1.24.
B. Infraction Violation. Where the city atton1ey determines that, in the interest of Justice, a violation of this
chapter ls an infraction, such infraction is punishable by a fine not exceeding one hundred dollars for a first
viol ation, a fine not exceeding two hundred dollars for a second violation of the same provision within one year,
and a fine r:iot exceed ing five hundred dollars for each additional infraction violati on of the same provi sion withi n
one year .
C. The fine amount s set forth above may be modified, from time to time, by city counci l resol ution. In no event
shall such fine amounts exceed the amounts authorized by state law.
D. If the city of San Luis Obispo finds, based on substantial record evidence, that any person has engaged in
commercial cannabis activity in violation of this chapter, the city shall fine that person as follows: Each day that
person without a commercial cannabfs operator permit offers cannabis or cannabis products for sale or exchange
shall constitute a separate violation and assessed a fine i n accordance w ith Sections 1.1 2.080 and 1 .24.070(A).
E. Each person committing, causi ng, or maintaining a violation of t hi s chapter or failing to comply with the
requi rements set forth herei n shall be deemed guilty of a separate offense for each and every day duri ng any
portion of which any violation of any provision of t his chapter is committed, continued, maintained, or perm itted
by such person and shall be punishable acco rdingly.
F. The violation of any provision of t his chapter shall be and is hereby declar ed to be a public nuisance and
contrary to the public interest. Any publ ic nLJisance under this chapter may, at the city's discretion, be abated by
the city by civil process by mea ns of a restrain i ng order, p reliminary or permanent injunction, or in any manner
provi ded by law for the abatement of such nuisance. The city shall also be entitled to recover its full reasonable
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Ch. 9.1 o Cannabis Regulations I San Luis Obispo Municipal Code Page 16 of 16
costs of aba tement. The prevai ling party in any proceeding associated with the abatement of a publ ic nuisance
shall be ehtitled to recovery of attorneys' fees incurred in any such proceeding if the city has elected at the
initiation of that individual action or proceeding to seek recovery of its own attorneys' fees.
G. In lieu of issuing a criminal citation, the city may issue an admi nistrative citation to any person responsi ble for
committing, causing or maintaini ng a violation of this chapter. Nothing i n this section shall preclude the city from
al so issuing a citation upon t h e occurrence of the same offense on a separate day.
H. The remedies set forth in this chapter are cumulative and in ad dition to any and all other remedies available
at law or equity, whether set forth elsewhere in the San Luis Obispo Municipal Code, or in state or federa l laws,
regulations, or case law. In addition to other remedies provided by this chapter or by other law, any vi olati on of
this chapter may be remedied by a civil action brought by the city attorney, including but not limited to
admi nistrative or judicial nuisance abatement proceedings, civil or criminal code enforcement proceedings, and
suits for injunctive relief. (Ord. 1647 § 4 (Exh. A (part)), 2018)
9.10.290 Severability.
If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this chapter is for any reason held
to be invalid or unenforceable, such invalidity or unenforceability sha ll not affect the validity or enforceability of
the remaini ng sections, subsections, subdivisions, paragr aphs, sentences, clauses or phrases of this chapt er or the
rules adopted hereby. The city council of t he city of San Luis Obispo hereby declares that it wou ld have adopted
each section, subsection, su bdivision, paragraph, sentence, clause or phrase hereof, irrespective of the fact that
any one or more other sections, subdivisions, paragraphs, sentences, clauses or phrases hereof be declared
inval id or unenforceable. (Ord. 1647 § 4 (Exh. A (part)), 2018)
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021 .
Disclai mer: The City Clerk's Office has t he official version of the San Luis Obispo Municipal Code. Users shou ld
con tact the City Clerk's Office for ordinances passed subsequent to the ordinance cited above.
Note: This site does not support Internet Ex plorer. To view this site, Code Publish ing Company recommends using
one of the following browsers: Google Chrome, Firefox, or Safari.
City Website: ww w .stocity.org:
Ci ty Telephone: (805) 781-7100
Code Publishing Com pany
The San Luis Obispo Municipal Code is current through Or dinance 1702, passed November 15, 2021 ..
000219
EXHIBIT 2
000220
Office of the City Clerk
990 Pa lm Street, San Luis Obispo, CA 93401-3218
805.781.7100
l1l1:t Vo1
CERTIFICATION
I, Teresa Purrington, City Clerk, do hereby certify under penalty of perjury the attached
document is a true and correct copy ofthe original now on file in my office .
WITNESS MY HAND AND THE SEAL OF THE CITY OF SAN LUIS OBISPO.
DATED: ---=-J=an=u=ary:..,....:2=5.,_, 2=0=2=2 ___ _
Teresa Purrington, City Clerk
City ofSan Luis Obispo
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17.86.080 Cannabis I San Luis Obispo Municipal Code Page 1 of 11
17.86.080 Cannabis.
A. Purpose. The purpose of this section is to protect the public health, safety, and welfare, enact strong and
effective regulatory and enforcement controls in compliance with state of California law, protect neighborhood
character, and minimize potential for negative impacts on people, communities, and the environment within the
dty of San Luis Obispo by establishing land use requirements and development standards for cannabis activities.
Cannabis activity, as defined in Section 17.156.008 (C Definitions), includes the cultivation, possession,
manufacturing, processing, storing, laboratory testing, labeling, transporting, distribution, delivery, or sale of
cannabis or a cannabis product for either personal or commercial use. Therefore, this section recognizes that
cannabis activities require land use controls due to state legal constra ints on cannabis activity, and the potential
environmental and socia l impacts associated with cannabis activity. Nothing in this section is intended to affect or
alter federal law, which identifies marijuana (cannabis) as a Schedule I controlled substance.
