The owners of a business that was selected to file for a special permit to sell marijuana in Pasadena only to be turned away filed a federal lawsuit Tuesday that claims the city failed to “discharge a mandatory duty” and violated the due process rights of the business.

The lawsuit essentially reiterates points spelled out in a claim for damages against the city, which was denied by the City Council shortly after it was filed with the City Clerk’s Office on Aug. 19.

In the claim and the lawsuit, owners of The Atrium Group of Westlake Village assert the company has suffered substantial economic damages, including loss of sales and business profits, injury to its business reputation and loss of business opportunity.

“On the basis of knowledge and belief, the wrongful actions alleged were committed by David Reyes, Director of Planning, City Manager Steve Mermell, Asst. City Manager Nicholas Rodriguez, City Attorney Michelle Bagneris, Management Analyst IV Guille Nuñez, and other unknown persons working on behalf of the city of Pasadena,” that document states.

The lawsuit filed in US District Court names as defendants the city, Mermell, Reyes, Harvest of Pasadena (another applicant based in Arizona), Hinderliter De Llamas and Associates of Brea (a consultant group that reviewed the applications), and does one through 10.

In June, The Atrium Group, Harvest of Pasadena, Integral Associates Dena, Tony Fong, Sweetwater Pasadena and MME Pasadena Retail were picked from among 122 applicants vying for permission to sell marijuana in the city. Each applicant was forced to pay the city a $14,000 fee just for the opportunity to apply. The total spent was $1.7 million if each applicant paid the fee. 

Several dispensaries that were not picked to move forward in the city’s process have threatened lawsuits. A claim for damages is usually the first step in filing a lawsuit against a government agency.

Mermell declined to comment on the claim on Friday. On Wednesday morning, city spokeswoman Lisa Derderian said Mermell could not comment on the lawsuit because he is named as a defendant.

“Our process is proceeding in accordance with the regulations and the measure approved by voters,” Derderian said, referring to Measure CC, a 2018 city-sponsored ballot initiative that called for six weed dispensaries, but allowing only one in each of the council’s seven districts.

The claim and the lawsuit stem from a failed conditional use permit (CUP) application filed by The Atrium Group on June 13 which would have allowed the company to open a dispensary in trendy Old Pasadena, located in City Council District 3. In its CUP application, The Atrium Group informed city officials it planned to operate at 70 W. Union St.

However, just one day before Atrium submitted its CUP application, Harvest of Pasadena submitted an application to operate at 169 W. Colorado Blvd. — a vacant building leased seasonally to a Halloween business that’s located on the northeast corner of Pasadena Avenue and Colorado Boulevard, and also located in District 3.

Officials with Harvest signed a 10-year lease that will see them pay $55,000 per month, or $660,000 a year. Next year the rent will increase to $726,000. The agreement includes annual rent increases.

Another applicant, Sweetwater Pasadena, was also rejected after it applied for a CUP in Old Pasadena.

In rejecting The Atrium Group’s application, city officials notified the group that it would not “further evaluate its application.”

However, The Atrium Group claims the city is looking the other way while Harvest of Pasadena violates another condition of the ordinance which bans cannabis dispensaries from operating within 600 feet of a library.

Besides only allowing one dispensary per council district, the ordinance mandates dispensaries must be at least 600 feet away from residential neighborhoods, schools, libraries, churches and parks. Plus, dispensaries and cultivators cannot operate within 1,000 feet of each other.

The Rudolf Steiner Library is located at 110 Martin Alley, across the street from the Pasadena Weekly offices. The library, which is not visible from either DeLacey Avenue to the east or Pasadena Avenue to the west, is open primarily on the weekends, although some study groups are held there on Tuesdays and the first Monday of every month.

According to a map submitted to the city by The Atrium Group’s Jim Townsend, the entry door to the Steiner Library is 470 feet from 169 W. Colorado Blvd., the building from which Harvest of Pasadena will operate.

Things got even more hostile after the owners of The Atrium Group claimed that Harvest of Pasadena had turned in an incomplete application because it did not include a complete Taxpayer Protection Act Disclosure Form, failed to list a beneficial owner and a financially interested partner.

“It is The Atrium Group’s positon that because Harvest of Pasadena has failed to submit a complete and accurate Taxpayer Disclosure Form, Harvest of Pasadena has not complied with the Master Application requirements,” wrote Townsend. “As a result, the Planning and Development Department must deem Harvest of Pasadena’s application for a conditional use permit incomplete.”

Last month, Mermell and Reyes revealed that the city may only be able to accommodate three cannabis dispensaries due to the city’s ordinance, which imposes strict limits on where cannabis businesses can operate.

Over the past two years, a number of dispensaries have been forced to close because they sold cannabis in Pasadena without a license. The Pasadena Weekly has reported on a possible ballot initiative that, if approved, could open the door to any number of marijuana dispensaries desiring to operate in Pasadena.

Proponents of The People’s Initiative to Preserve the Existing Operation of Non-Offending Commercial Cannabis Businesses submitted 12,900 signatures to City Clerk Mark Jomsky’s office on July 31. A total of 8,542 valid signatures are needed to qualify for the March ballot. The Los Angeles County Registrar’s Office has until Sept. 12 to verify the signatures.

As it stands now, Harvest of Pasadena has been approved to open at the northeast corner of Pasadena Avenue and Colorado Boulevard, Integral Associates will open in the 900 block of East Colorado near the South Lake Avenue corridor in District 7, and Tony Fong, will open a shop in Council District 4, in the 3300 block of East Colorado Boulevard.

“Based on these facts, Harvest’s application should never have been accepted by the city for a filing appointment. Regulation VII is clear that the order of applications shall be determined not merely by ‘completeness,’ but also by ‘compliance,’” Townsend wrote.

“By failing to comply with the Pasadena Municipal Code, Harvest cannot be rewarded by receiving the privilege of operating the only commercial cannabis business in the city’s famous historical quarter. We ask the city to recognize its error and promptly rectify the problem,” the letter states.