Lawrence J. Conlan
831 S TATE S TREET , S ANTA B ARBARA , C ALIFORNIA 93101- 3227 LCONLAN @ CAPPELLONOEL . COM T EL (805) 564 - 2444 F AX (805) 965- 5950 WWW . CAPPELLONOEL . COM
March 4, 2025
Via Email
David G. Lim, Esq.
Richards Watson Gershon
One Sansome Street, Suite 2850
San Francisco, California 94104
Email: [email protected]
Re: Support for Resolution No. 2025-37 Rescinding Cannabis Permit for Authentic Fairfield LLC
Dear Mr. Lim:
We are legal counsel for Embarc, the operator of a retail cannabis dispensary in Fairfield, California. We write to support the revocation of the cannabis permit previously granted to Authentic Fairfield LLC for failure to comply with Fairfield Municipal Code Chapter 10E sections regarding transfer or change of ownership.
Fairfield’s Municipal Code is clear in its prohibition on change of ownership of cannabis business permits: “A commercial cannabis business permit is nontransferable to any other person except in accordance with this section. Any attempt to transfer a commercial cannabis business permit without complying with this section shall be deemed void and is grounds for permit revocation.”
As set forth below, we urge the City to follow the Code, adopt the recommendation of City staff, and void and revoke Authentic Fairfield’s permit.
1. Failure to apply for permission or to notify of a change in ownership should result in mandatory revocation of Authentic Fairfield’s permit.
There is no legitimate dispute that Authentic Fairfield has violated the Code and its permit should be revoked, as City staff recommends in the March 4, 2025 Agenda Report. The Code requirements are plainly written, easy to understand, and mandatory. If a permittee wishes to transfer or change ownership which results in a change of more than 51% of the original ownership, they shall file an application with the City Manager at least 30 calendar days prior to any anticipated change. And, even in the event that there is no change of 51% of original March 4, 2025
ownership, the permittee is still required to notify the City Manager in writing within 10 days of the change taking effect.
The Code means what it says, its requirements are not optional, and the penalty for violation is mandatory revocation. Here, Fairfield Authentic has flouted the Code’s requirements. It attempted to conceal or convolute changes in its ownership without any application or notification. Then, when its violation of the Code was discovered, Authentic Fairfield presented false, misleading and non-credible explanations in an attempt to avoid the consequences.
2. The evidence demonstrates that Authentic Fairfield either misrepresented its ownership in its license application, or its ownership was changed without properly notifying and receiving approval from the City.
Authentic Fairfield’s original license application identifies the following:
- Brian Mitchell (Co-Owner/CEO) – 30%
- Dr. Albert Mitchell (Co-Owner/CMO) – 30%
- James Kim (Co-Owner/Managing Director) – 11.5%
- Tony Huang (Co-Owner) – 27%
- Jon Avidor (Co-Owner/Executive Chairman) – 1.5%
Each of those individuals apparently signed the application under penalty of perjury, and Brian Mitchell further certified under penalty of perjury that the information was true, complete and accurate, and that a misrepresentation of fact is cause for revocation. (See Exhibit A.)
Authentic Fairfield subsequently applied to the Department of Cannabis Control (“DCC”) for its State license. The DCC is the State agency that licenses and regulates cannabis businesses, and the DCC’s public website identifies a licensee’s owners in direct relation to the information that an applicant provides to the DCC, at the time of application or renewal.
At the time of the City’s last hearing on this issue in December 2024, the City had learned that DCC identified Authentic Fairfield’s owners, different from its original application as:
- Gregory Fink
- James Kim
- Susan Hoy
- Takayashi Sato
So, when the DCC listed Gregory Fink, Susan Hoy and Takayashi Soto as new or additional owners, it could only be based on information that Authentic Fairfield supplied. (See Exhibit B.)
March 4, 2025
To be clear, only one of those individuals, James Kim, appears on Authentic Fairfield’s application from September 2020. Yet, all of them remained the identified owners of Authentic Fairfield on the DCC website until last week.
1 At the December 2024 City Council hearing, representatives for Authentic Fairfield suggested that the DCC website is not reliable, that the DCC “disclaims” the accuracy of the information, or that the information listed on it in relation to Authentic Fairfield was somehow mistaken. Those are not credible explanations, and they should be carefully scrutinized.
