Trouble on the High Seas — cannabis retailer sues Costa Mesa for withholding permit
For the past two years, the High Seas cannabis boutique has been a dream in the making.
Massive saltwater aquariums in its spacious lobby and showroom lend an oceanic theme to the chic interior, where delicate lighting plays off of empty jars and cases intended to house cannabis flowers and elegantly packaged product.
Orange County real estate investor and developer Rachel Xin, who maintains majority ownership in the business, said she saw possibility in the 7,215-square-foot space at 1921 Harbor Blvd., formerly occupied by a Barbecues Galore and a training gym.
“I understand what piece of property makes sense. And I understand location, location, location, like real estate investors always mention,” Xin said in a recent interview. “Through my search and research on the area and also based on the opportunity zoning for cannabis, we secured this piece of property.”
To make the enterprise happen, Xin teamed up with Michael Moussalli and Matteo Tabib, co-founders of Se7enLeaf, a licensed manufacturer, processor and distributor of cannabis products already doing legal business in Costa Mesa under Measure X, passed in 2016.
Together, the trio embarked on a journey with the city’s planning department to make High Seas a reality, submitting an application in August 2021.
They sailed through the pre-application process, obtained a business license and were granted a use permit by the Costa Mesa Planning Commission, after submitting security, parking and traffic plans. They secured a state retailer license and got a building inspector to sign off on $4.5 million in renovations at the site.
By Sept. 26, the dispensary was ready for business. The final leg of the journey involved securing a cannabis business permit (CBP) from the city.
“It should have taken a day or two,” Xin recalled. “Everything the city required we submitted.”
Instead, all they got was radio silence.
Despite multiple calls, texts and emails to city staff, Xin said she received no communication about what was holding up issuance of the permit.
She, Moussalli and Tabib had hired employees, begun marketing High Seas on social media and were daily fielding questions about an opening. The pressures, and costs, were mounting with each passing day.
After an investment of nearly $10 million, Xin estimates the business is losing about $111,000 each month it remains shuttered, including the payment of partial wages to retain employees.
Their hands tied, the business partners on Oct. 18 filed a petition in Orange County Superior Court asking a judge to compel the city to issue the outstanding permit.
“The city has essentially left High Seas’ application for a CBP in administrative limbo, as the city has not denied High Seas’ application, which would trigger its right to an appeal of that decision,” the document reads.
During a Costa Mesa City Council meeting Tuesday, Xin was joined by several High Seas employees and contractors, who asked in public comments for city leaders to intervene.
High Seas’ Assistant General Manager Kevin Ferrer was hired to help find, train and support staff but instead just calls employees with weekly updates on the ongoing closure.
“I text or call or talk to them in person and let them know we can’t start this week and we don’t know why. I’d be lying if I said I wasn’t afraid for my future, my family’s future and my livelihood,” the Costa Mesa resident told the council.
“I’m here to ask tonight, to anyone who has any say here at all to help us. We need answers and we need help opening our doors.”
City Atty. Kimberly Hall Barlow at Tuesday’s meeting acknowledged a legal complaint was filed.
“There are issues,” she said of the application. “I spoke with the attorney for High Seas on Oct. 20 for over 15 minutes, including offering a meeting with him. When I spoke to him again on Oct. 23, he said they were not interested.”
Xin acknowledged such a conversation took place but said Barlow offered no explanation for why the city was withholding the permit.
When asked whether there might be any legal or criminal issues causing the delay, not unheard of in an industry where the line between legal and questionable activities is not always clear, she said she was not aware of anything.
“They passed the background check,” she said of Moussalli and Tabib. “As far as the personal relationship with Michael and Matteo, they have my entire confidence to say they have done nothing illegal. Nothing on their record could potentially affect High Seas’ process.”
Barlow said Thursday Gregory Palmer, another attorney from firm Jones & Mayer who handles Costa Mesa legal matters, communicated the reason to the plaintiff’s attorney and was preparing an official notice for delivery Monday.
Electing not to comment on any discovery made by the city, Barlow argued issuing a cannabis business permit is not simply a signing off but one last chance for the city to review applications in their entirety.
“It’s very much a discretionary decision,” she said. “It’s everything in [the city’s] ordinance, everything in the conditional use permit conditions of approval and everything in its administrative regulations that has set out the basis for the determination of each license at each phase.”
Xin said her only wish is to open High Seas’ doors.
“Every day we don’t open the damage is piling up,” she said. “The sun still rises, it still comes down, but money is bleeding into the water. I want a resolution that can benefit all the parties — the city, our business, the community and our employees.”
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