Former dispensary operator sues Ontario for “arbitrary” cannabis retail lottery

Mar 15, 2019

The Owner of Cannabis & Coffee, is suing the Ontario government for $1.1 million in damages he claims he incurred over sudden decision to cap licenses, which took place in December 2018.

According to a statement of claim filed by Cannabis & Coffee Inc. against the Alcohol and Gaming Commission of Ontario (AGCO) and the Attorney General’s Office, the coffee shop had been “structuring its operations and incurring expenses” for a year in order to obtain a retail license that would enable the owner to turn his coffee shop into a cannabis store. The extra expenses incurred by the coffee shop owner include the cost of purchasing the business, legal fees, rent, and salaries of employees over the past year.

“We were told something by the Ford government, and then there was this complete 180 degree turn from qualified applicants to random applicants. It was kind of ridiculous.”

Chris James, owner of Cannabis & Coffee

When the Ford government initially assumed power in the summer of 2018, it had announced a repeal of the provincial-run retail system for cannabis previously proposed by the Liberal government. Instead, it was proposed that any private operator would be eligible to apply for a licence to open a cannabis store. However, the Ford government made a sudden decision to limit the initial number of cannabis retail licenses at 25, which would be granted through a randomized lottery system. The provincial government cited a “severe supply shortage” as the main reason for its decision.

When the 25 lottery winners were announced by the AGCO, the provincial body responsible for regulation of the cannabis retail system, it turned out that the majority of winners were sole proprietors with no prior experience in cannabis or retail. Not surprisingly, in the days following the announcement of the winners, numerous cannabis businesses, licensed producers, and lawyers attempted to make deals with the lottery winners in order to prevent them from giving up control of their businesses. The province plans to open 25 cannabis retail stores by April 1. However, no store locations have been definitively approved to date.

According to Daniel Sommers, the lawyer representing Cannabis & Coffee in the lawsuit, “This is fundamentally a story about a callous bureaucracy that has been totally comfortable allowing innocent small business owners like my client to dangle on a thread and spend precious business funds and then yank the rug out from under them.”