Confronted with the inconsistencies in its disclosed ownership information, Authentic Fairfield backpedaled, and it offered a variety of questionable excuses and attempts to remedy the problem. At the December 2024 City Council meeting, Brian Mitchell publicly represented that he “thought he was still an owner.” Likewise, Takayashi Sato and Authentic Fairfield’s outside counsel suggested that Authentic Fairfield ownership has “not changed” or “only changed a little.” The lack of clarity or credibility in Authentic Fairfield’s explanations is revealing and should be of great concern to the City.
Now, in recent days, the owners of Authentic Fairfield listed on the DCC website are as follows (see Exhibit C):
- Brian Mitchell
- James Kim
- Tony Huang
Authentic Fairfield has yet to offer any credible or valid explanation for its multiple changes to its ownership, which are, by definition, Code violations.
3. Authentic Fairfield’s ownership changes raise additional questions and concerns.
The latest change to Authentic Fairfield’s ownership on the State regulatory records should also be concerning to the City for other reasons. At the December 2024 hearing, Mr. Sato pleaded with the Council that it could trust him, and that the representations he was making to Council could be relied on.
But just a year prior to that meeting, Mr. Sato was interviewed in the cannabis industry news outlet MJBizDaily. In that interview, Mr. Sato stated that Tony Huang “is no longer an owner, employee or director of the company” and that “Tony Huang has not held a formal position within the company for years...” (See Exhibit D.) And similarly, at the December 2024 hearing, Mr. Sato represented Mr. Mitchell was still an owner, yet when Mr. Mitchell was
1 It also appears that, separate from the attestation in the application section listing Dr. Albert Mitchell as an owner of Authentic Fairfield, the entity has never provided any documents to the City or to any other state or federal agency or regulator showing that Dr. Mitchell was actually an owner at any time. It is logical to conclude that Authentic Fairfield falsely listed Dr. Albert Mitchell in its City license application, but he was never a bona fide owner of the entity. Such an misrepresentation is also grounds for revocation of the permit.
March 4, 2025
previously charged with insurance fraud (see Exhibit E) 2 the Company announced Brian
Mitchell…has stepped down from the role for personal reasons unrelated to Shryne. (See Exhibit F.)3
Yet now, Mr. Sato and Mr. Mitchell invite this City Council to believe that Mr. Huang and Mr. Mitchell are and have always been owners of Authentic Fairfield. The City Council should decline that invitation. It is entirely disingenuous for Authentic Fairfield to publicly distance itself from Mr. Huang, claim that he has not been an owner or “held a formal position within the company for years” only to suddenly resurrect his involvement as an owner in an attempt to cure a default for which there is no remedy but revocation. The same can be said for Mr. Mitchell and Mr. Avidor, who was also listed in the initial application but not on the DCC website.
In addition, the operating agreement Authentic Fairfield provided in an attempt to explain itself only reinforces the company’s violations of the Code. The 2024 operating agreement definitively proves that a transfer of ownership of greater than 51% occurred without the City’s approval, in direct violation of 10E.15(a). The operating agreement shows completely different owners than those stated in Authentic Fairfield’s initial application, and it demonstrates that Authentic Fairfield violated Municipal Code (“MC”) 10E.15(a) when Albert Mitchell, Brian Mitchell, Tony Huang, and Jon Avidor transferred their ownership in Authentic to other individuals without City authorization.
There is no question, on these facts, that Authentic Fairfield has misled the City and the City Council, and that its “explanations” for how and when it describes its ownership ranks are simply not credible. For those reasons, Authentic Fairfield’s permit should be revoked.
Should the City have any doubt, it can simply submit a Public Records Act request to the DCC for the application and renewal history of Authentic Fairfield, which will confirm the various changes made to DCC ownership records at the request of Authentic Fairfield, and which were plainly never conveyed to the City. Likewise, the City can request the same information from Authentic Fairfield and its counsel, who will be bound to provide true and accurate records of license applications and renewals to the DCC regarding ownership of its proposed dispensary in Fairfield. Under no circumstances should the City allow Authentic Fairfield to keep its permit without exercising that diligence.
Authentic Fairfield is playing a shell game, trying to deflect and hide the ball, when it was its own conduct that led to this situation. Now that it has been caught red-handed in violation of the City’s ordinance, its permit must be revoked.
