A marijuana delivery business is seeking $900,000 in damages from the city of Mountain View, alleging that city staff blindsided them with new restrictions that prevented them from opening.
The company, MWKM Corporation, filed a claim against the city after it was effectively blocked last year from opening a cannabis business on Polaris Avenue due to security deficiencies. The Mountain View City Council reviewed the claim in closed session Tuesday and voted unanimously to reject it.
City planning staff, and later police officials, told the company last year that it must have an enclosed area for loading and unloading cannabis in order to meeting the city's security requirements. Matthew Mahaffey, the owner of the company, argues that this isn't spelled out anywhere in the city code, and that he was strung along by staff for months only to be told the property wouldn't work.
"The Police Department's position that an enclosure is required to satisfy (city code) is without basis," according to the claim. "There is no reason that an enclosure is necessary."
Mountain View is one of only a few cities in the region to allow cannabis businesses to open, passing a law in 2018 that allowed for up to four pot shops to open in numerous commercial locations in Mountain View -- including downtown. Last year, those rules were significantly tightened following pubic pressure, banning storefronts and only allowing up to three delivery-only cannabis businesses.
The revisions occurred midway through the city's cannabis business application process, changing the rules on 10 businesses that had already gone through a regulatory gauntlet including a full business description, security plan and -- most significantly -- evidence of a legal right to occupy a property or tenant space in the city.
MWKM Corporation's proposal to open a delivery business at 229 Polaris Ave. was the only application to meet the new requirements, and was the sole business initially allowed to move forward. Other applicants were given the opportunity to reapply under the new rules.
In the application, Mahaffey wrote that the state had recently allowed statewide delivery by cannabis businesses, and that this was an "ideal" time to open in Mountain View and serve customers not only in Mountain View but neighboring cities that have outlawed pot sales -- namely Los Altos, Sunnyvale and Palo Alto.
But in October last year, city staff informed Mahaffey that his business had a critical flaw: There was no enclosed area for loading and unloading cannabis products, and it's unlikely that the property could support such a structure.
Sharmi Shah, an attorney representing Mahaffey, wrote in the claim that the requirement is not explicitly stated anywhere, only that a "secure loading area" must be provided. Mahaffey began meeting with police officials to come up with an adequate alternative -- later developing a fenced-off loading area known as a sally port -- only to be told by police in January that it was still inadequate.
Running out of options, Mahaffey requested in February that he be allowed to scrap the plan and change his location entirely, which was denied two weeks later. The city has yet to give MWKM Corporation a formal denial pending a hearing, which has yet to be scheduled, according to the claim.
Shah alleges that the city gave other applicants the opportunity to find a new location under the changing city rules, and that the same chance was not afforded to MWKM Corporation in its bid to open its cannabis delivery business. It was only when these other businesses reapplied with enclosed loading areas that the city began insisting that MWKM do the same, Shah wrote in the claim.
When asked for comment on the claim, Shah said he is still awaiting a hearing date on the company's conditional use permit.
The claim is seeking $904,947, the majority of which would be to offset "loss of business opportunity" totaling $155,000 per month since December 2019. This assumes 50 deliveries per day at $100 per delivery. The remaining $145,000 would be to offset the cost of getting the business up and running, including renting the property, paying the licensing and legal fees and hiring an architect for the application.