Two lawyers on the "explosive" Glass House suit

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Two lawyers thoughts on the “explosive” Glass House suit
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The Benzinga Cannabis Awards are back live in Chicago on September 27-28, celebrating the creative, innovative, and outstanding brands and leaders in the cannabis industry. Earn global recognition for your company in front of our engaged investor audience. All applications due by June 28th!

This week Catalyst Cannabis CEO Elliot Lewis filed a lawsuit against Glass House Brands, alleging that the company building California’s largest greenhouse is a major diverter.

The suit alleges Glass House sells large amounts of product to state-licensed “burner distros,” which then sell it to the illegal market. It echoes claims Lewis has made on social media.

Glass House did not respond to a request for comment.

Burner distro schemes are widely believed to be prevalent in California cannabis, perhaps even propping up the industry by providing as escape valve for excess product. The Department of Cannabis Control (DCC) has not publicly cracked down on them or commented on the issue.

The complaint is clear that its case depends on data not presently known to it. It alleges that material obtainable throughdiscovery, such as data from the state’s Metrc track and trace system and Glass House’s internal data “will demonstrate the unlawful, fraudulent and unfair nature of its business practices.”

The Glass House suit comes after Lewis filed a 2021 suit alleging the DCC has willfully ignored burner distros.

The agency got the suit tossed out, arguing that it had fulfilled its obligations. Lewis has appealed the case.

However, lawyers I spoke to said suing a company directly, could prove to be a more effective legal strategy.

Attorney Omar Figueroa described the allegations as “eye-popping” and “explosive.”

“These allegations are so serious they should result in an investigation by the state,” he said. He noted that authorities have access to the necessary data in Metrc.

“It requires a strong defense from Glass House,” Figueroa said. “But if they come in too strong, with a libel counterclaim, for example, that would open up a Pandora’s Box of discovery. Since truth is a defense to libel, the plaintiff would be incentivized to dig deep.

Compared with Lewis’ previous lawsuit, Robert Finkle, managing attorney with Armada Law, noted that the new complaint as an unlawful business practices case, which is seeking a court injunction, rather than a payment from Glass House. This means the plaintiff has a relatively low bar to clear for standing, and to push the case forward.

The case, he said, has the potential to provoke hard questions from Glass House’s board of directors.

Finkle, who has worked with the Lewis’s lawyer, Jeff Augustini in the past, described him as a skilled and aggressive litigator.

QUICK HITS

Federal:

U.S. Secretary of Health and Human Services Xavier Becerra said he expects the department to finish its assessment of cannabis scheduling this year.
Marijuana Moment

Business:

Days after it opened, authorities shut down Cookies’ first Baltimore shop citing security and advertising breaches. Cookies, which didn’t respond to a request for commment, has a chance to appeal.
MJBiz
Amazon-owned Twitch ruled streamers can promote booze, but not you know what.
Benzinga

State and local:

California and other states are moving to crack down on licensees who don’t pay their debts.
MJBiz
The Florida Supreme Court is set to consider a 2024 REC ballot initiative. Canna Law Blog discusses it.
An embattled N.Y. Cannabis Control Board member stepped down amid conflict of interest concerns.
New York Upstate
A new report details the New Mexico industry.
KRQE
Alabama awarded its first MED licenses. Only one product flavor is allowed.
WRBL
An Arkansas judge struck down 27 amendments to the state MED law.
THV
Pot taxes in eastern Oregon could inspire Idaho to legalize.
N.Y. Times

CALIFORNIA HITS

State:

Tax revenue fell for the seventh straight quarter.
SF Gate

Business:

Two ex-employees who tried to blow the whistle on alleged illegal activities at their former company now face a countersuit in court.
Green Market Report
Jocelyn Sheltraw shows off her brands pins, some no longer operating.
@jocybossy

Local:

The South China Morning Post reports on how Asian Americans in SF regard legalization.
Santa Monica could open up to REC shops.
Santa Monica Daily Press
A new podcast tells the story of depressed prison town Adelanto’s (San Bernardino Co.) attempt to become a growing hub.
Crooked Media
The Trinity County Agriculture Alliance is holding an Eggroll Fundraiser.

NOTABLES:

Company milestones:

Beverage brand Uncle Arnie’s raised an undisclosed amount of capital to fuel its national expansion.
MarketWatch
Velvet opened a shop in Napa.
MSO Green Thumb Industries is opening a Rise dispensary in North Las Vegas.

Job moves:

Unrivaled named Patty Chan its permanent CFO.

Interview:

Cannabis Business Times talks to Jetty Extracts Chief Innovation Officer Matthew Kim.

Upcoming:

Oakland Equity Collective is hosting a Strength in Numbers mixer on June 22.
@equitytradenetwork

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THE BIG IDEA

WHAT YOU MISSED IN WEEDWEEK CALIFORNIA PRO

SCOOP: Cresco Labs faces fraud arbitration amid deal push

Read the story

Brands call for payments halt amid Herbl “meltdown”

Read the story

FOLLOW THE WEEDWEEK JOB BOARD

LATEST PRESS RELEASE

Renowned Tibetan Medical Physician Brings 50 Years of Experience to Jampha's Unique Botanical Products

Feature your company news here.

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