B. Applicability. Nothing in this section shall be construed to allow any conduct or activity relating to the
cultivation, distribution, dispensing, sale, or consumption of canncibis that is otherwise illegal under local or state
law, statute, rule or regulation. It is neither the intent nor the effect of this chapter to condone or legitimize the
illegal use, consumption or cultivation of cannabis under state or local law and nothing herein is intended to
interpret, alter, interfere with or in any way affect otherwise applicable federal law.
C. Definitions. See Chapter 17.156, Land Use Definitions (Table 2·1: Uses Allowed by Zone). Terms used in this
section that are defined terms under state cannabis statutes or regulations shall have the same meaning as the
respective state definition, as now defined or as the definition may be amended by the state in the future, except
as otherwise specifically provided in Chapter 17.156, Land Use Definitions (Table 2-1: Uses Allowed by Zone), or
Chapter 9.10, Cannabis Regulations.
D. Personal Cultivation.
1. Indoor Personal Cultivation. Indoor personal cultivation of cannabis does not require a permit and is
allowed in all private residences subject to all the following minimum performance standards:
a . All indoor personal cultivation shall occur only inside a private residence or fully enclosed and secure
accessory building or structure to a private residence. Accessory building or structure for indoor personal
cultivation of cannabis does not include a greenhouse or hoop structure.
b. Structures and equipment used for indoor cultivation, such as indoor grow lights, shall comply with
all applicable building, electrical and fire code regulations as adopted by the city.
c. All accessory buildings and structures used for indoor cultivation shall comply with the city's zoning
regulations and building codes.
d. Indoor personal cultivation of cannabis may occur inside a dwelling and/or an accessory building or
structure, subject to the following restrictions:
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i. The cumulative cultivation for cannabis shall not exceed six cannabis plants per private
residence.
ii. All personal cultivation shall be conducted by persons twenty-one years of age or older, and the
cumulative total of cannabis plants per private residence, indoor and outdoor, shall not exceed six
cannabis plants, regardless of the number of persons residing on the property.
e. Personal cultivation of cannabis shall not interfere with the primary occupancy of the building or
structure, including regular use of kitchen(s) or bathroom(s).
f. Cannabis cultivation must be concealed from public view at all stages of growth and there shall be no
exterior evidence of cannabis cultivation occurring at the property vi sible with normal unaided vision
from any public place, or the public right-of-way. Personal cultivation of cannabis shall be shielded to
confine light and glare to the interior of the structure.
g. Nothing in this section is intended, nor shall it be construed, to preclude any landlord from limiting or
prohibiting personal cultivation of cannabis by tenants.
h. Nothing in this section is intended, nor shall it be construed, to authorize commercial cultivation of
cannabis at a private residence.
i. Personal cultivation of cannabis shall not create: offensive odors or excessive dust, heat, noise, light,
glare, smoke, traffic, or hazards due to the use or storage of materials, processes, products or wastes, or
other unreasonable impacts to persons of normal sensitivity who are living, working or lawfully present in
the vicinity of the personal cultivation.
j. Cannabis cultivation areas in a private residence shall be locked at all times when the cultivator is not
present.
2. Outdoor Personal Cultivation. Outdoor personal cultivation of cannabis does not require a permit and is
allowable at all private residences, subject to all of the following minimum performance standards:
a. Outdoor personal cultivation of cannabis is not permitted in the front yard between the public right-
of-way and the private residence. Outdoor personal cultivation is only permitted in a rear or side yard
that is entirely enclosed by a solid, opaque fence that is associated with a private residence used for
residential purposes.
b. The cannabis plants shall be placed at a minimum setback of five feet from the edge of canopy to the
property line.
c. Cannabis cultivation must be concealed from public view at all stages of growth and there shall be no
exterior evidence of cannabis cultivation occurring at the property visible by normal unaided vision from a
public place or the public right-of-way. Cultivation may occur within a greenhouse or hoop structure (as
long as it complies with the performance sta ndards), but mixed light cultivation i s prohibited.
d. All outdoor personal cultivation shall be conducted by persons twenty-one years of age or older.
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e. The cumulative total of cannabis plants cultivated outdoor shall not exceed six cannabis plants per
parcel containing a private residence, regardless of the number of persons resid fng on the property, and
regardless of the number of private residences on the parcel.
f . Nothing in this section is intended, nor shall it be construed, to preclude any landlord from limiting o r
prohibiting cannabis cultivation by tenants.
g. Nothing in this section is intended, no r shall it be construed, to authorize commercial cultivation of
cannabis at a private residence outdoors.
h . Outdoor personal cultivation of cannabis shall not create: offensive odors or excessive dust, heat,
noise, light, glare, smoke, traffic, or ha zards due to the use or storage of materi als, processes, products or
wastes, or other unreasonable impacts to people of normal sensitivity living, working or lawfully present
in the vicinity of the personal cultivation.
E. Commercial Cannabis Businesses.
1 . Commercial Cannabis Operator Permit.
a. No person or entity shall operate or conduct a commercial cannabis activity or commercial cannabis
business wi thout first obtaining both a commercial cannabi s operator permit from the city pursuant to
Chapter 9.10, Cannabis Regulations, and a use permit from the city pursuant to this chapter to conduct
the commercial cannabi s activity at a specific location. Any permit authorizing commercial cannabis
activi ty pursuant to this chapter shall be conditioned upon the holder obtaining and maintaining a city
commercial cannabis operator permit and the appropr iate state license for t he activity.
b. A commercial cannabis activity pursuant to this chapter may be transferred, assigned, or bequeathed,
by operation of law or otherwise as described in Section 9.10.120.
c. The commercial cannabis operator permit must be renewed each year.
d. Expiration of the use permit shall be consistent with Section 17.104.070 .
