Legal battle over Grover Beach pot shop survives demurrer


A pair of Grover Beach marijuana shop owners’ attempt to quash a lawsuit claiming the pair had defrauded a partner hit a significant judicial roadblock earlier this month.

San Luis Obispo County Judge Ginger Garrett denied a pleading seeking to have the theft and fraud lawsuit dismissed in its entirety because it lacks merit. If the demurrer had succeeded, the 11-action case against Brian Touey and Erich Haas would have been dismissed.

Breach of contract, deceit and conspiracy are key issues raised in a lawsuit Wendy Cronin filed in Dec. 2019 in San Luis Obispo County Superior Court.

In late 2016, Cronin, Touey and Haas formed a partnership and began courting Grover Beach city officials to win one of three retail cannabis shop permits. At that time, Cronin was listed in city records as a principal in the business.

While Touey and Haas had the capital, according to the lawsuit, Cronin had the previous cannabis sales experience, which gave the company’s application more points for having a principal in the industry.

The lawsuit, filed by attorney Allison Margolin with the Beverly Hills firm of Margolin & Lawrence, asserts that in early 2018, Touey and Haas applied for a state license without listing Cronin as a partner. They later informed Cronin that she was no longer a partner.

In Jan. 2017, the Grover Beach City Council selected then-mayor John Shoals and councilman Jeff Lee to form a committee that determined the points for specific criteria for each pot shop applicant, that appeared to favor specific businesses. Several applicants and former councilwoman Debbie Peterson later claimed corruption in the Grover Beach City Council’s section process.

“The city of Grover Beach was previously accused of corruption when people came forward with claims that council members were accepting bribes in exchange for giving cannabis business owners a leg up in the cannabis retail permit process,” according to Margolin & Lawrence.

Since then, FBI agents raided a pot shop owner’s home, Mayor Lee’s home, former San Luis Obispo County Supervisor Adam Hill’s home and the county government center.

As a result of Garrett’s ruling on the demurrer, the lawsuit is entering the discovery phase. Margolin is planning to depose current Mayor Lee and Councilwoman Mariam Shah as well as former mayor Shoals.

Cronin is asking the court for a declaration that she was an owner of 805 Beach Breaks, for general and punitive damages, and for the cost of the suit.

“Ms. Cronin is taking civil action to obtain her rightful share of 805 Beach Breaks’ profits and an injunction preventing her partners from taking further steps to remove her as an owner,” Margolin said.