ATTACHMENT 1
JIVA MCE, LLC APPEAL OF CITY OF MERCED PLANNING COMMISSION APPROVAL OF COMMERCIAL CANNABIS BUSINESS PERMIT #22-02R
SUPPLEMENT #1
BRIEF IN SUPPORT OF APPEAL
Jiva MCE, LLC (“ Jiva MCE”) provides the following analysis in support of its appeal of the decision of the Merced City Planning Commission (the “Commission”) in approving Commercial Cannabis Business Permit #22-02R. Jiva MCE, which received an average score of 92.67, should have been awarded an additional three points pursuant to Criteria 5d and 5e, resulting in the highest average score in the City’s Commercial Cannabis Business (Retail) application process.
The following excerpt shows the Criteria 5d and 5e prompts together with the City Selection Panel’s scoring for Jiva MCE:
Jiva MCE previously expressed its concern with the City Selection Panel’s scoring of Criteria 5d and 5e in a letter to the City dated October 28, 2022 attached hereto as Attachment 1. The letter outlined the manner in which Jiva MCE’s applicat ion materials responded to and satisfied the Criteria 5d and 5e prompts in full and provided comprehensive information concerning Jiva MCE owner Dr. John Oram’s longtim e operation of CCSAC, Inc. (“ CCSAC”), a California Mutual Benefit Nonprofit Corporation.
The City has already admitted that the City Sele ction Panel’s scoring contained errors that have prejudiced Jiva MCE. Specifically, the City responded by email dated November 4, 2022, attached hereto as Attachment 2, in which Michael Hren, Principal Pl anner, acknowledged that, contrary to the City Selection Panel’s scoring, “the App lication appears to establish Dr. John Oram as an owner of Jiva MCE consistent with Section 20.44.170, Subsection C, Part 34 of the Merced Municipal Code.” Further, Mr. Hren states that the “Application appears to demonstrate CCSAC was a Mutual Benefit Nonprofit Corporation (“ MBNC”) until March 20, 2020,” in reference to Criterion 5e. The email concludes with “the Panel arguably could have provided one point to Jiva MCE under Criterion 5d,” an admission that the City Selection Panel erred in scoring the Jiva MCE application. Mr. Hren asserts, however, th at Jiva MCE should not have been awarded the two points available under Crit erion 5e because it did not provide documents specifically connecting Dr. Oram with CCSAC, the MBNC that he founded in 2011, for more than three years.
This level of documentation was not specified by Criterion 5e and was not provided by two other applicants – Haven XIII LLC (“Haven”) and Bang Mingo LLC (“Bang Mingo”) – that were awarded points for both Criteria 5d and 5e. The City’s conclusion, then, is arbitrary and capricious both on its face, in reference to the Criterion 5e, and in application since it was not administered in a uniform manner.
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The Criterion 5e prompt did not specify that evidence of more than three years’ affiliation with a verified MBNC was required to be submitted with the application. Rather, the prompt directed applicants to include proof of payment of ta xes by the MBNC, a require ment that the City acknowledges Jiva MCE satisfied. In its Application, Jiva MCE stated in its response to Criterion 5e that Dr. Oram was an ow ner of CCSAC, founded in 2011, and provided the Articles of Incorporation dating to Septembe r 2011. Dr. Oram was in fact the founder of CCSAC and has served as President of the MBNC since its inception. Included in the Jiva MCE appeal materials as Supplement #2 is an affidavit provided by Dr. Oram attesting to hi s continuous leadership of the MBNC and tax payments made by the entity to the State of California and City of Oakland.
Mr. Hren’s November 4, 2022 response to Jiva MC E appears to suggest that the City applied a uniform, detailed level of review to MBNC affiliation documents across all Commercial Cannabis Business Permit (Retail) applications. This is not true, nor would the administrative record support this characterization on review in a petition for writ of mandamus. Largely due to the acknowledged lack of documentation most MBNCs maintained (following the guidance of many California criminal defense attorneys advisi ng nonprofit cannabis coll ectives prior to 2018), almost all of the 2022 Merced Commercial Cannabis Business Permit (Retail) applicants provided non-contiguous years of tax records or simply affirmed compliance with Criteria 5d and 5e without supporting documentation. They did so reasonably because the Criterion 5e prompt did not specify that more than three years of documents was required to substantiate an applicant’s MBNC “prior experience.” Mr. Hren’s response strains to find deficiencies in Jiva MCE’s Criterion 5e response to justify its scoring after the fact. The City cannot change its scoring metrics after an application is released or diverge from the prompts in the application without notice to applicants.