2. No Vested Right to Operate . No person shall have any ent it lement or vested right to operate a cannabis
business solely by virtue of licensing under these regulations. Operation of cannabis activity(ies) requires both
the approval of a conditional use permit and a commercial cannabis operator permit under Chapter 9.1 O,
which is a revocable privilege and not a right in the city. The applicant bears the burden of proving that all
qualifications for licensure have been satisfied and continuously maintained prior to conducting a cannabis
business at an otherwise allowed location within the city.
3. State Application Required. Filing a local application for cannabis activity(ies) with the city does not
constitute an application with the state of Califorhia. A separate state application and license process must be
followed through with the state.
4. Application Requirements. All commercl al cannabis activit ies require qualification through the commercial
cannabis operator sel ection approval process in Chapter 9.10, Cannabis Regulations, a state license and a use
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17.86.080 Cannabis I San Luis Obispo Municipal Code Page 4 of 11
permit for a specific location pursuant to this chapter. The application for a use permit shall include the
following information:
a. Site plan, floor plans, and a general description of the nature, square-footage, parking and type of
cannabis activity(ies) being requested.
b. An operations plan including:
i. A security plan to the approval of the chief of police, pursuant to criteria approved by resolution
of the city counci l, including but not limited to on-site security measures both physical and
operational and, if applicable, security measures for the delivery of cannabis associated with the
commercial cannabis business and payment of taxes and fees;
ii. Plan for restriction of access by minors;
iii. Employee safety and training plan;
iv. Odor, noise and light management plan;
v. Estimated energy usage and energy efficiency plan;
vi. Estimated water usage and water efficiency plans;
vii. Waste management plan; and
viii. For retail sales, provide an educational material dissemination plan.
c. Proposed signage:
i. Must comply with city's sign regulations for size, area and type of sign, no exceptions allowed.
ii. Internal illumination of signs is prohibited.
iii. No portion of the cannabis plant may be used in any sign visibl e from the public right-of-way.
iv. Provide sign size, height, colors, and design of any proposed signage at the site.
v. Must include a sign inside the premises that states: "Smoking, ingesting, vaping, eating or
consuming cannabis or cannabis products on this site or in a public place is prohibited."
vi. Must include a sign at each entrance of a retail storefront t hat prohibits persons under twenty-
one years of age from entering.
d. An analysis that demonstrates neighborhood compatibility and a plan for addressing potential
compatibility issues.
e. Applications for retail storefronts shall include a vicinity map showing at least one thousand feet of
surrounding area and the distances to the following uses: any preschool, elementary school, junior high
school, high school, public park or playground, six hundred feet from any licensed daycare center, and
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17.86.080 Cannabis I San Luis Obispo Municipal Code Page 5 of 11
three hundred feet from a residentially zoned area. Youth centers do not require a buffer. Distance shall
be measured from the nearest point of the property line of the site that contains the commercial
cannabis activity to the nearest point of the property line of the enumerated use using a direct straight-
line measurement.
f. Proof of ownership, option to purchase, (or lease agreement or option to lease with landowner's
express written consent to the proposed commercial cannabis activity(ies) to be conducted on the
premises) or other proof of right to apply for the permit at the location.
g. A list of all other uses on the property.
5. Commercial Cannabis Development Standards. Each cannabis business is required to meet the following
standards:
a , Qualification through the Chapter 9.10, Cannabis Regulations, commercial cannabis operator
selection process to apply for a commercial cannabis operator permit. Submittal of a use permit
application to conduct the commercial cannabis business within the zones specified for each type of
commercial activity listed below.
b. Commercial cannabis facilities shall be allowed in areas demarcated with CAN overlay zoning and as
allowed in the underlying zone for each type of commercial cannabis activity.
c. All commercial canhabis facilities shall be sited and/or operated in a manner that prevents cannabis
odors from being detected off site. Commercial cannabis activities shall not create offensive or excessive
odors, dust, heat, noise, light, glare, smoke, traffic, or hazards due to the use or storage of materials,
processes, products or wastes, or other unreasonable impacts to people of normal sensitivity living,
working or lawfully present in the vicinity of the commercial facility.
d. All commercial cannabis operations must be concealed from public view at all times and there shall
be no exterior evidence of cannabis or cannabis products occurring at the property visible with normal
unaided vision from any public place, or the public right-of-way. Commercial manufacturing of cannabis
or cannabis products shall be shielded to confine light and glare to the interior of the structure.
e. All commercial cannabis facilities shall include adequate measures that address enforcement
priorities for commercial cannabis activities, including restricting access to the public and to minors and
ensuring that cannabis and cannabis products are only obtained from and supplied to other permitted
licensed sources within the state and not distributed out of state.
f . The use permit to be issued under this chapter shall include, but is not limited to, the following
conditions:
i. The obtaining and maintaining of the commercial cannabis operator permit and appropriate
state license.
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ii. Payment of all applicable current and future state and local taxes and all applicable commercial
cannabis fees and related penalties established by the city council, including but not limited to
application, administrative review, inspection, etc.
iii. The commercial cannabis operator permit or a controlling interest in the permit may not be
assigned, transferred or bequeathed, by operation of law or otherwise, unless permitted as described
in Chapter 9.10, and the permit shall terminate automatically on such event.
iv. Any commercial cannabis operator permit issued pursuant to this chapter and Chapter 9.1 O
expires after one year, unless renewed.
Prohibition of on-site consumption of cannabis at: (AJ at a commercial cannabis business or
commercial cannabis activity location; (B) any other business, club or cooperative or event, regardless
If open to the public or only to members; and (C) anywhere an entry or other fee is charged to
attendees orthe host or thing of value or consideration is received or exchanged.
vi. Prohibition of the possession, storage, sale, distribution or consumption of alcoholic beverages
on the premises, or the holding of license from the State Division of Alcoholic Beverage Control for
the sale of alcoholic beverages, or operating a business that sells alcoholic beverages on or adjacent
to the commercial cannabis activity site.
vii. No cannab is products or cannabis accessories may be displayed in windows or visible from the
public right-of-way or from places accessible to the general public.
viii. Prohlbition of minors and persons under the age oftwenty0 one on the premises, even if
accompanied by a parent or guardian.
ix. Outdoor storage of cannabis or cannabis products is prohibited.