2 Exhibit E https://www.insurance.ca.gov/0400-news/0100-press-releases/2021/release094- 2021.cfm
3 Exhibit F https://www.businesswire.com/news/home/20210921006170/en/Jon-Avidor-Named- CEO-of-Shryne-Group
March 4, 2025
4. Authentic Fairfield has no legitimate legal claims against the City.
A business that does not follow the same rules and regulations that other competing businesses follow reflects poorly on that business’s core values and principles. A business that intentionally misleads the public and its elected officials about its conduct is a sign of deeper problems within that business and its leadership.
Authentic Fairfield has not followed the City’s cannabis ordinance and its representatives have not been candid with the City when asked to explain the ownership abnormalities. To the extent the City is concerned about a “threat of litigation” from Authentic Fairfield, the City should step back for a moment and consider whether that threat is legitimate. It is not.
Authentic Fairfield has what is known in the law as “unclean hands.” This is the case both on the issues concerning its undisclosed and changed ownership, as well as concerning the business and operational backgrounds of its principals. In the highly unlikely event Authentic Fairfield pursued legal action against the City, the City would have available to it plenty of evidence to summarily defend itself, as well as additional grounds for revocation, and would have the legal right to force Authentic Fairfield to indemnify it for its legal expenses.
Embarc views Authentic Fairfield’s conduct as knowing and willful violations of the City’s Code, and well outside the bounds of fair play. If its permit is not revoked, Embarc will have no choice but to take all necessary steps to protect its interests, and hereby reserves all rights.
Respectfully,
Lawrence J. Conlan
Cc: David Gassaway
City of Fairfield, City Manager
1000 Webster Street
Fairfield, California 94533
Email: [email protected]
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Home (https://mjbizdaily.com) / Retail (https://mjbizdaily.com/retail) Stiiizy president denies allegations of illicitmarijuana operations, sales By Chris Casacchia (https://mjbizdaily.com/author/ccsacchia/), Staff Writer December 19, 2023 - Updated December 19, 2023
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However, Stiiizy appears to be distancing itself from co-founder Tony Huang, the subject of growing allegations of illegal business dealings in California.
Stiiizy dominates market share in California in vape sales and is the largest retail operator in the state.
Its national footprint includes operations in Illinois, Michigan and Nevada as well as distribution at more than 1,400 retail outlets.
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CANNABIS 101 (HTTPS://INSIGHTS.MJBIZDAILY.COM/CANNABIS-101/?UTM_SOURCE=MJBIZDAILYWEB&UTM_MEDIUM=TOP_NAV_BAR&UTM_CAMPAIGN=CANNABIS_101_COURSE) FOLLOW US (HTTPS://WWW.FACEBOOK.COM/MJBIZDAILY/) (HTTPS://WWW.TWITTER.COM/MJBIZDAILY) (HTTPS://WWW.INSTAGRAM.COM/MJBIZDAILY/?HL=EN) (HTTPS://WWW.LINKEDIN.COM/COMPANY/MJBIZ/) 3/2/25, 8:04 PM Stiiizy president denies allegations of illicit marijuana operations, sales https://mjbizdaily.com/stiiizy-president-denies-allegations-of-illicit-marijuana-operations-sales/ 1/5 In an exclusive interview with MJBizDaily, Stiiizy President Tak Sato said Huang has not held a formal position within the company for years, though he still serves in an advisory role.
In a follow-up inquiry by MJBizDaily, the company said Huang exited Stiiizy’s executive team in December 2020.
The company declined to provide any financial details related to Huang’s exit.
Sato also told MJBizDaily in a phone interview that the vertically integrated cannabis company has not engaged in or benefited from any illegal business activities in California.
The denials were in response to a recent Los Angeles Times story alleging that Huang leased several buildings (https://www.latimes.com/california/story/2023-12-12/stiiizy-founder- tony-huang-cannabis-empire-landlord-black-market-dispensaries) to unlicensed retailers in and around L.A. and helped funnel Stiiizy products through illicit retail channels while serving as a top executive for the company.
“I don’t want to minimize the allegations, but they are from many, many years ago,” Sato told MJBizDaily.
“They have absolutely zero connection to Stiiizy and have zero effect on Stiiizy’s fully legal and confined activities.”