Even worse, the City appears to have applied, in an arbitrary and capricious fashion, different evidentiary standards to Jiva MCE than to other applicants in evaluating Criteria 5e. Specifically, Merced applicants Haven and Bang Mingo rece ived full points for Criterion 5e based on less evidence than Jiva MCE submitted. Haven’s narrative responses to 5(d) and 5(e) reference the 2015-2019 operations of MBNC Hea lthy Healing Holistic Options, In c. without any evidence of mutual benefit corporation affili ation or proof of payment of ta xes. Instead, Haven provided a mishmash of 2021 quarterly tax filings for several entities – including RLB Collective, Inc., CLB Collective, Inc., and Airport Collective, Inc. – that converted to for-profit general stock corporations in 2019 or 2020. Thus it appears the tax filings post-dated the entities’ conversion to for-profit entities, which does not meet the Criterion 5e prompt. Moreover, the tax filings are the entities’ own records; the appl icant did not include proof of payment issu ed by a government entity. The only reference to the tax-paying entities in the Haven application is a chart in Section 3 stating that these entities are partially ow ned by two of the Haven owners, again with no substantiating documentation, let alone documents from three separate years.
Like Haven’s materials and scoring, Merced applicant Bang Mingo submitted only one federal tax filing from 2012 as evidence of mu tual benefit corporation expe rience and no other evidence in support of its perfunctory Criteria 5(d) and 5(e) responses besides the December 2010 Articles of Incorporation signed by owner Be njamin Harris – evidence for only one year of Mr. Harris’s association with that entity. Yet here too the City departed from its stated standard of review, as described in the November 4, 2022 email from Mr. Hren, and awarded full points for Criteria 5(e) to Bang Mingo. In contrast, Jiva MCE provided more simila r MBNC documentation to Bang
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Mingo and more than Haven and more comprehensiv e proof of tax payments than either entity.
Not only do Jiva MCE’s 5d and 5e responses tie Dr. Oram to CCSAC, Jiva MCE describes and documents CCSAC’s ongoing mutual benefit corporation operations with supporting evidence of tax compliance as required by the prompts. Mr. Hren acknowledges this fact in the November 4, 2022 email. Yet, Jiva MCE received no points for Criteria 5(d) and 5(e). These inconsistencies support Jiva MCE’s rational belief that a scoring error occurred with respect to its Application and that Jiva MCE was improperly held to a higher standard than other applicants.
After filing this appeal, Jiva MCE communicated with City staff to discuss: 1) if the City would recognize Jiva MCE as the next applicant eligible to receive a Commercial Cannabis Business Permit (Retail), when and if available (subject to Jiva MCE's argument that it should have received three additional points, rather than one); and 2) if the City would consider awarding an additional Commercial Cannabis Business Permit (Retail) to Jiva MCE in light of the scoring issues. Staff’s response, in summary, is that the Council’s review of the appeal is de novo and that permitting discretion lies with the Council.
Jiva MCE is confident that its Application was complete and responsive with respect to Criteria 5(d) and 5(e) without further documentation and submits these supplemental materials in support of its appeal of Commercial Cannabis Business Permit #22-02R only for the elimination of doubt.
The group has invested significant time and cost, dating back to 2018, in its efforts to locate in Merced and contribute to the local economy. We remain committed to that outcome and appreciate the Council’s consideration of this appeal.
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Attachment 1
October 28, 2022 Letter from Jiva MCE to City of Merced
October 28, 2022
City of Merced
Planning & Permitting
ATTN: Michael Hren & Stephani Davis
678 West 18th Street
Merced, CA 95340
VIA EMIAL TO: [email protected]
[email protected]
D
ear Mr. Hren, Ms. Davis, and members of the Commercial Cannabis Business (CCB) City Selection Committee:
Let me first express our sincere gratitude for your efforts and consideration of Jiva MCE’s application for a commercial cannabis business permit (retail) within the City of Merced. After just missing the cut in 2018, we were thrilled to have an opportunity to communicate with City staff and officials how much our business has progressed in recent years. Our goal this time around was nothing short of a perfect score. Thanks to your careful consideration, we succeeded in all aspects of our application but one. We are yet unclear as to why.
The purpose of this letter is to inquire as to why Jiva MCE was not awarded all 9 points in connection with one of our owner’s verified operation of a mutual benefit non-profit corporation for greater than 3 years, as was reflected in our application. For reference, please find the applicable excerpt from our score card below.
It seems that none of the three parties within the City Selection Committee evaluating our application determined that we had met any of the criteria. Given that this was a pass/fail (true/false) aspect of your application vs. one that invited the discretion and opinions of the scorers, the only logical conclusion is that a simple clerical error is responsible for the missing points.
