Ex-Big Law Partners Face Federal Court Fight Over Marijuana Startup
A pot dispensary launched by a pair of former Polsinelli partners has found itself in federal court over its Philadelphia location.
October 20, 2017 at 10:59 AM
3 minute read
Medical marijuana.
A medical marijuana dispensary started by two former Big Law partners has hit a bump in its pursuit of a Pennsylvania facility, and the ability to open it may rely on federal courts.
PharmaCann, which was founded by former Polsinelli partners Teddy Scott and John Leja, has found itself caught up in litigation over opening its business in a Philadelphia shopping complex. Scott is still the CEO of PharmaCann, and former Polsinelli lawyer Jeremy Unruh is its general counsel.
The case is one of several involving Pennsylvania's medical marijuana program or its participants, threatening to slow the state's ambitious timeline for implementation of a medical cannabis program.
After receiving licenses to operate cannabis dispensaries in Illinois and New York, PharmaCann pursued and won a license to operate a Pennsylvania facility in Philadelphia, at a former Chi-Chi's restaurant. But the shopping complex owner that sold the property to Chi-Chi's in 1991 has said it's illegal to open a marijuana dispensary there.
Pennsylvania licensees are required to be fully operational by January of next year, so PharmaCann sought an order from Pennsylvania courts to push the sale through.
PharmaCann filed suit last month in the Philadelphia Court of Common Pleas against the developers and property owners involved in the Philadelphia Mills shopping complex, including Franklin Mills and Simon Property Group, seeking declaratory relief. Franklin Mills and Simon have now sought to remove the case to federal court.
Pennsylvania lawmakers have passed legislation allowing medical marijuana in the state, under strict regulations. But marijuana is not legal under federal law, even for medical purposes.
According to PharmaCann's complaint, when Franklin Mills sold the property to Chi-Chi's in 1991, it was subject to certain deed restrictions. When PharmaCann sought to take over the space, Franklin Mills got the right of first refusal to repurchase but waived that right in a March 2017 letter, the complaint said. Still, in the same letter, Franklin Mills said the sale of the property for use as a medical marijuana dispensary is prohibited under the 1991 deed.
But PharmaCann argued that, because Pennsylvania has enacted legislation authorizing medical marijuana sale and use, the deed would no longer prohibit that use of the property.
In their notice of removal, Franklin Mills and Simon argued that the defendants are from a diversity of jurisdictions, and that the amount in controversy exceeds $75,000, as the property sold for $560,000 in 1991.
The dispute is far from the only one to arise from Pennsylvania's medical cannabis program.
As PharmaCann fights for its Philadelphia location, the entire medical marijuana program is being challenged in other litigation brought by companies who applied for licenses and did not win them. Organizations including the Pennsylvania Cannabis Coalition, the Campaign for Compassion and Patient-First Association of Companies have looked to intervene in those cases.
Joshua Horn of Fox Rothschild, who represents PharmaCann, said, “We feel very strongly about our case and don't believe it should be in federal court.” Unruh, the company's GC, did not immediately respond to a call for comment.
Blank Rome is representing Franklin Mills and Simon. The firm did not respond to a request for comment.
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