Welcome to a new feature of Kanna Knowledge: a recap of recent litigation involving cannabis businesses that underscores the need for adequate insurance coverages. Future issues will include guidance from attorneys on lessons learned, current state and national requirements, and best legal practices for the many MSOs who have targets on their backs. Stay tuned.
Pennsylvania operator Harvest Health & Recreation Inc. and members of its Board of Directors have been named in an investor’s lawsuit in Colorado federal court. The plaintiff claims the company failed to properly apprise shareholders about the terms of its proposed $2.1 billion acquisition by medical cannabis company Trulieve — omitting critical information on financial projections, and on the data points used by the company’s financial advisors to prepare their fairness opinions. It is also claimed that the proxy statement the company filed left out the financial metrics used to calculate its gross profit and EBITDA.
Cannabis company True North of Utah LLC has asked a judge to dismiss claims that it colluded with Utah regulators to obtain a highly-coveted cannabis license at the expense of other applicants. The plaintiff, an applicant who was unsuccessful at obtaining a license, filed suit against several Utah agencies, the state itself, several individual evaluators, and all winning license applicants. True North argues the complaint contains no specifics and does not fit the requirements of federal civil conspiracy claims.
Los Angeles-based cannabis equipment manufacturer Sho Products LLC has filed a $1 million complaint against JJG Distributing, alleging this former client unlawfully breached an exclusivity agreement for testing and marketing a commercial-grade ice water hash extraction machine called a Hashatron. According to their complaint, Sho Products lost over $156,000 testing and promoting the machine for an ultimate sale when JJG suddenly terminated their agreement, leased the machine to a third party, and removed the machine from Sho Products’ property.
Florida cannabis products manufacturer JPG Herbal LLC sells products under the brand name High Hemp. They have sued a competitor, Texas-based Lone Star Distro, for selling its own line of products under the name Hemp High with a “confusingly similar” logo. JPG has pending trademark applications, and notes that Lone Star’s subsequent trademark applications were refused by the U.S. Patent and Trademark Office based on its similarity to the applied-for High Hemp mark.
California-based Delta Technologies LLC, the parent company of cannabis brands Delta Farms and Spensary, has filed a $2.5 million suit against wholesale distributor Vape Whole Supply arguing that it smeared their brands’ reputations after their distribution agreement broke down. Delta charges that Vape Whole Supply founder Shivan Kanagaraja posted a notice on the VWS website that “We no longer endorse Delta Farms or Spensary, or can vouch for the efficacy or safety of their products, unfortunately, due to unknown sourcing.” Delta claims this false statement caused them to lose profits and was a breach of a written non-disparagement agreement.
Colorado marijuana and hemp extraction firm Gene Pool Technologies has filed patent infringement lawsuits against two subsidiaries of Canadian cannabis firm Halo Collective Inc., claiming that five of its extraction patents have been violated. They are seeking three counts of infringement against Coastal Harvest LLC, and two counts against ANM Inc., for using a system that infringes on their patented methodology for extracting cannabinoids and terpenes from raw cannabis plants. They are seeing unspecified damages, costs and fees.
Online California-based CBD retailer Smilz Capital Inc. is suing the payment processing companies that handled its credit card payments, charging that they were unfairly added to a database of merchants who have violated processing rules. They allege that they were placed on Mastercard’s MATCH list — Member Alert To Control High risk — without any evidence to support the violations charged. The processors claim that Smilz ended up on the list due to chargebacks, disparate price points for the same items, online shopping carts adding more products than requested, and the use of fake celebrity endorsements.