SPRINGERVILLE — White Mountain Flowers, LLC (WMF) has demanded $6 million from the Town of Springerville in damages from the ill-fated marijuana grow operation the WMF began near Springerville’s airport which is now defunct.
During its Nov. 12, 2020 council meeting the town approved a lease of 19.5 acres of land to WMF which intended to operate a cannabis growing and an infusing operation at the site. Infusing means to infuse non-cannabis products products with cannabis oil, like baked goods, candy or anything that can receive infusion.
The seemingly well-intentioned exercise was fraught with difficulties and some of the town’s residents loudly opposed it, claiming there was conflict of interest issues, that the operation was not well studied for water use and traffic, and claimed irregularities by the Town Council in zoning and ordinance changes. The Federal Aviation Commission got involved and threatened to pull federal funding for the airport and hinted at criminal charges against the town because although possession, use and cultivation of marijuana can be legal under Arizona law, it is still illegal under federal law.
The Notice of Claim
It might be noted that a Notice of Claim is not a lawsuit. It is a notice to a “pubic agency, public school or public employee” required by Arizona law to be served or filed within six months of the injury or damage. Some consider the requirement as a fair way of alerting a public agency of a claim so that the agency can evaluate it and possibly resolve it. Others see it as a way to sharply abbreviate the years-long statute of limitations in such matters and to unfairly shield the government from lawsuits: if a plaintiff misses the six-month deadline for a notice of claim, the plaintiff is not allowed to bring an actual lawsuit against the alleged wrongdoer.
The Notice of Claim by WMF is dated August 26 and WMF’s lawyers, Zwillinger Wulkan PLC, a law firm in Phoenix, filed it with the town clerk by process server. The claim does not mention any of the circumstances stated above; rather WMF urges that Springerville told WMF that the town owned the land that it leased to WMF, but the town actually did not own the land. That, says WMF is a “material misrepresentation “ and caused WMF damages.
The claim insists the Dec. 10, 2020 development agreement between the town and WMF specifically required the town to provide “title to the land,” which it turns out, the town didn’t have. In lawyer-speak, that was a default of the agreement and that the town didn’t even try to cure that rather glaring default, its failure to cure it was yet another breach of the deal. Finally, WMF points out that Arizona law implies in any contract (whether written in a contract or not) a “covenant of good faith and fair dealing,” and the town breached that as well, urges WMF.
WMF has since set up shop in Eden, Arizona, according to the claim. Eden is an unincorporated community in Graham County near Safford, founded in 1881. Legends of America wrote that it was named after the Garden of Eden in the Hebrew Bible and called it the “Mormon Ghost Town.” Eden had a population by zip code that was estimated to be 150 persons in the year 2000, according to Wikipedia.
The Notice of Claim stated that in Eden, WMF’s “net annual rent is $500,000.” By contrast the agreement with Springerville called for $9,600 per year for 25 years, meaning that the difference “will cost White Mountain Flowers $12,500,000, before 40-year extension are exercised,” stated claim. Not only that, says the claim, in Eden, WMF “was required to give certain percentage rent concessions to its new landlord, beginning with White Mountain Flower’s (sic) first harvest, that may amount to approximately $1,000,000 a year for 25 years, totaling a loss of approximately $25,000,000, plus 40 years of extension and inflation.”
In short, WMF is demanding the town pay part of the LLC’s “benefit of the bargain” damages meaning the amount they now have to pay for rent ($500,000 per year) as opposed to the amount they bargained for ($9,600 per year) if the Town of Springerville had not breached the agreement.
WMF also claims that relying on its agreement with Springerville, the LLC “expended no less that $3,500,000,” to advance Springerville operation, which WMF considers lost.
Finally, The Notice of Claim demands $6 million at this point in time, but warns that, “If a lawsuit is filed, White Mountain Flowers will seek damages substantially exceeding that amount. (Emphasis in original.) The claim stated that WMF just wants to put the matter behind it and get on with its business. On the other hand, typically, identifying the owner of real property is easily accomplished with a simple check of county records, or by consulting a title company. Whether a lessee is permitted by law to merely take a lessor’s word in that regard involving a long term business lease might raise a legal issue regarding due dilligence on the lessee’s part.
There is an insurance company of sorts for municipalities to cover losses the municipality may incur in legal disputes. The Arizona Municipal Risk Retention Pool covers 77 of Arizona’s 91 towns, said Sheri Reintjes, the Branch Vice President of AMRRP. She told the Independent during a phone call that Springerville is indeed one of the Pool’s members. The details of Springerville’s specific policy with AMRRP are unknown, but damages sought for breach of contract (as opposed to officer shootings or slip and fall cases in public buildings) are common enough that they may be covered. If so, typically Springerville will “tender the defense” of any lawsuit to AMRRP attorneys or defense attorneys the Pool contracts with.
It might be noted that a recent Springerville Town Council action bolstered the town’s legal resources by $50,000. Town Clerk Kelsi Miller told the Independent by email that “the Town prefers to make no comment at this time.”
The Independent will update this story as it develops.