Weedweek recently reported that former Stiiizy CEO Jon Avidor filed a lawsuit in September (https://www.weedweek.com/stories/scoop-stiiizy-co-founders-embroiled-in-criminal- enterprise-former-ceo-alleges/) contending Huang and other co-founders ran a criminal enterprise of at least 18 unlicensed marijuana stores in the L.A. area.
Sato denied to Weedweek any connection between the allegations involving Huang and Stiiizy’s licensed operations.
“He is no longer an owner, employee or director of the company,” Sato confirmed to MJBizDaily.
However, Huang is founder and adviser of Stiiizy’s parent, The Shryne Group, the company confirmed.
Huang denied through a spokesperson any wrongdoing, the L.A. Times reported.
Willing to cooperate
Stiiizy is unaware of any formal investigations by law enforcement or regulatory agencies into its business operations.
Sato told MJBizDaily the company submits to annual audits by California’s Department of Cannabis Control (DCC), the state’s chief marijuana regulator, as well as every municipality where it has operations.
“We’ve had no issues from a compliance or licensing perspective, and we’re very proud of that,” he said.
“We are not aware of any investigations,” Sato added, “but we welcome any communication with regulators so that we can reassure them that none of these allegations have any connection or effect on our legal and licensed activities.” A DCC spokesperson told MJBizDaily that the agency “does not have any comment on this matter at this time.”
Rise to the top
Stiiizy was established in Los Angeles in 2017 by Huang, Samuel Cho and James Kim, who serves as CEO.
The company was founded on the eve of Jan. 1, 2018, when California launched its regulated adult-use market (https://mjbizdaily.com/reporters-california-notebook-frenzied- launch-worlds-largest-marijuana-market/) after more than a decade of gray-market collectives and cooperatives supplying medical patients in a largely unregulated system.
The company built its popular vape brand on authenticity, quickly amassing a loyal customer base as it expanded into retail and cultivation.
Stiiizy is on pace to close 2023 as one of the top-selling brands in California, where it dominates market share in the vape pen category.
The brand’s overall sales in the state, as of press time, have eclipsed $358.9 million this year, controlling an 8.7% market share of all products sold in California, the world’s largest regulated marijuana market, according to the most recent sales data from Seattle-based cannabis analytics provider Headset.
Stiiizy sells nearly $25 million in vape pens and cartridges every month through its large network of in-house stores and distribution deals with hundreds of other retailers.
Nearly a quarter of all vape pens sold in California are from Stiiizy, which distributes products in about 900 stores throughout the state.
“It is safe to say Stiiizy is the most known and purchased cannabis brand in California – the brand consumers recognize and remember buying the most,” said Madeline Scanlon, marijuana insights manager at Chicago-based analytics firm Brightfield Group.
Raw Garden, based in Santa Barbara County, is a distant second with a 5.9% market share in vape pens, according to Headset.
Stiiizy is also the state’s largest retailer with 31 locations.
Beyond California, Stiiizy operates three stores in Michigan and has distribution deals with an additional 500 stores in Michigan, Arizona, Illinois and Nevada.
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3/2/25, 8:04 PM Stiiizy president denies allegations of illicit marijuana operations, sales https://mjbizdaily.com/stiiizy-president-denies-allegations-of-illicit-marijuana-operations-sales/ 2/5 Industry backlash
Some members of a California marijuana retail trade group intend to boycott the purchase of Stiiizy products based on the L.A. Times report.
The United Cannabis Business Association (UCBA), comprised of licensed retailers statewide, posted an Instagram message (https://www.instagram.com/p/C00BeWApDVE/) last week decrying a lack of enforcement on licensed and unlicensed retailers.
Such operators still proliferate throughout Southern California nearly six years after the state launched its regulated, adult-use market.
The UCBA’s post about Stiiizy was less than discreet: “Urgent! Lack of enforcement allows legal operator to play both sides in CA cannabis industry.” A follow-up UCBA comment on the post said the allegations are alarming enough that the organization’s president – Jerred Kiloh, who owns a store in Los Angeles – and other board members intend to cease any further purchases from Stiiizy until the charges are fully resolved.
