New York-Based Cannabis Company Accused of Fraudulently Taking Lucrative License
The complaint accuses New York-based Columbia Care of tortious interference with contract, unjust enrichment, civil conspiracy, aiding and abetting fraud and aiding and abetting breach of fiduciary duty, among other offenses,
June 02, 2020 at 05:15 PM
3 minute read
The original version of this story was published on New York Law Journal
Cannabis seedlings. Photo: Mary Esch/AP
A Florida company focused on low-THC cannabis sued a New York-based cannabis company in New York County's Supreme Court Commercial Division Friday, arguing that a medical marijuana license worth tens of millions of dollars was fraudulently misappropriated.
In the complaint, which accuses New York-based Columbia Care of tortious interference with contract, unjust enrichment, civil conspiracy, aiding and abetting fraud and aiding and abetting breach of fiduciary duty, among other offenses, Kasowitz Benson Torres partner Sarmad Khojasteh also accused Columbia Care of "a pattern of racketeering and tortious activity" in other states, including Arizona and Massachusetts.
Khojasteh argued that his client, Florida MCBD, spent years and hundreds of thousands of dollars seeking a license to operate a medical marijuana treatment center from the Florida Department of Health, starting in 2015.
To complete that process, Florida MCBD entered into a joint venture agreement with Sun Bulb, a Florida-based nursery, to help meet the state's requirements for medical marijuana treatment center licenses, according to court filings. Sun Bulb lacked cannabis experience, but Florida MCBD filed confidential information related to its cannabis expertise as part of the license application, according to court documents.
The Department of Health initially denied the joint venture's application, but the partners spent the next two years appealing and lobbying the state legislature to authorize additional licenses.
During the same period, Khojasteh wrote in the complaint, the New York-based national cannabis conglomerate Columbia Care "feverishly sought to obtain a license."
"Their desire to obtain a license to operate a medical marijuana treatment center was unsurprising, as such licenses were being bought and sold for over $50 million," Khojasteh wrote.
Columbia Care's first two applications for a license were rejected, according to the complaint, and in the summer of 2017, the company and its chief executives allegedly engaged in secret negotiations with Sun Bulb and conspired to defraud Florida MCBD and the state's Department of Health, Khojasteh argued.
Columbia Care and its executives agreed to indemnify Sun Bulb for MCBD's ownership claims for the medical marijuana treatment center license, and Sun Bulb submitted "updates" to the Department of Health describing its new relationship with Columbia Care.
In the complaint, Khojasteh emphasized that Sun Bulb presented those updates as supplemental information, not as fundamental changes to the license application "prepared, paid for, and filed" by Florida MCBD. Nevertheless, by the end of 2017, Sun Bulb received the state's authorization to begin cannabis cultivation with Columbia Care as its partner, according to the complaint.
Arbitration between Sun Bulb and Florida MCBD is ongoing, the complaint noted.
Columbia Care has yet to enter an appearance in the case, and a request for comment from the company did not immediately receive a response Tuesday.
READ MORE:
NY Bar Association Backs Legalizing Recreational-Use Marijuana
'Cannabis 2.0′: Cuomo Counsel Pushes Renewed Effort at Marijuana Law at State Bar Conference
Complex Marijuana Laws Leave Lawyers in Legal Limbo
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