Former Arkansas Lawmakers and legal firms file dueling medical marijuana business license lawsuits

In the original lawsuit, lawyers were accused of creating phantom groups of local owners to get four of the first 32 licenses for medical cannabis dispensaries in California.

By Hunter Field, Arkansas Advocate

Last week, a prominent law firm representing the medical marijuana industry in Arkansas retaliated against a former partner as well as other dispensary owners that accused them of fraud and malpractice during the rapid growth of the cannabis industry.

Last month, the Little Rock law firm Steel, Wright, Gray, was sued in Pope and St. Francis Counties for fraud and legal malpractice regarding the creation ownership groups of the lucrative cannabis dispensary industry.

Steel, Wright Gray has responded in both cases filed by dispensary associations. Late last week, the firm filed its own defamation lawsuit against Marshall Wright, former state legislator and former Arkansas Pharmacists Association CEO, as well as Scott Pace, former lobbyist, former Arkansas Pharmacists Association CEO, and former state law partner.

Pace and Wright belong to the Enlightened Dispensary group that brought the explosive lawsuits filed against Nate Steel (also a former legislator) and Alex Gray.

The lawsuit accused Wright and Gray, of creating phantom ownership groups in order to obtain 4 of the first 32 licenses for medical cannabis dispensaries in 2019 by the state.

The local “owners” of two of those dispensaries–Enlightened Dispensary locations in Heber Springs and Morrilton–say they had little control over the businesses, which are instead controlled by out-of-state management companies. They also claim that they received little or no income from Enlightened, while incurring tax liabilities of hundreds of thousands.

Steel, Wright, Gray denies the allegations, and says the lawsuits should be dismissed due to a variety of procedural issues.

The firm claimed that Wright also prepared dispensary licensing application materials for both the group of dispensaries he belonged to as well as Pace’s group. The defamation lawsuit alleges that both Pace and Wright had negotiated with management companies outside and knew they would manage their dispensaries.

The lawsuit continues to claim that Gray and Steel did not advise Wright and Pace how to operate their dispensaries or use their licenses.

At some point Pace and Wright grew “adverse to” the management company that ran their dispensaries and hired Gray and Steel in order to find a purchaser. The suit claims that they eventually hired a new attorney.

The defamation lawsuit states that “Defendants engaged in a targeted and systematic campaign to defame Gray and Steel and tarnish Gray’s and Steel’s reputaitons in the Arkansas legal and business communities and interfere with SWG’s law and business practice with the intention to harm Plaintiffs.”

In the suit, Pace is also accused of disparaging and making false statements about Steel and Gray in front of the Pharmacists Association, who ended their business relationship with Steel, Wright, Gray. Court documents show that the firm has been retained by the association as its outside general counsel.

Scott Poynter is an attorney who represents Pace and Wright and several of their dispensary partner companies. He said that his clients preferred to fight in court and not through the media.

Poynter wrote in an email that “Our clients are confident about the allegations they made and have tried to resolve them for over a year.”

“As for the defamation claim, these claims are a result of the same problems. Procedurally they should have been filed in the St. Francis County and Pope County cases as counterclaims.” This truth will serve as a defense against the defamation cases filed recently when we prove in Court our client’s malpractice claims.

Steel, Wright Gray also requested that Poynter be disqualified from representing Wright and Pace in fraud and malpractice lawsuits. In the defamation lawsuit, Poynter was referred to as “a disgruntled ex-member of SWG.”

The filings in court were just the latest chapter of a bitter battle that brought to the fore controversies surrounding the cannabis industry.

What is ownership, and why should you care?

In a hearing held on Monday afternoon, the Arkansas Legislative Council’s Medical Marijuana Oversight Subcommittee examined this question. However, there were no answers concrete to the issues between management and ownership companies.

A number of legislators have expressed their frustration at the fact that, due to the structure and management agreements, the owners listed in the documents for medical cannabis companies are not necessarily the ones who control the company.

Arkansas law requires that marijuana businesses be owned by residents of Arkansas at least 60%.

Linda Chesterfield of Little Rock, a state senator, said, “That’s the rub.” “I might own 60 percent on paper, but if i don’t have the power to vote, i don’t really control that company.”

This article was originally published by Arkansas Advocate.