Florida Cannabis Company Claims Industry Leader Took Its Stake by Fraud
The complaint accuses New York-based Columbia Care of quietly dealing with a partner to grab Florida MCBD's stake in a joint venture.
June 02, 2020 at 05:15 PM
3 minute read
The original version of this story was published on New York Law Journal
A Florida company focused on low-THC cannabis sued a cannabis industry leader, arguing a medical marijuana license worth tens of millions of dollars was fraudulently misappropriated.
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.
Kasowitz Benson Torres partner Sarmad Khojasteh in New York also accused Columbia Care of "a pattern of racketeering and tortious activity" in other states, including Arizona and Massachusetts.
Khojasteh argued his client, Florida MCBD LLC, spent hundreds of thousands of dollars seeking a license to operate a medical marijuana dispensary from the Florida Department of Health starting in 2015.
To complete that process, Florida MCBD entered into a joint venture agreement with Sun Bulb, an Arcadia-based nursery, to help meet state requirements for medical marijuana dispensary licenses, according to court filings.
Sun Bulb lacked cannabis experience, but Florida MCBD filed confidential information about its cannabis expertise as part of the license application, according to court documents.
Florida MCBD was incorporated in Florida by a Plantation registered agent but tracks back to managers in Winchester, Kentucky, Florida corporate records show.
The Florida Health Department initially denied the joint venture's application, but the partners and others seeking medical marijuana licenses spent the next two years appealing and lobbying the state Legislature to authorize additional licenses. Medical marijuana remains the only legal form of cannabis in Florida.
During the same period, Khojasteh said in the complaint that 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, and the company and its chief executives allegedly engaged in secret negotiations with Sun Bulb in 2017 and conspired to defraud Florida MCBD and the state Health Department, Khojasteh argued.
Columbia Care and its executives agreed to indemnify Sun Bulb for MCBD's ownership claims for the medical marijuana license, and Sun Bulb submitted "updates" to the state describing its new relationship with Columbia Care.
In the complaint, Khojasteh emphasized Sun Bulb presented the updates as supplemental information, not as fundamental changes to the license application "prepared, paid for and filed" by Florida MCBD. Nevertheless, by late 2017, Sun Bulb received state 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 now operates 11 Florida dispensaries. It has yet to enter an appearance in the New York County Supreme Court commercial division case, and the company had no comment by deadline.
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