Since receiving our score card, we have studied the City’s ordinance, application and scoring process, and materials that we submitted as part of our application in detail. We’ve now had multiple sets of eyes review the same, including counsel and consultants familiar with the City’s process and other similar cannabis licensing processes. Consensus is that while the complexity and volume of the information provided made it cumbersome to review, we clearly met all criterial for being awarded all 9 points related to both Sections 5(d) and 5(e) Attachment 1
A summary of our eligibility for the points in question was provided on the 4th PDF page of Section 5 within our application as follows:
Though the facts were in our favor, documents dating as far back as 2011 were admittedly difficult to track down under the pressure of time. The result was a more piecemeal approach to answering the question than we would have hoped. Even so, we the materials submitted do affirm each of the points described in the summary above. More specifically the documents provided prove that:
1) Dr. John Oram is an owner of JIVA MCE LLC;
2) Dr. John Oram was an owner of CCSAC, Inc.,
3) CCSAC, Inc. is a Mutual Benefit Nonprofit Corporation for cannabis in compliance with Cal
ifornia law;
4 ) CCSAC Inc. paid taxes to the State of California and the city of Oakland (Measure Z) taxes and license fee for more than 3 years (36 months).
Toward the goal of easing your audit of our application let me address each of the 5 points in sequence with reference to where you may find the supporting material. 1) Dr. John Oram is an owner of JIVA MCE LLC.
Dr. Oram’s ownership percentage in the applicant entity (Jiva MCE LLC) is clearly noted in Section 1 of our CCB Application in both a) the Operating Agreement for Jiva MCE LLC and b) the City of Merced’s Cannabis Business Application form.
reads as follows:
Attachment 1
Pa
ge 3 of the Cannabis Business Application form states:
2)
Dr. John Oram was an owner of CCSAC, Inc..
PDF Page 9 of Section 5 (Qualification of Owners) notes that Dr. John Oram is a 60% owner of CCSAC Inc. with the accompanying permit/license # for reference.
Attachment 1
PDF Page 15 of Section 5 includes a Statement of Information filed with the State of California further confirms Dr. John Oram’s ownership of CCSAC, Inc. as President and CEO. His status is repeated on Page 16.
3) CCS
AC, Inc. is a Mutual Benefit Nonprofit Corporation for cannabis in compliance with California law.
CCSAC, Inc. was a nonprofit mutual benefit corporation beginning in 2011.
Attachment 1
PDF Page 67 of Section 5 shows that CCSAC’s status as a nonprofit mutual benefit corporation continued through 2020 as evidenced by the Restated Articles of incorporation:
4) CCSAC Inc. paid taxes to the State of California and the city of Oakland (Measure Z) taxes and license fees for more than 3 years (36 months).
CCSAC Inc. paid taxes to the State of California and the city of Oakland (Measure Z) taxes and license fees for nearly a decade. Based upon the City’s knowledge of how rigorous compliance standards are enforced, annual licenses would not have been renewed and the company would not have been allowed to operate had the company failed to pay taxes for the entire duration of the company’s existence 9+ years. As such our evidence of continuous operations should suffice to prove legal operations and continuous payment of taxes. But because the method of proving payment was open ended and standard to which we would be held was not described by the application, we opted to leave nothing to chance by utilizing a ‘kitchen sink’ approach to proving payment of tax beyond any shadow of doubt.
PDF Pages 18 through 66 of Section 5 includes 44 months of payments from 2015 through January of 2020, as follows:
Attachment 1
• Beginning on PDF Page 18 of Section 5: CA State Tax Returns for 2015 (12 months)
• Beginning on PDF Page 33 of Section 5: CA State Tax Returns for 2016 (12 months)
• Beginning on PDF Page 47 of Section 5: City of Oakland tax receipts for April 2017 to Dec 2017, March 2019 to Dec 2019, and January 2020 (20 months)
While the time frame for which taxes were provided was not sequential (due to only CCSAC’s limited records from many years ago), this total accounting of 44 months of tax payments clearly meets the ‘more than 3 years’ qualification as per the wording of application question 5(e). 5) Comparison of two other applicants that received full points for 5(d) & 5(e)
In contrast to Jiva MCE’s scoring, at least two applicants that did receive full points for 5(d) and 5(e) – Haven XIII LLC (“Haven”) and Bang Mingo LLC (“Bang Mingo”) – provided one year or less of qualifying tax filings. Haven’s narrative responses to 5(d) and 5(e) reference the 2015-2019 operations of Healthy Healing Holistic Options, Inc. without any evidence of mutual benefit corporation verification or tax compliance. Instead, Haven provided a mishmash of 2021 quarterly tax filings for several entities – including RLB Collective, Inc., CLB Collective, Inc., and Airport Collective, Inc. – that converted to for-profit general stock corporations in 2019 or 2020. The only reference to these entities is a chart in Section 3 stating that are partially owned by two of the Haven owners, again with substantiating documentation. Bang Mingo submitted one federal tax filing from 2012 as evidence of mutual benefit corporation experience and no evidence in support of Attachment 1
its perfunctory 5(d) and 5(e) responses. Conversely, Jiva MCE’s 5(d) and 5(e) responses clearly describe and document CCSAC’s ongoing mutual benefit corporation operations with supporting evidence of tax compliance as required by the prompts.
