The owner of Cannabis & Coffee is suing the Ontario government for $1.1 million in damages he claims he incurred over the Ford government's abrupt decision to cap marijuana retail store licenses.

Cannabis & Coffee Inc. filed a statement of claim against the Alcohol and Gaming Commission of Ontario (AGCO) and the Attorney General’s Office, stating the company had been “structuring its operations and incurring expenses” in preparation for obtaining a retail license so the coffee shop could be turned into a cannabis store.

The expenses included the cost of purchasing the business, rent, salaries of employees and legal fees. “We were told something by the Ford government, and then there was this complete 180-degree turn from qualified applicants to random applicants. It was kind of ridiculous,” said Chris James, owner of Cannabis & Coffee.

After Premier Doug Ford took office last year, he repealed the provincial-run retail system for cannabis proposed by the Liberal government and placed a cap on the number of stores that could be owned by any one company at 75. However, there was no limit on the number of licenses for storefront operations.

Less than four days before companies were supposed to finalize and submit their applications for retail locations, Doug Ford's government changed the rules, saying the provincial government was having a lottery for 25 retail cannabis store licenses, and anyone with $75 and the time to write an "Expression of Interest" could apply for the 25 license slots.

“The retail license lottery engaged in by the Defendants is arbitrary and thus unlawful and has deprived the Plaintiff of a reasonable opportunity to acquire a license it has suffered tremendous financial harm preparing for the acquisition of,” the statement of claim read, according to the Financial Post.

Daniel Sommers of Sommers Business Law who is representing Cannabis & Coffee in the lawsuit said: “This is fundamentally a story about a callous bureaucracy that has been totally comfortable allowing innocent small business owners like my client to dangle on a thread and spend precious business funds and then yank the rug out from under them."

James has been involved in the cannabis business for a decade, operating an unlicensed online dispensary in Toronto called Weedora. He closed that business down in advance of legalization in compliance with the rules laid out by the government, he says, in the hopes of being able to participate in the legal market.

“Now we have a crazy system where people who know nothing about the business are being the front for these giant companies. It just doesn’t make any sense,” said James.

When AGCO announced the 25 winners out of the 17,000 who had entered the lottery, there were cries of "foul" and "unorthodox." Most of the winners of the 25 licenses had no business experience or any experience in the cannabis market.

“Realistically, there’s nobody who wins,” says Christian Borys, an industry observer who runs the website The Cannabis Complex. “It’s a shit show all around.” Boyd calls the lottery outcome “a failure all around. It’s bad PR for the government obviously, it’s bad for entrepreneurs, and it’s bad for the consumer.”

AGCO sent an email to the Financial Post saying they had not received notification of the lawsuit. The Attorney General’s office did not respond to a request for comment.