Past owners led ‘hostile takeover’ of MedMen pot shops

Two Arizona men led a “hostile takeover” of Level Up marijuana dispensaries in Scottsdale and Tempe when MedMen Enterprises Inc. failed to pay the remaining $12 million owed them from selling to the national chain last year, according to court documents.

MedMen officials warned of “a fight in the street,” amid a weeks-long ownership dispute, according to court documents, although the dispute never came to that.

MedMen owed the managers of the Level Up dispensaries the balance of a $33 million sale last year.

The details of the bitter deal gone bad are laid bare in court documents. They show the two men who sold to MedMen renegotiated the sale repeatedly this year as MedMen tried to resell the shops to pay them off.

The men who controlled the management companies for the dispensaries, C. Michael Colburn and Daryll DeSantis, eventually forced their way into one of the shops last month. They canceled workers’ state-issued dispensary-worker cards and changed the locks on the building to get rid of MedMen.

After that, Maricopa County Superior Court Judge Danielle Viola issued an order June 26 preserving the status quo, allowing Colburn and DeSantis to keep control of the shops while the litigation plays out.

Viola also ordered MedMen to cooperate with renewing the licenses at the dispensaries and not to interfere with management.

The MedMen logos are gone from the shops, and many of the workers have been rehired.

$33 million deal for dispensaries

In 2018, MedMen, which is technically a Canadian company but with headquarters in Los Angeles, announced a deal to buy the Level Up dispensaries near the Scottsdale Airport and on University Drive in Tempe.

MedMen also had recently bought the rights to the former Monarch dispensary in Scottsdale and grow house in Mesa. It still controls that dispensary, although it’s in litigation over that deal as well.

When the Level Up deal was announced, they reported Level Up shops were going to earn more than $22 million in revenue for 2018, a 62% bump from the year prior, including sales of cannabis to other dispensaries.

The deal closed in February 2019. Colburn and DeSantis agreed sell their interests in the management companies that ran the dispensaries for $33 million.

The agreement included what MedMen described as “one of the highestgrossing dispensaries in the state” at the Scottsdale location and the K.I.N.D Concentrates name brand marijuana products produced under the dispensary licenses.

MedMen paid the men $18 million in cash and stock and gave them a note for $15 million to cover what wasn’t paid up front. MedMen made a $3 million payment toward that note in August, with the remaining $12 million due Feb. 8, 2020.

$12M never paid; no Keef Cola

Until the remaining $12 million was paid, Colburn and DeSantis kept a security interest in the management companies, and they could retake control if MedMen didn’t pay, according to their complaint.

MedMen didn’t pay.

MedMen announced it would sell its

Arizona dispensaries in December. Court documents show that sale was needed to pay off the original purchase.

Leading up to the February due date for payment, MedMen ran into a host of problems nationally, which included layoffs in November and the CEO’s resignation in January.

Colburn and DeSantis pushed back the payment due date twice, to April 8. MedMen didn’t pay. They signed a third agreement pushing back the due date to Dec. 31.

But here’s where the parties continue to debate.

Colburn and DeSantis claim that third agreement never took effect because MedMen didn’t meet other terms of the deal relating to selling K.I.N.D. marijuana products.

In particular, they note that a product they previously made under their dispensary licenses called Keef Cola had

Continued on next page