Mancini Shenk Lawyers Prevail in Landmark Los Angeles Social Equity Program Cannabis Litigation

Mancini Shenk LLP recently obtained the complete dismissal of a landmark lawsuit against a prominent participant in the Los Angeles Department of Cannabis Regulation’s Social Equity Program.

More than two years ago, Mancini Shenk LLP’s client was threatened with a lawsuit for refusing to go into business with investors who demanded that he perform illegal contract terms that violated the Los Angeles Municipal Code. Rather than agreeing to abide by the law or revise their illegal contract, the investors sued our client seeking more than $12,000,000 in alleged damages.

For approximately twenty-one months, we vigorously attacked the illegality of the contract the investors wanted the court to enforce. We were repeatedly successful. The investors sought an emergency restraining order requiring our client to perform the illegal terms. They were denied. The investors twice amended their complaint to try to bring at least one viable claim. They could not.

As we told the investors and their counsel for almost two years, the illegality of their contract and the relief they sought doomed their case. On February 22, 2023, Judge Robert B. Broadbelt III of the Los Angeles Superior Court agreed and dismissed the second amended complaint without leave to amend. We prevailed because the terms the investors tried to enforce violated the Los Angeles Municipal and California Business and Professions Codes. Consequently, the contracts were so permeated by illegality that they were void and unenforceable as a matter of law:

“The court finds that the Operating Agreement contains four terms that are in violation of the Los Angeles Municipal Code and Business and Professions Code.

. . .

Defendants argue, and the court agrees, that the illegal provisions permeate the Operating Agreement ‘because they are fundamental to the operation of the LLC.’ (Demurrer, p. 9:11-14.) The court finds that the Operating Agreement’s single object is unlawful, cannot be severed, and is therefore void and unenforceable. (Civ. Code, § 1598; Marathon Entertainment, Inc., supra, 42 Cal.4th at p. 991, fn. 9 [Civil Code section 1598 codifies the companion principle for when severability is infeasible”].)”

And because the plaintiffs failed to demonstrate how any additional amendment of their complaints could save the lawsuit, the court dismissed the lawsuit without leave to amend.

We are proud to vindicate our client’s rights against investor attempts to enforce illegal contracts, and we look forward to being on the right side of justice in future cases as well.

To read the complete order by the court, please click here.