6. Commercial Cultivation.
a. Commercial Cannabis Cultivation. Commercial cannabis cultivation may be conditionally permitted
indoors only, subject to the requirements of this section and the obtaining and maintaining of a
commercial cannabis operator permit pursuant to Chapter 9.10, Cannabis Regulations, and appropriate
state license, in the following zones:
L Service commercial (C-5);
ii. Manufacturing (M);
iii. Business park (BP).
b. A maximum of seventy thousand square feet of cumulative canopy area (includes total canopy of
either horizontal or vertical growing situations) for cultivation and nurseries shall be allowed for indoor
commercial cannabis cultivation in the city within the zones identified above, including microbusinesses
under subsection (E)(12) of this section.
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c. Outdoor commercial cannabis cultivation, including but not limited to cultivation in greenhouses,
hoop structures, and by mixed light (part daylight/part artificial light), is prohibited. All commercial
cannabis cultivation shall be conducted only inside a fully enclosed, legally permitted structure that meets
all applicable building and other codes.
d . Commercial cannabis cultivation conditional permits include the following:
i. Specialty Cultivator. A maximum of no more than five thousand square feet of canopy of indoor
cultivation (either in horizontal or vertical growing situations) and includes processing.
ii. Small Cultivator. A maximum of no more than ten thousand square feet of canopy of ind oor
cultivation (e ither in horizontal or vertical growing situations) and includes processing.
iii. Nursery, Cannabis. A maximum of no more than ten thousand square feet of indoor propagation
area (either in horizontal or vertical growing situations).
e. Pevelopment Standards.
i. Compliance with subsection (E)(S) of this section, Commercial Cannabis Development Standards.
ii. Canopy areas shall be easily identifiable for inspection and measurement. Each unique area
included in the total canopy calculation shall be separated by an identifiable boundary such as an
interior wall or by at least ten feet of open space (see "Canopy'' definition in Chapter 17.156).
iii. All indoor cannabis cultivation shall be designed to accomplish zero net energy use from the start
of the operation.
iv. Pesticides and fertilizers shall be properly labeled, stored, and applied to avoid and prevent
contamination through erosion, leakage, or inadvertent damage from rodents, pests, or wildlife.
7. Manufacturing.
a . Manufacturing (Nonvolatile) Permissible. Nonvolatile cannabis or cannabis products manufacturing
may be conditionally permitted indoors only, subject to the requirements of this section and the obtaining
and maintaining of a commercial cannabis operator permit pursuant to Chapter 9 .1 0, Cannabis
Regulations, and appropriate state license, in the following zones:
i. Service commercial (C-S);
ii. Manufacturing (M);
iii. Business park (BP).
b. Manufacturing (Volatile) Prohibited. Cannabis or cannabis products manufacturing involving volatile
solvents, processes, compounds or substances is prohibited.
c. Development Standards.
i. Compliance with subsection (E)(S) of this section, Commercial Cannabis Development Standards.
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ii. Outdoor manufacturing of cannabis or cannabis products is prohibited.
iii. A complete description of all products used in the manufacturing process Including the cannabis
supply chain, liquids, solvents, agents, and processes.
iv. Storage protocol and hazard response plan.
v. Employee safety and training equipment plan, plus materials safety data sheet requirements, if
any.
8. Distribution.
a. Commercial cannabis distribution may be conditionally permitted, subject to the requirements of this
section and the obtaining and maintaining of a commercial cannabis operator permit pursuant to Chapter
9.10, Cannabis Regulatfons, and appropriate state license, in the following zones:
i. Service commercial (C-S);
ii. Manufacturing (M);
iii. Business park (BP);
b. Development Standards.
i. Compliance with subsection (E)(S) of this section, Commercial Cannabis Development Standards.
9. Testing Laboratory.
a. Commercial cannabis testing may be conditionally permitted, subject to the requirements of this
section and the obtaining and maintaining of a commercial cannabis operator permit pursuant to Chapter
9.10, Cannabis Regulations, and appropriate state license, in the following zones:
i. Service commercial (C-S};
ii. Manufacturing (M);
iii. Bus iness park (BP);
iv. Office (0).
b. Development Standards.
i. Compliance with subsection (E)(S) of this section, Commercial Cannabis Development Standards.
ii. The cannabis testing laboratory, as proposed, will comply with all the requlrements of the state
for the testing of cannabis, including dual licensure and participation in an authorized track-and.trace
program.
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iii. The owners, investors, permittees, operators, and employees of the cannabis testing laboratory
will not be associated with; nor have any financial interest in, any other form of commercial cannabis
activity.
Iv. The cannabis testing laboratory is accredited by an appropriate accrediting agency as approved
by the state and further described In Health and Safety Code Section 5238 and as it may be amended.
v. The cannabis testing laboratory operating plan demonstrates proper protocols and procedures
for statistically valid sampling methods and accurate certification of cannabis and cannabis products
for potency. purity, pesticide residual levels, mold, and other contaminants according to adopted
industry standards.
10. Retail-Storefront.
a. Commercial cannabis storefront retail may be conditionally permitted, subject to the requirements of
this section and the obtaining and maintaining of a commercial cannabis operator permit, and the
appropriate state license, in the followi ng zones:
i. Retail commercial (C-R);
ii. Service commercia l (C-5);
b. Development Standards.
i. Compliance with subsection (E)(S) of this section, Commercial Cannabis Development Standards.
ii. Only three retail storefronts, which must front arterial streets, will be allowed within the city.
