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Cat Packer, executive director of the Los Angeles Department of Cannabis Regulation, in 2017. <span class="copyright">(Chris Pizzello / Associated Press)</span>
Cat Packer, executive director of the Los Angeles Department of Cannabis Regulation, in 2017. (Chris Pizzello / Associated Press)

Cannabis entrepreneurs who want licenses to open new shops in Los Angeles are suing the city, arguing that an application process flooded by hundreds of competitors was “flawed” and unfairly implemented.

The lawsuit, filed this week by the Social Equity Owners and Workers Assn. and one of its members, is pushing for the city to vet every one of the applications turned in under a first-come, first-served process for a limited number of licenses — or to roll out a new process that gives everyone “an equal, fair and transparent opportunity” to compete for a license.

The group filed its suit less than three weeks after a long-awaited audit of the hotly contested process for handing out L.A. licenses for new shops was released.

Hundreds of people rushed to turn in applications in September, vying to be first in line for just 100 licenses that were expected to be awarded through the process. Mere seconds made the difference in whether someone had a shot.

When marijuana applicants discovered that some people started their applications before the official 10 a.m. launch time, many argued that the process had been tainted. City officials called for an audit scrutinizing what had happened, and the licensing process was put on hold for months.

The audit, conducted by Sjoberg Evashenk Consulting, found that although some applicants got into Los Angeles’ application system ahead of its official launch time, the city took “reasonable and appropriate” steps to prevent any unfair advantage — by pushing their applications back in line to where they would be if they began the process at 10am.

The city administrative officer, one of the top officials in Los Angeles, said the newly released report found “no evidence of bias or unfairness” and that the city should press forward with awarding licenses.

Critics pointed out, however, that the audit also showed that the department had told some applicants they couldn’t sign onto the online system at all before 10 a.m., a necessary step before beginning their applications. That wasn’t accurate — and auditors found it could have put some marijuana entrepreneurs at a disadvantage because they waited to do so.

The audit found that 226 applicants accessed the online platform before 10 a.m., although only 14 of them actually started their applications before that time. The Social Equity Owners and Workers Assn. argued in its lawsuit that those 226 applicants had a “significant advantage” over others who waited until 10 a.m. to log on.

“Fundamental to any fair race is that the competitors must start at the same time or, at the very least, be given accurate information about when the race will begin,” the group argued. “The record demonstrates that this did not occur.”

The group added that “despite a diligent effort to do so,” it had not been able to “identify a single applicant that started the application process at the designated 10:00 a.m. processing period that was selected to move on to the next phase.”

Attorneys representing both the group and one of its members, cannabis applicant Madison Shockley III, in the newly filed case did not immediately respond Saturday to a request for comment.

The Department of Cannabis Regulation declined to comment. Rob Wilcox, a spokesman for Los Angeles City Attorney Mike Feuer, said Saturday that their office would review the complaint and had no further comment.

Cat Packer, executive director of the cannabis department, recently issued a report recommending key changes to the next round of the application and licensing process, including tightening criteria for entrepreneurs to qualify for its “social equity” program, which aims to assist cannabis entrepreneurs from communities hit hardest by the war on drugs.

Packer also recommended a new benefit for applicants who were unable to snag licenses for new shops during the heavily contested process last year: Giving them “priority processing” for opening other kinds of cannabis businesses such as delivery or manufacturing. The City Council has yet to approve those recommendations.

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