Petaluma faces challenge from Mercy Wellness on cannabis retail selection

Cannabis businesses vying for retail space in Sonoma County have gotten competitive, with the city of Petaluma the latest to face a challenge over its selection process.

Petaluma officials announced Dec. 10 the city had selected three companies to forge ahead with cannabis retail within its boundaries, following a selection process officially approved by the city council last June.

The three that were chosen were Solful, Down Under Industries and Farmhouse Artisan Market — which already operates a delivery network in town.

The Retail Cannabis Pilot Program decision outraged one of the nine applicants, Mercy Wellness CEO Brandon Levine, who called the selection process “unfair” and demanded “transparency” about how the three were picked.

Mercy Petaluma – Letter to Request an Appeal of Decision (Signed).pdf

“I have never seen a local permitting process shrouded in such secrecy,” Levine said in a company statement released Dec. 12.

For his part, Levine argued Mercy Wellness already had a solid presence in the local cannabis market, with more than 14 years in neighboring Cotati.

He demanded to see his scorecard measuring his business against the criteria used and to appeal the decision, an action the city choose not to take at the time.

The city says its decision was made by committee using a scoring mechanism, without requiring a vote from city council.

Levine attended the Dec. 16 Petaluma City Council meeting armed with what he said were 1,800 letters in support of his operation, along with attorney, Lauren Mendelsohn, who spoke during the public comment period after Levine.

In her comments, she cited a California Auditor Report that urges cities to refrain from “blind scoring” and to allow for an appeals process.

“There are serious questions to whether what happened here aligned with this recommendation,” Mendelsohn told the council and said Mercy Wellness deserved “a second chance.”

Levine received a denial letter on Nov. 21 “without detailed explanation of its scoring or rationale,” he told the Business Journal.

He requested an appeal but a letter from the city dated Dec. 5, said “it was premature to appeal the outcome.” He plans to again request an appeal.

“This decision raises concerns about fairness, transparency and whether the best candidate is being considered,” he told the city council.

Mercy Wellness also failed in its bid to establish a Healdsburg location in November 2023. Solful of Sebastopol was selected by a vote by Healdsburg city council. Eli Melrod, Solful’s CEO, said he plans to open his Petaluma locationat 5004 Petaluma Blvd. N. by the end of the year.

Levine challenged Healdsburg’s decision in Sonoma County Superior Court in February. The legal challenge was dismissed. It now rests with the Court of Appeals in San Francisco.

Petaluma Economic Development and Open Government Director Ingrid Alverde, who helped the city select the three operators, insisted the city followed the process and did not give preferential treatment.

She said that Farmhouse Artisan was a known vendor doing business as a delivery service. In addition, Down Under Industries has operated just outside city limits. She said the third business, Solful, stood out for its sustainability practices.

Alverde said the city was unable to share the scoring and reasons behind its decision because of the “confidential” information provided with each application.

“You wouldn’t want to apply for a job, get turned down and then have it known to others why (in public),” she said. “We’re not trying to be secretive about it. We had to look at all factors, but we fully expect to expand the program.”

The city adopted its ordinance regulating commercial cannabis activity within city limits June 17. The code was expanded to add up to three storefront retail locations to certain areas.