Cookies Hit With $8.4M Penalty in Failed San Francisco Dispensary Dispute

Prominent Cannabis Brand Cookies Must Pay Former Partner After Arbitration Ruling

One of the most recognizable names in the marijuana industry, Cookies, has been ordered to pay $8.4 million to a former partner following a failed dispensary venture in San Francisco. The hefty penalty stems from a licensing agreement dispute over the now-closed “Berner’s on Haight” cannabis store, a location once hailed as a landmark in the city’s legal marijuana market.

The store, which launched in December 2019, was a joint operation between Cookies and Cole Ashbury Group, a company led by a social equity licensee under San Francisco’s cannabis program. Despite its high-profile branding and premium location, the venture ultimately collapsed, and legal fallout has followed.

A Contractual “Put Option” Triggers the $8.4M Obligation

At the core of the legal conflict is a “put option” clause included in a November 2019 licensing agreement between Cookies and Cole Ashbury Group. The clause granted Cole Ashbury the right to force Cookies to buy out their stake for $10 million, provided certain conditions were met.

In May 2023, Cole Ashbury exercised that option, but Cookies refused to pay, leading to arbitration proceedings. According to Judge David Garcia, a retired San Francisco Superior Court judge who served as arbitrator in the case, Cole Ashbury had met all obligations, including maintaining its license to use Cookies’ branding for the required 42-month period.

Garcia issued a decision in April 2025, awarding Cole Ashbury $7.3 million in damages and $1.1 million in attorney’s fees and costs, for a total of $8.4 million. That decision was officially upheld by retired Judge Harold Kahn on June 30, 2025, solidifying Cookies’ obligation.

Dispensary Rebrand and Closure Preceded Legal Dispute Escalation

After Cookies refused to honor the put option, it also revoked the store’s right to use the Cookies brand, forcing the dispensary to rebrand as Blaze on Haight in early 2024. But the rebrand did little to revive the location, and the store closed shortly thereafter.

Despite the closure and the failure to turn a profit, Garcia held that financial performance did not nullify the licensing terms, stating plainly that “the usual consequence of making a bad deal is to suffer the consequences.”

Cookies had argued that mismanagement, including pending litigation against Cole Ashbury Group’s equity partner Shawn Richard, and the store’s lack of profitability, made the location “worthless.” However, the arbitrator found no evidence that Cookies attempted to revoke the agreement on those grounds prior to the conflict.

Arbitrator Cites Larger Industry Struggles and Governmental Challenges

In his written decision, Garcia pointed to broader regulatory and market challenges that have affected the cannabis sector. He cited “governmental regulatory failure” and “overtaxing and overpermitting” as possible reasons behind the store’s failure.

San Francisco’s cannabis industry has been under pressure due to high operational costs, saturated markets, and conflicting regulatory frameworks that make it difficult for even high-profile ventures to succeed.

Cookies Facing Multiple Legal Challenges Across Retail Network

This ruling is not the only legal conflict Cookies is grappling with.

In a separate arbitration case overseen by the same arbitrator, Cookies was awarded $22.7 million from another partner, Cookies Retail (affiliated with Los Angeles-based TRP Co.), over unpaid royalties and trademark misuse. That partner is currently attempting to overturn the decision, with a hearing scheduled for July 14, 2025.

The contrast between the two rulings underscores the volatile and litigious environment facing cannabis operators, especially those navigating multiple licensing partnerships in an evolving regulatory space.

Eaze Set to Relaunch Shuttered Storefront with New Brand

Despite the failed partnership and store closure under the Cookies umbrella, the Haight Street dispensary location may soon be reborn under new leadership.

Eaze Inc., a rebooted version of the once-popular cannabis delivery startup, is now managing the location under the brand “Eaze on Haight,” according to company CEO Cory Azzalino. State records show that Azzalino was added to the site’s permit earlier in 2025.

Eaze Inc. is backed by tech billionaire Jim Clark, and though the company’s delivery business was recently shut down, it has pivoted to retail management and branding efforts. Azzalino clarified that Eaze will manage the store but not own it.

No opening date has been confirmed, and the storefront remains closed as of July 10, 2025.

Social Equity Implications and Industry Reflections

The Cookies-Cole Ashbury dispute also raises questions about the future of cannabis social equity programs, particularly in major metropolitan markets like San Francisco. Cole Ashbury was the first group licensed under the city’s equity program, and its legal dispute signals both the promise and pitfalls of such partnerships when mixed with powerful commercial brands.

Shawn Richard, the equity partner behind Cole Ashbury, has denied any wrongdoing in the separate legal allegations that were introduced as part of Cookies’ defense. His case, unrelated to this arbitration, remains pending.

Observers suggest the case highlights the fragility of equity partnerships, especially when companies leverage their licenses in high-risk business environments without guaranteed returns.

Lessons for the Broader Cannabis Sector

This ruling is a cautionary tale for cannabis businesses, investors, and social equity entrepreneurs alike. Key takeaways include:

• Ensure contractual obligations are crystal clear and legally sound, especially when involving exit options like “put clauses.”
  
• Profitability is not a defense if the legal framework is honored by all parties.
  
• Regulatory unpredictability and market oversaturation continue to hinder cannabis retail success, even for iconic brands.
  
• Social equity programs need stronger structural support, or they risk being exploited or weakened by corporate interests.
  

As Cookies navigates multiple legal disputes and partners like Eaze attempt to revitalize once-promising locations, the industry as a whole must grapple with the growing pains of rapid expansion and uncertain regulation.

The cannabis retail landscape in California and beyond is entering a critical phase, where financial pressures, legal clarity, and operational excellence will increasingly determine who survives and who gets smoked out.