HAVERHILL — City leaders want cannabis shop owner Caroline Pineau to show Haverhill the money — a whole lot of it.
As Pineau approaches the first anniversary of her shop, Stem, later this month, city officials say she must pay $31,000 to cover legal fees charged by lawyers representing Haverhill in court cases involving the business. Pineau, however, says the city is not entitled to that money.
Pineau, who owns and operates the first marijuana sales business to open in Haverhill — located downtown at 124 Washington St. — filed a lawsuit April 2 against the city. In the suit, she is asking a judge to compel Mayor James Fiorentini to detail the impact her shop has on Haverhill and its residents, as well as outline associated costs to departments like police and fire, before she pays what is called an "impact fee," estimated to be $400,000.
Pineau also says she should not have to pay the $31,000 in legal fees because the city breached the host community agreement signed by her and the mayor in December 2018 before she opened her shop. She said the agreement was breached because the city has failed to specifically list how her shop has impacted the community.
In a February 20 letter to Pineau, City Solicitor William Cox enclosed invoices paid for legal services provided to the city by the firm Blatman, Bobrowski & Haverty, LLC. The invoices list charges from 2019 and 2020 associated with lawsuits involving the Stem shop and which also named the city as a defendant.
The suits, brought by local people opposed to Stem opening downtown, involved the city’s zoning for cannabis shops and a special permit issued to Stem by the City Council.
The host community agreement includes an indemnification clause that protects the city in certain cases. The city is trying to invoke the clause, which states, in part, that “(Stem) shall indemnify, defend, and hold the City of Haverhill harmless from any and all claims ... including attorney’s fees ... by any third party arising from or relating to the development of the Property and/or Facility."
The agreement stated Stem would reimburse the city for all applicable costs.
In a letter rebutting the city's effort to collect the money, Pineau’s attorney Thomas MacMillan said Haverhill is not entitled to charge the legal costs to Stem for several reasons. First, MacMillan said, some of the fees are related to a Land Court case contesting the zoning of cannabis shops citywide in Haverhill, not just Stem.
“The claims in that matter were not related to ‘the development of the Property and/or the Facility’ (the Stem shop) as required by the HCA …. accordingly, Stem is not required to reimburse the City for its legal fees related to that action,” MacMillan wrote.
Further, he argued, if Stem were required to pay legal fees for that claim, since it was a zoning claim, the other two cannabis shops in Haverhill — CNA Stores and Full Harvest Moonz — should also be required to pay since the ordinance also permits them to operate in the city.
MacMillan also argued that legal fees related to a special permit appeal are not subject to the indemnification listed in the host community agreement.
Earlier this month, Fiorentini said he was confident Pineau will pay all money she owes the city.
“Their agreement was that if they got sued, they would pay us,” the mayor said. “They’re making a lot of money on these marijuana shops. These are very lucrative establishments."
“This is not about transparency or itemization,'' Fiorentini said. "This is about a company that comes here and makes an agreement and tries to get out of it.”
Like the two other pot shops in Haverhill, Pineau negotiated an agreement to pay 3% of Stem’s gross sales to the city annually for five years, as long as the expenses are “reasonably related” to the costs imposed upon the city by Stem’s operation.
Fiorentini, though the city solicitor, argued Stem has had a variety of detrimental impacts locally. However, the mayor has refused to detail those impacts or say how the city’s budget has taken a hit. That resulted in Pineau filing the lawsuit to force Fiorentini to list the impacts and their costs, as required by both the state Cannabis Control Commission and state law.
In a statement to The Eagle-Tribune, Pineau said she always intended to pay the impact fee and is simply asking the city to explain where the money she would pay would go. Pineau said she has set aside about $400,000 ahead of the May 30 due date for her first payment to the city. She wants a judge to decide if all or part of that money will go to the city if Haverhill shows it must spend certain amounts of money because of the impact the shop has on the community.
“When we signed our HCA with the city, we agreed to pay sales taxes and an impact fee. We fully expected that the impact fee would be properly documented and would be reasonably related to our operations, as required by law,” Pineau said in a statement, adding that she also pays $400,000 in sales tax.
On April 9, Cox sent an email to all city department heads alerting them to the litigation between Fiorentini and Pineau.
In that email, Cox asked the department heads to alert him to any contact they have with Pineau or representatives from Stem “before you provide them with any response to any requests they may have’' with the exception of emergencies, Cox wrote. He also asked all city employees to make him aware of any contact with Pineau or her staff within the last 60 days “so we can discuss.”
Cox used the phrase “attorney-client privilege” in the subject line of the email.
The email was also forwarded to city councilors.
Essex County Superior Court officials said last week that Fiorentini has yet to tell them which attorney will be representing the city in the case.