A Pueblo marijuana company is suing the Cortez City Council for denying a request for a new marijuana dispensary in October, alleging the decision was “arbitrary” and “capricious.”

NuVue Pharma LLC on Nov. 8 filed a complaint for judicial review in 22nd Judicial District Court. The complaint alleges that the Cortez City Council acted beyond its power in a quasi-judicial setting, engaged in “spot zoning” and effectively adopted a de facto moratorium on new marijuana dispensaries without proper procedures.

There are six retail marijuana dispensaries in Cortez, of which two also sell medical marijuana.

City Council on Sept. 11 held a public hearing and initially voted 7-0 to deny the application. On Oct. 9, the council officially denied the application in a 7-0 vote. All seven council members are named as defendants in the lawsuit.

Mayor Karen Sheek, one of the defendants, said she believes the City Council acted within its purview.

“We got letters from people that lived in that vicinity that said, ‘We have some concerns about having a marijuana shop open in our area,’ so that was the primary reason,” Sheek said Thursday in a phone interview. “That was the reason why we denied the license.”

According to video of the Oct. 9 meeting, City Attorney Mike Green said there was no “outward expression” of why the council voted to deny the application in September. He presented a findings and decision document for the council to review.

“Perhaps I should have stopped somebody and said, ‘OK, why are you making this motion?’ and then we could have worked through the wording of the motion better,” Green said at the meeting.

The document states Nuvue Pharma met all requirements in the Cortez retail marijuana codes, complied with all zoning regulations, passed a background investigation and met the 1,500-foot requirement for distance from schools.

Councilwoman Jill Carlson made a motion at the Oct. 9 meeting to amend the final paragraph – which is the only statement in the document that speaks to why the council denied the application.

Carlson moved to include all three factors for denial that the council is allowed to consider: reasonable requirements of the neighborhood, desires of the adult inhabitants and the character of the applicant.

Sheek on Thursday said the denial was based on the area in which NuVue wanted to open the shop. She said other dispensaries are primarily in commercial areas, but there are “a number of private residences” close to the NuVue location.

“Basically the license was denied based on the area in which they wanted to open their shop,” Sheek said.

The plaintiff’s complaint states that argument lacks any explanation, detail or statement of appropriate evidence.

NuVue proposed a dispensary at 503 Patton St., just east of the intersection of State and East Main streets on an undeveloped plot 530 yards from the city’s eastern limits. There are a few homes to the north and a small subdivision south of U.S. Highway 160.

Durango Organics, a dispensary on Main Street, is next to a 28-unit trailer park, and Medicine Man, also on Main Street, is next to two residences and a block from a single-family neighborhood, the complaint states.

NuVue’s complaint employs several quotes from Sheek to support its argument. At the Sept. 11 public hearing, Sheek stated that NuVue has met all licensing requirements and legally did everything it needed to do.

In response to a resident who asked whether an ordinance limits the number of dispensaries in Cortez, Sheek said the only limitation is the required 1,500 feet from a school, day-care center or another dispensary.

The plaintiff argues that City Council was supposed to act in a quasi-judicial setting and focus on whether the single applicant, NuVue Pharma, met all legal requirements to obtain a retail marijuana license, but instead imposed a “de facto moratorium on marijuana outlets throughout Cortez” and violated the city’s own code.

The plaintiff also alleges that two city employees who played a role in the licensing process have conflicts of interest.

Associate City Planner Neva Connolly, who reviewed the project’s distance requirement and spoke to a NuVue representative on several occasions, is married to the manager of the LivWell dispensary on Main Street. City Clerk Linda Smith, who oversees business licensing, is the mother of an employee at LivWell.

NuVue also alleges religious discrimination. Dr. Malik Hasan, a board-certified neurologist, owns NuVue. Hasan also is a Pakistani immigrant and Islamic Muslim, and the complaint argues that by action or omission, one or more defendants violated Hasan’s right to be free from religious discrimination.

During the hearing on Sept. 11, a third-generation Mancos resident named Wayne Cook concluded his comments opposing the application with a reference to the 2001 terrorist attack.

“Maybe we should not be thinking about granting a license to Mr. Hasan for manufacturing and selling drugs, but to honor and remember what happened 17 years ago today,” Cook said.

Sheek said the religion and character of the applicant had nothing to do with the denial, even though Carlson’s motion mentioned the applicant’s character. Sheek also said the relationship between city staff and a competing dispensary had nothing to do with the denial.

“I will tell you, that’s absolutely not the case,” Sheek said.

Before voting to deny NuVue’s application, the council received several letters from the public opposing the proposed shop. An elderly couple on Patton Street stated they were concerned about the safety of their children, pets and property and cited possible drug raids and “different crimes associated with this industry.”

Another resident on East Empire Street expressed concern that the site was too close to residential areas. Four other letters, which do not include addresses, state there were already too many marijuana shops in town and that the industry brings in crime.

According to the council’s Oct. 9 minutes, council members Sue Betts and Mike Lavey said their denial was based on neighborhood concerns. Carlson, in her motion to formally deny the application, stated that the council considered the requirements of the neighborhood and the desires of the adult inhabitants of the neighborhood.

“We acted legally in making the decision that we made and they’re obviously unhappy about it,” Sheek said.

A motions hearing is scheduled for March 22 in Judge Todd Plewe’s courtroom.

sdolan@the-journal.com