In light of the above, we remain hopeful that with this clarification, our score may be adjusted to correctly reflect 9 points related to 5(d) and 5(e) of the application. If, however, the score of 0 of 9 points for this section was intentional, and not an oversight, we would appreciate your assistance in helping us to understand how that conclusion was reached. We are happy to answer any additional questions you may have or to discuss this issue either in person or by phone so that we may find an equitable solution.
Best regards,
Patrick Orosco
Nolita Ventures LLC
[email protected]
831-649-0220 (Office)
Rajiv “Raj” J. Pottabathni
Jiva MCE LLC
[email protected]
732-801-6300 (Mobile)
CC: Cassia Furman, [email protected]
Sahar Ayinehsazian, [email protected]
Brian Shaffer, [email protected]
Attachment 1
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Attachment 2
November 4, 2022 Email from Mr. Michael Hren to Jiva MCE, LLC 2 From: Hren, Michael <[email protected]>
Sent: Friday, November 4, 2022 5:01 PM
To: Patrick Orosco <[email protected]>; Rajiv "Raj" Pottabathni - Jiva HWD, LLC ([email protected]) <[email protected]>
Cc: Davis, Stephani <[email protected]>; Espinosa, Kim <[email protected]>; Travis J. Lindsey <[email protected]>; Nick Clair <[email protected]>; planningweb <[email protected]> Subject: RE: Jiva MCE Scoring Clarification Inquiry
External Email
Mr. Pottabathni and Mr. Orosco,
You submitted an inquiry regarding the scoring process for the retail cannabis permit application for Jiva MCE LLC (“Jiva”), CCBP Application #22-09R. We note at the outset that the Cannabis Selection Panel (“Panel”), composed of the Director of Development Services, City Manager, and Chief of Police, is responsible for reviewing applications and individually scoring each application in accordance with the merit-based scoring system established by resolution of the City Council. While staff is unable to speak on behalf of the Panel, we have reviewed Jiva’s application and accompanying documentation (“Application”) in light of the questions you raised and provide the following as the likely explanation for the lack of points awarded for Criterion 5d and 5e.
The Application appears to establish Dr. John Oram as an owner of Jiva consistent with Section 20.44.170, Subsection C, Part 34 of the Merced Municipal Code. Fur ther, the Application appears to demonstrate CCSAC
was a Mutual Benefit Nonprofit Corporation (“MBNC”) until March 20, 2020. However, the application does not appear to sufficiently establish that Dr. Oram had experience with CCSAC, or any other MBNC, for the requisite period required for the award of points pursuant to Criterion 5d and 5e.
The earliest evidence in the Application demonstrating any involvement of Dr. Oram with CCSAC is the Statement of Information filed on June 15, 2017. This document appears on Page 236 of the submitted PDF. The Application also makes clear that CCSAC ceased to be a MBNC on March 20, 2020, as shown on Page 287 of the submitted PDF. Accordingly, the Application only demonstrates Dr. Oram’s involvement with CCSAC when it was an MBNC for a total period of approximately two years and nine months. While the Panel arguably could have provided one point to Jiva under Criterion 5d, the Application does not provide a basis for the award of any points under Criterion 5e.
Awarding one additional point to Jiva under Criterion 5d would not change the result of the Merit-Based Selection process. Jiva received an average score of 92.67. An additional point would raise that score to 93.67.
The highest-scoring application received an average score of 95.33.
The City appreciates Jiva’s participation in the application process. The City was fortunate to receive several quality applications, including from Jiva. We encourage Jiva to apply in the future when additional permits become available.
Respectfully,
Michael Hren, AICP
Principal Planner
City of Merced | 678 W. 18th Street | Merced, CA 95340
(209) 385-4768 | [email protected] | www.cityofmerced.org Attachment 2