Selection of the retail commercia l cannabis operator will be se lected from qualified commercial
cannabis operators as set forth in Cha pter 9.10, Cann abis Regulations. One of the retail storefronts
shall have a medicinal license and may also have an adult use license.
ii i. Retail storefronts sha ll be located at least one t housand feet from any preschool, elementary
school, junior high school, high school, public park or playground, six hundred feet from any licensed
day care center, and three hundred feet from any residentially zoned area. Youth centers do not
require a buffer. Distance shall be measured from the nearest point of the property line to the
nearest point of the property line of the enumerated use using a direct straight-line measurement.
iv. Retail storefronts must be separated from each other by at least one thousand feet.
v. Hours of operation sha ll be limited between nine a.m. to eight p.m.
vi. Must include a sign at each entrance of a retail storefront that prohibits persons under twenty-
one years of age from entering.
11. Retail-Non-Storefront (Delivery Services).
a. Commercial cannabis non-storefront retail may be conditionally permitted, subject to the
requirements of this section and the obtaining and maintaining of a commercial cannabis operator
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permit pursuant to Chapter 9, 1-0, Cannabis Regulations, and the appropriate state license, in the following
zones:
i. Service commercial (C -S);
ii. Manufacturing (M);
iii. Business park (BP).
b. Development Standards.
i. Compliance with subsection (E)(S) of this section, Commercial Cannabis Development Standards.
iL Hours of delivery shall be limited between six a.m. to ten p.m.
12. Microbusiness.
a. Microbusi nesses fall into two groups as described below and may be conditionally permitted, subject
to the requirements of this section and the obtaining and maintaining of a commercial cannabis operator
permit pursuant to Chapter 9.10, Cannabis Regulations, and the appropriate state license, in the following
zones:
L Mi crobusinesses with no more than fifty percent of the gross receipts being from cultivation,
distribution and manufacturi ng are allowed in the following zones:
a) Retail commerci al (C-R).
ii. Microbusinesses with no more than fifty percent of the gross receipts being from sto refront retai l
sales are allowed in the following zones:
a) Ma nufacturing (M);
b) Busi ness park (BP).
iii. Microbusinesses located in the service commercial (C-S) zone are not limited by gross sales
receipts from cultivation, distribution, manufacturing or ret ail sales.
b . Microbusinesses are subject to the seventy thousand square feet of canopy cultivation citywide
limitation (either in horizontal or vertical growi ng situations) and the limit of three retail storefronts
fronting arterial streets citywide set forth in subsection (E)(10) of this section .
c. Development Standards.
i. Compliance Wit h subsection (E)(S) of this section, Commer cia l Cannabis Development Standards.
ii. A maximum of seventy thousand square fee t of cumulative canopy for cultivation and nurseries
shall be allowed for indoor cultivation In the ci ty within the allowed land use zones.
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17.86.080 Cannabis I San Luis Obispo Municipal Code Page 11 of 11
iii. All indoor cannabis cultivation shall be designed to accomplish zero net energy use from the start
of the operation.
iv. Pesticides and fertili zers shall be properly labeled, stored, and applied to avoid and prevent
contamination through erosion, leakage, or inadvertent damage from rodents, pests, or wild life.
v. Only three retail storefronts, which must front arteria l streets, will be allowed within the city.
Selection of the retail commercial cannabis operator will be selected from qualified commercial
cannabis operators as set forth in Chapter 9 .10, Cannabis Regulations. One of the retail storefronts
shall have a medicina l license and may also have an adult use license.
vi. Any m icrobusiness with a retail storefront shall require a planning commission use permit .
vii. Retail storefronts shall be located at least one thousand feet from any preschool, elementary
school, junior high school, high school, public park or playground, six hundred f eet from any licensed
day care center, and three hundred feet from any residentially zoned area. Youth centers do not
require a buffer. Distance shall be measured from the nearest poi nt of the property line to the
nearest point of the property line of the enumerated use using a direct straight-l ine measurement.
viii. Retail storefronts must be separated from each oth er by at least o ne thousand feet.
ix. Hours of retail shall be limited to between nine a.m. to eight p.m. and delivery shall be limited to
between six a.m. to ten p.m.
x. Mu st include a sign at each entrance of a retail storefront t hat prohibits persons under twenty-
one years of age from entering. (Ord. 1647 § 5 (Exh. BJ, 2018)
The Sa n Lui s Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021 .
Disclaimer: The City Clerk's Office has the official version of the San Luis Obispo M u nicipal Code. Users should
conta ct the City Clerk's Office for ordinances passed subsequent to the ordinance cited above.
Note: This site does not support Internet Exp lorer. To view this site, Code Publishing Company recommends using
one of the following browsers: Google Chrome, Firefox, or Safari.
City Websit e: www.slo city .org
City Telephone: (805) 781-7100
Co de Publishing Company
The San Luis Obispo Municipal Code is current through Ordinance 1702, passed November 15, 2021 .
000232
EXHIBIT 3
000233
Case 2:21-cr-00343-AB Document 16 Filed 08/24/21 Page 1 of 1 Page ID #:69
a le Approve d, I /2, /2121
By· D11
O PSA
h lc:nsion: ... 1 .... 4 .... 5._2 __ _
UNITE D STATES 0JSTRICT COURT
CENTRAL 0JSTRICT OF CALIFORNIA
UN I I rm srATES or AM r_:.lU CA CASI· NUM Arn
FILM>
CUIU{, U.S. 0 15TIUc-1' COVJIT
08/24/2021
Cf.lITR,\LPISTR lt"I' OF CALIFOR/<LA
ov,_JB.f3_ot PUTY
Pl.AIN rtFF, 2:2 l -c r-00343-A B
V.
