Coastal Dispensary founders (from left) Julian Michalowski, Malante Hayworth, and Josh Ginsberg at the Chapala location in downtown Santa Barbara. | Credit: Paul Wellman (file)

The convenient and popular cannabis shop Coastal Dispensary in downtown Santa Barbara is mired in a contractual dispute between its owners over a pending $56 million sale of the company to California marijuana conglomerate The Parent Company, famously backed by Jay-Z, who is The Parent Company’s “chief visionary officer” for Black entrepreneurship.

Coastal won one of three cannabis storefront licenses granted by Santa Barbara in a “beauty contest” of attributes in 2018 that included the localness of its owners as well as their presumed probity. The stores earned a faithful following with 4/20 sales and other perks, but according to court documents and the marijuana media, Santa Barbara frontmen Julian Michalowski and Malante Hayworth shared management of the company with at least four other people, among them Adam Bierman, one of the Los Angeles–based MedMen, a wildly successful then wildly disastrous cannabis company, as described by Politico last year.

A suit filed in September by LMAJ LLC, which lists Bierman and his MedMen partner Andrew Modlin among its officers, alleges that Coastal arranged its sale and loans but left him out of the decision making. The complaint charges the loans underwrote the company until the “fire sale” of Coastal — the sale is projected to close in 2022 — and carried terms that benefited the other owners while diluting Bierman’s share of the company.

The Parent Company, which formed in January 2021, is traded on a U.S. and Canadian stock exchange, and boasts 450 retail outlets in California, announced on October 4 that it was buying 100 percent of Coastal and its five operating storefronts — in Santa Barbara, Pasadena, West Los Angeles, Stockton, and Vallejo — one to be opened in Northern California, and two delivery depots in Santa Barbara and San Luis Obispo. The sale terms included $16.2 million in cash and $40 million in equity “upon completion of milestone events,” among them the transfer of the rights to sell marijuana.

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The City of Santa Barbara was unaware of the pending sale of Coastal and had not received an application to transfer the cannabis retail license, said Tava Ostrenger, with the City Attorney’s Office. “Three different LLCs owned Coastal,” she said, and the city’s ordinance allows an LLC to file an application to request a transfer of the permit. “We would review the new owner, who would be held to a standard of as good as or better than the permit holder,” she said.

Coastal is the second of Santa Barbara’s three marijuana storefronts to be sold. The first was GSG SBCA Inc., which had a location on upper State Street that was sold to Jushi of Boca Raton, Florida, in 2020. The sale price was undisclosed, and the store was Jushi’s first in California. The original applicant, GSG, which stands for Golden State Greens, was the root of an unsubstantiated media fracas that ultimately exonerated former Santa Barbara Police Department spokesperson Anthony Wagner but triggered a retraction by L.A. Magazine and a lawsuit by Wagner.

Whether the dispute between the partners at Coastal will delay the sale to The Parent Company remains unknown as the attorneys involved did not respond to attempts to contact them. The case, first filed in Orange County Superior Court, was moved to federal court four days after it was filed; the complaint alleges Michalowski and Hayworth’s current location is Nevada and puts the residences of the other partners being sued as: Josh Ginsberg in Colorado or Puerto Rico, Steven Loeb in Hong Kong, and Jason Loeb in Massachusetts. It is also unclear whether a federal court would close down the case as it involves the sale of a company that sells a federally prohibited controlled substance.

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