Two companies that once sought to partner up and cash in on the booming cannabidiol market are now facing a legal battle over a deal gone bad.

In a suit filed in Ventura County Superior Court, H2 Partners of Moorpark, California, accuses United Cannabis Corp. of making “false promises” about its ability to grow hemp for cannabidiol, or CBD, production. H2 Partners is suing Colorado-based United Cannabis, known as UCANN, and its corporate leaders, Earnest “Earnie” Blackmon and John Walsh, for alleged fraud and breach of contract, as well as other complaints. The complaint demands more than $16 million in damages.

“This is a case involving new and promising areas of business and technology,” the lawsuit claims. “It is also a case involving some of the oldest and most unfortunate business practices: making promises knowing that they cannot be kept, failing to disclose blatant and obvious conflicts of interest, and outright lying to get another business's money.”

Kinsella Weitzman Iser Kump & Aldisert of Santa Monica represents H2 Holdings. Partner Jonathan Steinsapir declined to comment on the suit.

Jesús Vázquez, general counsel to United Cannabis, said the company had not yet been served with the lawsuit and declined to immediately comment.

➤➤ Get the latest cannabis lawyering, compliance and commentary straight to your inbox with Higher Law, a new Law.com briefing. Learn more and sign up here.

Cannabis analytics company New Frontier Data predicted in a report Tuesday that CBD will grow into a $1.2 billion market by 2022 as consumers continue to seek health benefits from the derivative. Hemp was grown on more than 25,500 acres across 19 states in 2017, according to the report. Seventy percent of that crop was grown for CBD.

H2 Holdings' lawsuit contends the two companies agreed in May to grow 600 acres of hemp crops in Colorado for eventual use in CBD products, with each party contributing an initial $650,000 to the venture. The plaintiffs accuse UCANN of misstating how much it had previously spent on preparing for the crop and of how much experience it had growing hemp.

On June 18, a hailstorm hit the hemp-growing fields, which were not covered by crop insurance. A dispute between the two companies ensued over the planting techniques that were used, the quality of seed that United Cannabis had purchased, how much of the crop might be salvageable from the flooded fields and whether the company was candid about the chief grower's experience growing hemp for CBD.

The two companies decided to part ways on July 20, and United Cannabis agreed to repay H2 Holdings' initial investment, according to the complaint. H2 Holdings said United Cannabis argued there was no agreement covering the terms of the dissolution and instead offered to provide “25 [percent] of equivalent industrial hemp seeds.”

The lawsuit acknowledges there were arbitration and venue clauses in the original letter of intent between the two companies but H2 Holdings argues that “by saying that no agreement had ever been reached, UCANN's general counsel effectively repudiated the letter of Intent, and the arbitration and venue clause therein.”

H2 Holdings claims its lost profits total at least $16 million.

United Cannabis separately is the plaintiff in a closely watched patent infringement case targeting Colorado-based Pure Hemp Collective. The company alleges in the U.S. District Court for Colorado that a Pure Hemp-produced tincture infringes on its protected CBD formulation.