HE LLI OS RAPHAEL DA YSPRJNG, ak a "B obby
Daysprin g,"
DEf l:.NDAf\'T(S),
A FFIDA VIT OF SUR ETY (NO JUSTIFICATION)
I, th e under sign ed surety, state on oath that I pcnn ,rn cn1ly re sid e with in th e j uri sdic ti on of the Unit ed State s Dis tri ct Co urt
fo r the Central Di strict of California at the addr4,:. s indicat ed below or in (City,ga11.:):
I further state that I understand th e provi sions ofthe bond ex ecuted hy the ab ove -named defendant for which thi s affidavit
supp ort s, and! agree 10 he ho und as a cond iti on of this hond hy the pr ovi sions of I .oe al Crim in al Rul e 46 -6 as se t fo r th at th e
hott om of this doc ument and further ackn owl edge and agr ee that I and my per so nal represe nta tiv es are houn d as a co ndit io n
of thi s bond.j o intly and severally with 1hc defendant and oth er sureti es, 10 pay to !he Unitc:d State s o f America the sum o f
50,000 .00 , in the event that the bond is forfeit ed . / fJ!.rther agree am/ represe tll that no fir earms or amm un ition
are bein g kept at the residence address of the de fendant.
I further und erstand that it is my obligati on to info rm the Court and coun sel o f any chan ge in rc ~idcncc addre ss or
empl oyment of th e de fendant immediatdy upon hcc oming aware of such fa ct.
I furth er agree and understand that, unle ss otherwi se ordered by the Court, th e bond for whi ch thi s affi davit sup ports is
a continuin g bond ( including any proceedin g on appeal or review) which sha ll con tinue in full for ce and effect until such tim e
as the unders igned is du ly exo nerated by Order of the Court.
I decl are under the penalty of perjury th at the fore go in g is tru e and correct. Executed on th is __ 26th __ day of
Aup~ ,=20_2~1 ___ _
Va lnette Garcia XXX -XX -
Name of Surety ~
dWllli~lAP~
Sign ature of Surety
Soe ia l Sc<.:ur ity Numhcr of Sun;ty (lo.J I 4 digiu on{,•)
Add ress of Sur ely
Gir lfriend
Relati onship o f Surety City, Stut c, Zip Co de
Lncal Criminal Rule 46-6
Jond -Sum mary Adj11dir:otio11 of Ob ligation
A bond or 1111dertaking preJerited f or filing shall r:ant«m co1Ltt 11J oftire principal u11d .rnref\• t}ia/, In case ofdlfaulr or conru'"ocy 011 IM part of1}11
pri11cipal or surety, the (ourt, upon ten ( 10) days natir:e, may rtnd,·r aj11dgment s11mmar,/y in rxc,mla111:e with the obligalron undena~n and u.rut a
wr// ofucc11tio11 upon such judgment. ,In 1tid,m1111 u or parly i11 l 111trut su A:ing u111r1Rmtnl on a bond or und1trtakln,: shall proceed bv \1ofl on for
Summary Adjudlr:ation ofObligatio 11 and E.xecu tion. Strl'/C'e 111(1}' bt1 made 011 a corporaJe surtty as provided in .31 U.S.C. § 9306
CR-04 ( 02/09) AH'IDA \'IT OF l'HKI'\' (NO JUSTII-IC.\ TION)
000234
PROOF OF SERVICE
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON
KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA 92612Proof of Service By Overnight Delivery I am a citizen of the
United States and employed in Orange County, California. I am over the age of eighteen years and not
a party to the within-entitled action. My business address is 18101 Von Karman
Avenue, Suite 1000, Irvine, California 92612. On January 28, 2022, I deposited with Federal
Express, a true and correct copy of the within
document(s): REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF
OPPOSITION TO PLAINTIFF NHC SLO, LLC’S EX
PARTE APPLICATION FOR
TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE:
PRELIMINARY INJUNCTION in
a sealed envelope, addressed as
follows: John Armstrong Armstrong
Law Group 23232 Peralta
Drive, Suite
102 Laguna Hills, CA
92653 Tel. 949-942-6069 john@armstronglawgroup.co Attorneys for Petitioner/Plaintiff Following
ordinary business practices, the envelope was sealed and placed for collection by Federal Express on this date,
and would, in the ordinary course of business,
be retrieved by Federal Express for overnight delivery on this date. I declare under penalty of perjury
under the laws of
the State of California that the above is
true and
correct.
1 -
DECLARATION OF CHRISTINE DIETRICK IN SUPPORT OF OPPOSITION
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BEST BEST & KRIEGER LLP JEFFREY V.
DUNN, Bar No.
131926 jeffrey.dunn@bbklaw.com DANIEL L.
RICHARDS, Bar No.
315552 daniel.richards@bbklaw.com
BEST BEST & KRIEGER LLP 18101 Von
Karman Avenue, Suite
1000 Irvine, California 92612
Telephone: (949) 263-2600
Facsimile: (949) 260-0972 Attorneys for Defendants and
Respondents City of San Luis Obispo and City Council of and
for the City of San Luis Obispo EXEMPT
FROM FILING FEES PURSUANT TO
GOVERNMENT CODE SECTION 6103 SUPERIOR COURT OF
THE STATE OF CALIFORNIA COUNTY
OF SAN LUIS
OBISPO NHC SLO,
LLC,
Petitioner and Plaintiffs, v. CITY OF
SAN LUIS OBISPO; CITY COUNCIL OF AND FOR
THE CITY OF SAN LUIS OBISPO;
AND
DOES 1-
10,
INCLUSIVE, Defendants and Respondents.
Case No. 21CV-
0734 Judge: Rita
Federman DECLARATION OF CHRISTINE
DIETRICK IN SUPPORT OF
OPPOSITION TO PLAINTIFF NHC SLO, LLC’
S EX PARTE
APPLICATION FOR TEMPORARY RESTRAINING ORDER
AND ORDER TO
SHOW
CAUSE RE: PRELIMINARY INJUNCTION
Date: January 31, 2022 Time:
8:30
a.
m.
