On April 10, 2015, Zoned Properties, Inc., filed a lawsuit against Duke Rodriguez, Ultra Health, LLC, and Cumbre Investment, LLC.  These parties apparently like to litigate.  Since 2011 Duke has been a litigant in seven lawsuits filed in Maricopa County Superior Court.  This is the fifth time since March 5, 2014, that Zoned Properties, Inc., has been a party to a lawsuit filed in Maricopa County Superior Court.

Cumbre Investment, LLC, owned by Duke Rodriguez, is a major stockholder (12.18%) of Zoned Properties.  The Complaint contains a fraud count and the following allegations (paragraph numbers correspond to the paragraph numbers in the Complaint):

9.  This lawsuit concerns Defendants’ collective failure to deliver to Zoned Properties a 1,536 square foot modular building (the “Building”) that was to be built and permanently installed on vacant land located at 988 S. 182nd Place, Gilbert, Arizona 85296 (the “Property”) for use as a licensed medical marijuana dispensary.

15.  In or around January 2014, Rodriguez verbally represented to Zoned Properties, individually and on behalf of Ultra Health and Cumbre, that if Zoned Properties purchased the Property, Rodriguez, individually and on behalf of Ultra Health and Cumbre, would ensure that the Building would be sold to Zoned Properties, that the Building would be built and installed on the Property, and that the requisite authorizations to operate the Building as a licensed medical marijuana dispensary had been obtained.

21. . . . Ultra Health purportedly sold the Building to Zoned Properties for $675,000 – the same Building that cost $135,566.50.

24. In exchange for the consulting fee, Ultra Health agreed to “ensure the dispensary received its authorization to operate prior to August 6, 2014 pursuant to the terms and guidelines under the Arizona Medical Marijuana Act for the Gilbert E CHAA (the ‘Project’).”

27.  From February 2014 until November 2014, Rodriguez, in his individual capacity and on behalf of Ultra Health and Cumbre, repeatedly made verbal representations to Bryan McLaren, Chief Executive Officer of Zoned Properties (“McLaren”), that the Building was being constructed, that the installation of the Building was imminent, and that Rodriguez already had obtained the requisite authorizations to operate the Building as a licensed medical marijuana dispensary.

28.  In an article published by The Arizona Republic on June 20, 2014, Rodriguez is quoted as saying that “his company” had invested more than $1 million into developing the anticipated dispensary in Gilbert, and that the Building was “nearly complete and could be opened before the end of the year.”

31. . . . Pac-Van never constructed the Building and Cumbre never took ownership of the Building.

32.  Since Cumbre never took ownership of the Building, it had no ownership rights in the Building

34. . . . Ultra Health did not own the Building, or have any ownership interest in the Building, at the time that it purportedly sold the Building to Zoned Properties

35.  The Building still has not been constructed and the Property remains vacant.

36.  In sum, Rodriguez orchestrated a series of straw transactions that culminated with the purported sale to Zoned Properties of a Building that neither Cumbre nor Ultra Health has ever owned and that has never existed, for a grossly inflated price.

Duke Rodriguez & Cumbre Investment, LLC, Ask Gilbert for Special Use Permit

Zoned Properties’ Complaint contains a fraud count against Duke Rodriguez.  The text below might help Zoned Properties prove its case.

On June 4, 2014, Duke Rodriguez and Jeffrey Kaufman, as attorney for Zoned Properties, Inc., spoke to the Gilbert, Arizona, Planning Commission in an attempt to convince the Planning Commission not to revoke a conditional use permit issued by the Planning Commission to Ultra Health, LLC, to operate a medical marijuana dispensary at the Property.  The Minutes of the Meeting contain the following statements (references are to the speaker and the page number of the Minutes where the statement is located):

the Town was concerned whether the applicant supplied a valid dispensary registration certificate as required by code and the conditions of approval of the Use Permit. . . . Ms. Lorbeer said that she had handed out a response that staff received from the state showing that the certificate supplied by the applicant, Duke Rodriguez, to town staff on April 10, 2014 is not recognized by the state as valid  Catherine Lorbeer, Town of Gilbert Zoning Administrator, Minutes page 21.

Mr. Kaufman stated that he represents Zone Properties which purchased the piece of property at issue . . . . Zone Properties entered into a partnership agreement with Ultra Health which is Duke Rodriguez’s company to participate in this venture and Mr. Rodriguez’s company has a contract with East Valley Patient Wellness Group. . . . Mr. Rodriguez’s company has a contract with East Valley Patient Wellness Group.  Jeffrey Kaufman, Minutes page 22.

he was the original applicant. . . . the facility is being built and $1 million has been invested. Duke Rodriguez, Minutes, page 23.

