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$40M Illegal Stores Lawsuit in BC

Several licensed cannabis retailers in BC are taking legal action against government officials in the western province because of what they see as a failure to prevent unlicensed cannabis shops from operating on First Nations reserves.

The reason behind the $40 million lawsuit centres around licensed cannabis retail stores having to buy cannabis from the province and follow strict regulations, while these stores don’t.

Filed in Victoria on April 27, the lawsuit by the group of retailers — which apparently consists of 14 numbered companies — is seeking a $40 million settlement. The plaintiffs claim they had each experienced “a $500K yearly reduction in gross sales due to business lost to illicit retailers operating on reserves with the knowledge of the defendants.”

The Defendants

The “defendants” in this instance are BC’s Minister of Public Safety, the Attorney General and BC’s Community Safety Unit. The companies filing the lawsuit operate retail locations in BC’s Southern Interior. One of the companies has 2 locations, another has four while the remainder operate just one store.

According to the statement of claim, the retail cannabis industry in BC has undergone rapid growth and annual sales are expected to exceed $1 billion by 2024. An excerpt from that statement read: “These illicit retailers on Indian Reserves are not authorized under British Columbia law to operate retail cannabis stores. There is no retail cannabis store license issued by the (Liquor Cannabis Regulation Branch) in relation to these retailers.”

Another excerpt from the statement says: “The illicit retailers sell black-market products or illegally obtained product that has not been purchased from the British Columbia government as required by the (Cannabis Control and Licensing) Act, nor authorized for sale under the Cannabis Act (Canada).”

The statement also says that “the defendants are aware of the continued, and growing, retail sales of cannabis on Indian Reserves in a manner that is circumventing and disregarding the prevailing legislative and regulatory regime in British Columbia for the retail sale of cannabis.”

ACCRES Advocates for Conciliatory Approach

Jaclynn Pehota, the Executive Director at Association of Canadian Cannabis Retailers (ACCRES), took a diplomatic approach to the lawsuit. She says, “The group of retailers that chose to pursue this course of action are not affiliated with ACCRES. Our organization was approached about joining this suit, but felt a relationship-building approach with governments—both Indigenous and not—would be more productive than a legal avenue.

“While ACCRES is not involved or affiliated with this lawsuit, we also recognize that it is the result of deep frustration on the part of the plaintiffs involved. Many retailers and other stakeholders feel that governments at all levels have abandoned the legal cannabis sector despite that good faith effort and, I think it is safe to say, the legal action you see here is the result of that frustration.

“ACCRES has always advocated for reconciliation-based and non-criminalizing approaches to cannabis regulations, centred around public safety and creating a level playing field for all. We will continue to pursue those ends through our advocacy work,” Pehota concluded.

“Breached Their Duty of Care”

The group of retailers say, “the defendants undertook the duty to safeguard the legal cannabis industry and prevent the illicit sale of unregulated cannabis products in the province.”

The plaintiffs went on to say that “the defendants failed in their duties to the plaintiffs and that they breached their duty of care.”

The 14 licensed cannabis retailers filing the suit did acknowledge that BC’s Community Safety Unit had taken enforcement actions against more than 70 unlicensed cannabis retailers in 2021. However, they want to see an order requiring the defendants to enforce the Cannabis Control and Licensing Act to stop illegal cannabis shops from doing business no matter where they are located in BC.

Tags: ACCRES (13), BC cannabis retail (25), BC government (1), Cannabis Industry (183), cannabis lawsuit (2), cannabis retailer (79), First Nations reserves (1), illegal cannabis stores (2), Jaclynn Pehota (17)