Dept: 2 ELECTRONICALLY FILED 1/28/
2022
2 -
DECLARATION OF CHRISTINE DIETRICK IN SUPPORT OF OPPOSITION
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BEST BEST & KRIEGER LLP
DECLARATION OF CHRISTINE DIETRICK I, Christine
Dietrick, declare as follows: 1.I have personal knowledge of the following facts, and if called
to testify thereto, I could and
would do so competently. 2.I am the City Attorney for the City
of San Luis Obispo.3. On October 9, 2020, I received a letter from Paul F. Ready
of Farmer & Ready, a Law Corporation, sent on behalf of Valnette Garcia, Helios Dayspring, and
NHC SLO, LLC. This letter provided information concerning Helios Dayspring’s transfer of
ownership interest in NHC SLO, LLC to Valnette Garcia. Attached hereto as Exhibit A is a true and
correct
copy of this letter. I declare under penalty of perjury under the laws of the State
of California that the forgoing is true and correct. Executed this 28th day of January, 2022,
at
San Luis
Obispo, California. Christine Dietrick
82508.
EXHIBIT A
000238
FARMER &READY
A Law Corporation
PAUL F.READY 1254 MARSH STREET
LESLIE A‘Tos POST OFFICE Box 1443
DAVID Y.FARMER *RETIRED San Luis Obispo,California 93406
Telephone:(805)541-1626
Facsimile:(805)541—0769
October 9,2020
Christine J.Dietrick
City Attorney
City of San Luis Obispo
990 Palm Street
San Luis Obispo,CA 93401
RE:NHC SLO LLC
Dear Christine,
I’m sorry I didn’t back to you earlier this week but,as I imagine you know,the covid—
crisis has disrupted Virtually every aspect of our lives and practice.
San Luis Obispo Municipal Code Section 9.10.120C clearly prohibits a transfer of a
Commercial Cannabis Operator Permit in violation of Chapter 9.10.The permit held by NHC
SLO LLC was not being transferred,rather,it was only Mr.Daysp'ring’s membership interest in
NHC SLO LLC being transferred.Section 9.10.120B prohibits transferring any portion of the
ownership or control of a Commercial Cannabis Business "to any person who does not have a
Commercial Cannabis Operator Permit from the City prior to the effective date of any action
described in this sentence".Valnette Garcia,the intended transferee,held a Commercial
Cannabis Operator Permit prior to the effective date of the transfer by way of her existing interest
in NHC SLO LLC,and therefore the intended transfer would be compliant with that ordinance
provrslon.
Section 9.10.120B also requires notification to the City,and that the transfer be
conditioned on City approval,and both of these provisions are met as well.In accordance with
my prior correspondence,the City has been notified of the transfer,and in accordance with the
documented transfer,it is expressly conditioned on City approval and the issuance of an amended
Commercial Cannabis Operator Permit,to the extent so required,and only becomes final upon
such approval.
Ms.Garcia's qualifications were previously vetted by the City during the initial permitting
process,as she was an original owner of NHC SLO LLC.The City already has her contact
information from that process,but I hope you will not hesitate to let me know if you need me to
provide it again.
Ms.Garcia meets all Merit Criteria required for a Primary Principal by way of her 7.5+
years of compliant cannabis experience through her prior management position at House of
Holistics Prop 215 delivery service,as well as her current ownership interest in the Natural
Healing Center in Grover Beach.
000239
Christine J.Dietrick
October 9,2020
Page Two
I hope you will not hesitate to let me know if there is any additional information you need
to process this intended transfer and the issuance of an amended Commercial Cannabis Operator
Permit,if required.
Sincerel
aul F.Re y
Enclosure
PFWtlw
cc:Valnette Garcia
000240
WWW,.“SEGMENT ’;_-V_.~_‘.VM.V
AND ASSUMPTION OF LLC MEMBERSE?INTEREST
THIS ASSIGMfENI‘AND ASSUE‘V?TION OF LLC MELNEBERHW INTEREST (this
03115:;
r .f A‘.,r._,‘3‘~.:
Hefias Dayspring (“Asafignor‘fi and Valname Garsia ("Assignee"},
vwvr‘*-:.:~
k .1 -m;92.x”;v A:nympmumy WWW»mJHCMETC?YT".-'.a“?_;~.‘;;.m';turgggggA,..L,1m».4 :.x ,m-fit .w:II:ii;,..3:w “u..-1,
1111??th '“‘.~~:«»-a ~..}=,.
W"
membership iuterest'in thavCampanji;and
WHEREAS,Assignasr desirea is assign and transfer hx's ninety ant:percent (91%)membershipinterestintheCompany,tagsthar with all other intfirast of Assignor i1;and t0 the Campany (collacfively,
the "Assigned Intarastf‘l
NGW,THEREFGRE,far good and valuabié consideratiam the {swig}?and adequacy af which
are bareby ackmwiedged,and subjact to the terms and conditions sat forth in 11mg Assignment,the partieg
agrae as foijows:
E.Assignmem Subj act only to the condifian sat forth in Secfien 2,beiow:Assignm‘hembyafisignsandtransferstoAssign-e ail {If the Assignor's right,ti‘fls,and interest in and to the Assignad interesg
éncluding alf voting,cement and financial rights new or hereafwr existing and associated withownershipoftheAssignedInterest.