If you look in the original application for UP13-07, it was the applicant as being Duke Rodriguez and the company being Cumbree Investments. It also says that the applicant has the dispensary registration certificate for CHAA 77 in east Gilbert. . . . In the application, it says that Duke Rodriguez is the applicant and it also says that the applicant has the dispensary registration certificate for CHAA 77.  Dane Nielsen,  Minutes, page 23.

The town granted UP13-07 on the belief that the applicants were the holder of the registration certificate which was not true as provided by Arizona Department of Health Services. Arizona Department of Health Services also confirmed that the applicant provided a copy of a dispensary registration certificate that had a DBA that mentioned one of their entities, Ultra Health, but the Arizona Department of Health Services has returned that and marked it void.  Dane Nielsen, Minutes, page 23.

In March 2013 they met with a couple of agents with Stone Pass Realty. They referred the Sanchez’s to Duke Rodriguez to help them find a suitable location in Gilbert. When he found the location in question unbeknownst to the Sanchez’s he placed it in his own LLC. . . . Mr. Sanchez stated again that no contract was ever signed with any of them.  David Sanchez, Minutes, page 24.

Patricia Haugland, Gilbert Arizona, came forward. Ms. Haugland said that she was the owner of Stone Pass Real Estate and Dave and Kathy Sanchez did come to her office and asked if her company would be able to assist in locating a piece of property in the Town of Gilbert for the CHAA that they had the license for. At that time she and Duke Rodriguez had worked for the firm approximately 30 days and she in turn referred the Sanchez’s to Mr. Rodriguez to represent them solely as a real estate agent. What then occurred was that Mr. Rodriguez met with Dave and Kathy Sanchez, got information about their business and about the medical marijuana industry and then went and locked up the real estate that was available in the town knowing that there was no other real estate in town for the Sanchez’s to get approved by the city. After that occurred and Ms. Haugland found out all the information about what she believed to be fraudulent activity on the part of an agent that worked for her firm she immediately terminated Mr. Rodriguez’s license. Ms. Haugland said that she wanted everyone to understand what her position was in terms of how she saw it unfold as an owner and broker of the company and watching his activities as it is at a minimum unethical.  Patricia Haugland, Minutes, page 25.

Cumbree is the development company who agreed to develop the site.  Duke Rodriguez, Minutes, page 25.

Commissioner Cavenee asked Mr. Rodriguez if he had an executed contract giving him the right to use this license . . . . Commissioner Cavenee said that was not his question. His question was did he have a contract to use this license. Mr. Rodriguez said that he does have a contract.Commissioner Cavenee asked why he did not present that contract, wouldn’t that have been crucial. . . . Commissioner Cavenee said that it seems to him that the crux of the matter is who has the right to utilize this licenseand represent the Use Permit, and proof of that relationship would have been crucial. That seems obvious.  Commissioner Cavenee, Minutes, page 26.

Mr. Rodriguez said that this was not the only license that they have done like this. They have done this in other communities. This is how it works in Clifton; this is how it works in Safford.  Duke Rodriguez, Minutes, page 26.  Author’s Comment:  Neither Duke nor any of his affiliated entities got a dispensary in Clifton or Safford, but his company did enter into a lease for real property with the City of Clifton that provided that the tenant would operate a medical marijuana dispensary in the premises.

When he was then asked to supply the proof to staff because it is a condition of the approval and a requirement of the code, he provided one which is not valid.  Ms. Lorbeer, Minutes, page 28.  See Dispensary Certificate.

See the relevant documents attached to the Minutes:

  • April 25, 2014, letter from the Arizona Department of Health Services to Kathy Sanchez that states “Further, ADHS recognizes East Valley Patient Wellness Group, LLC, as the current and sole holder of the DRC for Community Health Analysis Area (CHAA) 77 ADHS can confirm that it does not recognize Cumbre Investments, LLC, Ultra Health, LLC, or any other entity as a holder of the DRC for CHAA 77.”
  • March , 2014, letter from the Arizona Department of Health Services to Kathy Sanchez that states “AZDHS can confirm that it does not recognize Ultra Health, LLC as a holder of this or any other dispensary registration certificate.”

To learn more about the litigious Zoned Properties read: