Cannabis business sues city for breach of contract

Laney Griffo

SOUTH LAKE TAHOE, Calif. — Perfect Union SLT followed through with their threat to file a lawsuit against the city, after their cannabis and business licenses were revoked by the council.

During its June 1 meeting, the South Lake Tahoe City Council voted 4-0 (with Cody Bass recusing himself ) to cancel their agreement with Perfect Union SLT, citing delays in opening their business. They upheld the decision during the June 15 meeting with Mayor Tamara Wallace changing course and voting in the minority.

Perfect Union SLT was awarded one of two microbusiness cannabis licenses in Nov. 2019. The business agreement gave them a year to open their business.

The cannabis business cited COVID-19 as the reason for not being able to open on time.

“Mere weeks after the Development Agreement became effective on February 13, 2020, the world quickly and irrevocably changed due to the COVID-19 pandemic, and both business and construction in California in large part came to a grinding halt in March 2020,” the lawsuit states.

“Further, the COVID-19 pandemic caused the demand for construction around the South Lake Tahoe area to boom in a way never seen before,” the lawsuit continued.

After their year deadline passed, City Attorney Heather Stroud gave them 30 days to cure their default or at least started the process of curing the default but they failed to do so.

During the June 15 council meeting, David Wolfe, legal counsel for Perfect Union SLT, argued that the reason for the delay was a reasonable excuse under the development agreement which allows ‘delay beyond the reasonable control of a party caused by (a) calamities, including without limitation earthquakes, floods, and fire; (b) civil commotion; (c) riots or terrorist acts; (d) strikes or other forms of material labor disputes; (e) shortages of materials or supplies; or (f) vandalism.’ He said COVID did qualify as a reason for delay.

In the lawsuit, they stated, “two of the three areas of alleged breach… were cured within 30 days of notice of breach.” Those two breaches were payment of the Public Safety Mitigation Fee and proof of a legally, possessory or other equitable interest in the property.

The third breach was obtaining all necessary approvals and opening for business within one year of February 13, 2020. The lawsuit said that breach, “is a non-monetary alleged breach that is of a nature that could not reasonably be cured within 30 days.”

Wallace, who was originally in support of ending the agreement, said she was torn because during the pandemic, she underwent a large construction project in which she experienced delays. However, all the other cannabis businesses who were awarded licenses opened on time.

Perfect Union SLT is suing the city for breach of contract and is asking the judge to require the city to honor its development agreement and cover lost profits that the company is experiencing due to this disagreement. The case was filed on Sept. 22 in the El Dorado County Superior Court.

The city said it does not comment on active litigation.

Correction: This story has been updated to show the full name of the plaintiff, Perfect Union SLT.

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