2.Condition m Assignment.In the event that appmvai by the City cf San Luis Obispo (the “City”)afthis assignment andfor the issuance of an amendsd Comemiai Cannabis Operator Permit is required in
order to maintain the Cempanyis Commercial Cannabis Operate:Permit or miner entitlements fer the
m,1’Efinndpfi qT—‘nwgfivx‘fir..5374.A r1 M ,.
mi.§n ..‘n-“$7 A‘—i‘~m\~.r ,.._.
v '..3.Egprgc9rf3fTCP°T’T‘Ci “I 7“":5»:.‘.___.~;'“imbéw‘fi.,gk...‘:..-;....~v “My rw‘uumw Lu“:
I-"~.::
ig:;s is,1;.1.1;.44;;luff;smug o;Lin:magma imam»fissxgnur makes no came:representaaonsmwarrantiesandthe:Assigned interest is assigned to Assignea on an A543,Where~13 basis.
mu.Axuggéznu’mg:(mu;auvwcu um;umnmlgmunr-‘24‘
v Mg;fiflmwg 3;;v;Ag:amid;m.timings“;Lugpm‘agmb goat:«35.;
and represems,warrants,and agrerzs that Assigne:is an existing Member of the
Campany,and is famiiia:with ail aspects of the Compan;and the Operating Agreement,and the rights and
obiigaticns applicabie m the Assigneci Interest that are containeé therein,
7
5.Aggrmal.Assigno:and Assignee acknowiedge that this assignmergt of Asgignor‘s
AssignedInterestiscontempiatedbySection8dofthaOperatingAgreementandhasbeenapprovedbytheManagaroftheCompany,such that :20 Earths:action will ha required to effect this ass£gnment after its executionbyAssignorandAssignee,other than the safisfactien 0f the candiiian sci forth in Sectian 2,abave.Assignor.wili defiyer a copy of this Assigmnent m the Company t0 keep Wiih its capy offlze Gperating Agreement
Page l of}:
000241
6.Acaeg?afite"bx3‘Assignee.Assignee:(a)agrees ta accept the assig’nmam oféi‘l fifiiiésignar‘s’right,
tifia.and interest in andw-toflm Asaigzied Interest;03)agrees t0 accept such assignment 0:}-an .4345.Where~
13 basis,with no rapresantatians or warrantias that are net expressly 5%:fart}:herein;and (c)agrees to be
bcund by all if the terms.covenants,and conditisns of this Assignment and of the Operating Agreesni.
Assigmze agraes m indemnifil and bolt}Assigns-r,and his agents harmlass against any and all losses.s cams,
and expenses (inaiuding reascnabie aficmeys‘fees)arising {321%sf any obiigations 9f Assignae ralating m
the:Assigned Interest whim occur on or after,or arise fiom events occurring an m after,the dam heraof.
7’.Further Assurances.33.531ng and Assigneze shail prampfly axawta md deiiver to the other
anyaddiiionalinstrumentatotherdocumentwhichAssignororAssigneereasanablyrequeststoavidanceor
better effect the assignmant contained herein.
8.Rain.Successars.and Assigns-This Assignment shall bind and Emma t0 the benefit ofthepartieshereinandmagrespactivesuccessorsandassigns.
9.fifijfififtgigg ””73?5.";i:1 2‘.‘T .“1;;L41;.1...;;f.--;.‘.Mg...m-..5.;fig .u'mud
by,and shah be canstmed awarding to,thy:iaws oftha State cf California,wifhou:regard to mimic:of221wmiss.
IO,Countemm.This Assignment may be executed in any numba:of cemiarparts.eaah ofwhichwhensoexecutedanddaliveradshailbedeemedanorigmaifurailpurpcsses,and 213 gush cannterpms shali
together canstim‘ie but one and tin:same instmem.A signed cupy of this Assignment deiiverad {flyaitherfacsimfleOremailshallbedeemedmhavethe.sama §egal effect as delivery at"an original signed copyofthisAssigfiment.Nom’ithstanding tha foregoing,each party hereto shail deiiver origimicountarpartsignaturestotheotherpartiesanorbefezethedate.herecf.
11.Amsndmcnts agd Moéificatiens.This Assignment may not be madified or amended inanymamasotherthanbyawrittenagreamemSigflfidbythepartytobachargmi
I"!'flnvfi‘nad Tnmg-.flm-«34<f‘~..'.5 ‘..‘,1.._....,1 z :'_.~.....~--r..;.__-“myug um nu;gum wmc ucwmu dual:REVS we
meanings asm-ibed is such terms in the Gperating Agreement.
B‘Hvr'nmqn Vflmhr‘nfit‘:2 .2..«W ...~v :.»\~.s .\.....,
M-rd.m.-.)mun:klfwiartvxi‘s :12”.v-.2.132122;1::1 :2:23:12:11?3.23:3.
ASS¥GNOR:.5.00:.w;«x 1:45;.
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1 .7"‘nu
13:31:05 i)
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Page 2 0:52
000242
PROOF OF SERVICE
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BEST BEST & KRIEGER LLPATTORNEYS AT LAW18101VON
KARMAN AVENUE, SUITE 1000IRVINE, CALIFORNIA 92612Proof of Service By Overnight Delivery I am a citizen of the
United States and employed in Orange County, California. I am over the age of eighteen years and not
a party to the within-entitled action. My business address is 18101 Von Karman
Avenue, Suite 1000, Irvine, California 92612. On January 28, 2022, I deposited with Federal
Express, a true and correct copy of
the within document(s): DECLARATION OF CHRISTINE DIETRICK IN
SUPPORT OF OPPOSITION TO PLAINTIFF NHC
SLO, LLC’S EX PARTE APPLICATION FOR
TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE:
PRELIMINARY INJUNCTION in
a sealed envelope, addressed as
follows: John Armstrong Armstrong
Law Group 23232 Peralta
Drive, Suite
102 Laguna Hills, CA
92653 Tel. 949-942-6069 john@armstronglawgroup.co Attorneys for Petitioner/Plaintiff Following
ordinary business practices, the envelope was sealed and placed for collection by Federal Express on this date,
and would, in the ordinary course of business,
be retrieved by Federal Express for overnight delivery on this date. I declare under penalty of perjury
under the laws of
the State of California that the above is
true and
correct.