Kiloh, a vocal critic of illicit L.A. area dispensaries for years, told Green Market Report that about 40 retailers intend to boycott Stiiizy products
(https://www.greenmarketreport.com/l-a-cannabis-trade-group-calls-for-stiiizy- boycott-following-illicit-market-allegations/), which include popular vape cartridges, flower and infused THC edibles.
Sato said he was unaware of the UCBA’s existence until last week and that the hardline stance by some of its members represents a minority sentiment in the industry. “We’ve received a lot of support and phone calls, emails and letters from many, many retailers and other industry players,” he said.
“To our knowledge, not a single retailer has told us to cancel any orders or has made any changes to the regular orders they make.”
Sato noted that the UCBA’s general counsel, Yelena Katchko, is a board director at Glass House Brands, a Santa Barbara County-based megagrower accused of being one of the largest suppliers (https://mjbizdaily.com/catalyst-cannabis-lawsuit-accuses-glass- house-brands-of-illicit-activity/) of marijuana in the illicit market.
The claims were made in a lawsuit filed by Catalyst Cannabis Co. CEO Elliot Lewis. “It’s sad that another industry player is using this opportunity to throw mud at us, especially considering the stale nature of the allegations,” Sato said.
Glass House in late June filed a defamation suit (https://mjbizdaily.com/glass-house- brands-files-defamation-lawsuit-against-catalyst-cannabis/) against Catalyst, denying the allegations.
Sato expects the fallout from the allegations against Huang will have little effect on the company’s customer base or their brand sentiments.
“Customers in the cannabis industry are very discerning,” Sato said. “They’re really attracted to authenticity, and I think that’s the reason why our products continue to be so popular.”
Stiiizy’s vape brand has the most awareness in Arizona and is among the most recognizable in Michigan, according to Brightfield.
In the four markets where Stiiizy products are sold, upward of 55% of vape consumers listed “reliable” as a brand descriptor.
“In these states studied, Stiiizy’s overall perception is very positive, with the highest amount of negative perception in Michigan at only 3%,” Scanlon said. “We’ll continue to monitor if negative press dents Stiiizy’s perception in the minds of consumers. As of now, they stand as a strong, well-liked, well-distributed goliath of U.S. cannabis.
“While negative press about the brand might resonate throughout the industry, the general consumer is unlikely to change their affinity for the brand.” Stiiizy released a statement through its account on X, the platform formerly known as Twitter, highlighting its origin story during California’s Proposition 215 era while touting compliance efforts.
“We are for and by the people. We work tirelessly to bring the true cannabis culture while operating at the highest level of compliance,” Stiiizy said in the statement. “We take pride in providing the highest level of transparency to the cannabis regulators and city officials who audit our books and facilities year after year. “Together they ensure our organization upholds the requirements set forth by the states we operate in and exceeds the needs of our customers.”
Knockoffs and markups
Sato and other Stiiizy executives are well aware their products are showing up on shelves in unlicensed stores.
Sato said he was shocked at the abundance of Stiiizy-branded products he saw being sold at New York bodegas during a trip there earlier this year.
The company purchased and tested several products available at various illicit retailers in New York and found that about half were authentic and half were counterfeit. 3/2/25, 8:04 PM Stiiizy president denies allegations of illicit marijuana operations, sales https://mjbizdaily.com/stiiizy-president-denies-allegations-of-illicit-marijuana-operations-sales/ 3/5 (HTTPS://MJBIZDAILY.COM/CA
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Sato told MJBizDaily he believes the authentic products are purchased legally in California for $20-$25 at retail and shipped to New York, where they sell for $60-$90 per item. “They buy them legally and mark up the prices illegally,” he said.
As for counterfeits, Sato said Stiiizy is working with customs agents in China to mitigate the export of bogus products.
“We’ve successfully prevented multiple shipments of counterfeit products being shipped out of China into the United States,” he said.
Stiiizy, he added, was one of the first brands to include QR codes on packaging to ensure legitimacy.
Sato reiterated that Stiiizy has too much to lose by engaging in underground activities. “We are the No. 1 brand in the country right now,” he said, “and we have an opportunity to leave no doubt of being the No. 1 cannabis company in the world. “We wouldn’t jeopardize this once-in-a-lifetime opportunity and the unlimited potential this company has for a few dollars here and a few dollars there, being involved in the illicit market.”
Chris Casacchia can be reached at [email protected](mailto:[email protected]).
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