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Seattle Pays $1.5M to Settle with Cannabis Shop Over Licensing Conflict

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Following the reversal of a licensing decision and the deletion of text messages with evidence supporting the move, the city of Seattle is paying a $1.5 million settlement to cannabis retailer Marigold Products, according to a Seattle Times report. The settlement is among the largest lawsuit payouts made by Seattle this year, according to the City Attorney’s Office.

In the lawsuit, Marigold Products accused Seattle officials of “playing favorites” after they met with rivaling lobbyists and reversed their licensing decision. The company also asked a judge to penalize the city for intentionally destroying evidence, in violation of the state’s public records law and state policies. Seattle settled the case in April.

Per Washington state law, government records must generally be saved and available to the public so voters have access to the information and are able to properly ensure elected officials are held accountable for their records and actions.

The settlement is the most recent chapter of a years-long saga. A whistleblower in former Mayor Jenny Durkan’s office revealed texts from a 10-month period last year, including texts from 2020, were deleted. The Seattle Times later reported that other officials had similarly failed to retain text messages from that same period, including the police chief and fire chief, ultimately adding to concerns about government employees handling of their texts and other information.

While the city agreed last month to pay nearly $200,000 and make policy changes as part of a lawsuit settlement, brought by The Times over the missing texts and the way public records texts are handled, the City Attorney’s Office declined to comment on whether the allegations of record destruction were related to the Marigold settlement decision.

The texts in the Marigold lawsuit date back to 2018. The company was working to relocate one of its shops from Sodo to Ballard, hitting a roadblock when they found a city rule prohibiting clusters of cannabis stores. Officials first said Marigold couldn’t get a license in Ballard because cannabis retailers were registered in the same vicinity. Marigold complained, noting that one of the other companies hasn’t obtained a license or opened yet, so some officials said Marigold could carry forward with the licensing process.

That stance was reversed the next month by the city’s former Finance and Administrative Services director Fred Podesta, after meeting with lobbyists hired by Washington OG. Podesta said he listened to all parties and carried forward to make a decision based on the law.

Marigold was blocked from opening, and Washing OG opened in Ballard under the store name American Mary, and the Seattle Hearing Examiner upheld the decision later in 2018. Fast-forward to 2020: Marigold sued the city in King County Supreme Court for more than $10 million in damages. City lawyers were aiming to have the case dismissed in April, asserting that Marigold’s license application was repeatedly denied in writing and that the lawsuit was based on a “strained interpretation” of one email.

Back in 2019, Podesta turned in his phone to an assistant after leaving his decision, and city officials acknowledged that the phone’s data was wiped. When Podesta’s deputy left in 2020, his data was also wiped, according to the Marigold spoliation motion filed in April. The deletions took place after Marigold provided the city with notice of its legal claims and a potential lawsuit, according to the motion, alleging the texts contained “relevant and important evidence.”

While a city records manager testified in March that phones should be reviewed when employees leave and substantive records should be retained, the process is left to each department to carry out and no one at the city is responsible for verifying compliance, according to testimony by Jennifer Winkler.

The city and Marigold filed to settle the case a week after the spoliation motion on April 25.