Judge: Stephen P. Pfahler, Case: 20CHCV00560, Date: 2022-12-05 Tentative Ruling

Case Number: 20CHCV00560    Hearing Date: December 5, 2022    Dept: F49

Dept. F-49

Calendar # 1

Date: 12-05-22

Case # 20CHCV00560

Trial Date: 1-30-23

PLAINTIFF DEPARTMENT OF CANNABIS CONTROL’S MOTION FOR SUMMARY JUDGMENT

MOVING PARTY: Plaintiff Department of Cannabis Control

RESPONDING PARTY: None

RELIEF REQUESTED

Plaintiff requests summary judgment in favor of Plaintiff and against the following seven Defendants: (1) Ruben Kachian, a.k.a. “Ruben Cross”, (2) Vertical Bliss, Inc., (3) Kushy Punch, Inc., (4) Conglomerate Marketing, LLC, (5) More Agency, Inc., (6) Arutyun Barsamyan, and (7) Mike A. Toroyan, and for civil penalties totaling $128,061,000. The instant motion is not filed against Defendant Kevin Halloran.

SUMMARY OF ACTION

On September 23, 2020, plaintiffs California Department of Public Health and Bureau of Cannabis Control, the predecessor agencies to Plaintiff Department of Cannabis Control (hereinafter “Plaintiff” or “DCC”) filed a complaint for civil penalties pursuant to Business and Professions Code section 26038 and other applicable laws and regulations. Plaintiffs claim that Defendants engaged in commercial cannabis activities without the required licenses.

The Court issued orders deeming DCC’s requests for admissions to Defendants admitted and found that each “Defendant has apparently abandoned the action and/or apparently demonstrates no intent to comply with the court order. . .” (RJN, Exhibits B, C, D, E, F, G, and H.)

Plaintiff makes this motion on the grounds that (1) Plaintiff’s Requests for Admissions served upon these seven Defendants having been deemed admitted, establishes the cause of action against the seven Defendants, thereby leaving no triable issue of material fact, (2) the Declarations in Support of the Motion further confirm no defense thereto, and (3) pursuant to Business and Professions Code section 26038, subdivision (a), Defendants are subject to civil penalties of up to three times the amount of the license fee for each day of violation.

RULING: Granted. 

Request for Judicial Notice: Granted under Evidence Code sections (b), (c), and (d).

“A plaintiff … has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff … has met that burden, the burden shifts to the defendant … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar v. Atlantic Richfield, Co. (2001) 25 Cal.4th 826, 850.) The defendant “shall not rely upon the¿allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to¿the¿cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).) 

Plaintiff moves for summary judgment on the seven Defendants, subjecting them to civil penalties in the amount of $128,061,000. The penalties were calculated based on Business and Professions Code section 26038 subdivision (a) which states that a person engaged in unlicensed cannabis activity is “subject to civil penalties of up to three times the amount of the license fee for each violation.” Here, Plaintiff provides evidence showing (1) that the seven Defendants violated section 26038; (2) that they did so for 527 separate days of violation; and (3) that they were subject to total licensing fees of $81,000 for each day of commercial cannabis activity operation. 

Defendants Vertical Bliss, Inc., Kushy Punch Inc., Conglomerate Marketing, LLC, and More Agency, Inc. (“Business Entity Defendants”) have each admitted to engaging in (1) unlicensed commercial manufacturing cannabis activity and (2) unlicensed commercial distributor cannabis activity. (SSUMF Nos. 10-11, 13-14, 18-19, 21-22, 26-27, 29-30, 34-35, and 37-38; RJN, Exhibits D, E, F, and G; Yun Decl., Exhibits 2, 4, 6, and 8 (RFA Nos. 4, 12, 19, and 27 in each Exhibit).) The three individual Defendants, Kachian, Barsamyan, and Toroyan (“Individual Defendants”) have each admitted to engaging in (1) unlicensed commercial manufacturing cannabis activity and (2) unlicensed commercial distributor cannabis activity in the City of Canoga Park in the State of California, by admitting that they are “OWNER[s]” of Vertical Bliss, Inc., Kushy Punch, Inc., Conglomerate Marketing, LLC, and More Agency, Inc. (SSUMF Nos. 4-7 and 40-48; RJN, Exhibits A, C, and H; Yun Dec, Exhibit 1 [as to Kachian] (RFA Nos. 8, 11, 14, and 17), Exhibit 10 [as to Barsamyan] (RFA Nos. 1, 5, 8, 11, and 14), and Exhibit 12 [as to Toroyan] (RFA Nos. 2, 5, 8, and 11).) In addition, the declaration of Eileen Del Rosario provides further uncontroverted evidence that the individual Defendants engaged in unlicensed commercial cannabis activity. Specifically, during CDPH’s investigation there were ongoing communications with Defendants Kachian and Toroyan in their capacity as active representatives of the Business Entity Defendants. (Del Rosario Decl., ¶ 4-8, 22, 25-29, and 33.) Thus, there are no triable issues to any material facts that Defendants violated section 26038, subdivision (a), and are subject to civil penalties of up to three times the amount of the license fee for each day of the violation(s).

The Business Entity Defendants have each admitted to (1) engaging in unlicensed commercial manufacturing cannabis activity in the State of California on 527 separate days and (2) engaging in unlicensed commercial distributor cannabis activity in the State of California on 527 separate days. (SSUMF Nos. 10-11, 13-14, 18-19, 21-22, 26-27, 29-30, 34-35, and 37-38.) Likewise, the Individual Defendants, as owners and persons with direct control over the Business Entity Defendants, are also deemed to have engaged in unlicensed commercial cannabis activity on 527 separate days in the State of California. (SSUMF Nos. 4-7, 10-11, 13-14, 18-19, 21-22, 26-27, 29-30, 34-35, 37-38, and 40-48.) Thus, there is no triable issue as to this fact when determining the civil penalty that should be assessed in this case.

The Business Entity Defendants have each admitted they received gross revenue exceeding $10,000,000 and $1,000,000, annually, from unlicensed commercial cannabis manufacturing and distributor activities, respectively, during the relevant period. (SSUMF Nos. 12, 15, 20, 23, 28, 31, 36, and 39.) As to the individual Defendants, they each engaged in illegal commercial cannabis activity by virtue of their admitted ownership of, ownership interest in, and/or control and managing power over, the Business Entity Defendants. Also, the Del Rosario Declaration gives facts which further confirm Defendants’ undisputed admissions as to the gross revenue generated by their illegal activities. (See Del Rosario Decl., ¶¶ 10, 11, 39, 44.) Thus, there are no triable issues as to the licensing fees to which the Defendants were subject and which form the basis of the civil penalty that should be assessed in this case.

Defendants have not filed an opposition.  

The unopposed motion for summary judgment is granted in the amount of $128,061,000 as Plaintiff requests.

Plaintiff is to give notice.