Kasowitz Benson Torres filed a lawsuit May 29 against New York-based multistate cannabis operator Columbia Care on behalf of Florida MCBD LLC, alleging that the company conspired with MCBD’s joint venture partner, Sun Bulb, to fraudulently misappropriate a medical cannabis business license in Florida.
The complaint, filed in New York County’s Supreme Court Commercial Division, accuses Columbia Care, two of its affiliates, and its founders Michael Abbott and Nicholas Vita of tortious interference with contract, unjust enrichment, civil conspiracy, aiding and abetting fraud, and aiding and abetting breach of fiduciary duty to fraudulently misappropriate MCBD’s rights to a medical cannabis business license worth tens of millions of dollars.
According to the complaint, MCBD partnered with Sun Bulb, a Florida-based nursery, in 2015 to apply for a medical cannabis business license. When Florida passed its medical cannabis law in 2014, it allowed nurseries with at least 30 years of experience and the ability to cultivate a minimum of 400,000 plants to seek licenses to become vertically integrated operations that would cultivate, distribute and dispense medical cannabis in the state.
As part of a joint venture agreement, MCBD and Sun Bulb submitted a 2,600-page application in July 2015 to secure a medical cannabis license. When the state awarded licenses in November 2015, MCBD and Sun Bulb fell one point short of winning a license, prompting them to file an administrative appeal in the spring of 2016. That appeal was denied in August 2016, but Sun Bulb then lobbied to the state legislature to revise the law and allow for more licenses.
In June 2017, the lobbying efforts proved successful, and the legislature amended the law to grant licenses to applicants who came within one point of winning a license in 2015, when licenses were originally issued.
Around the same time, the complaint alleges that Columbia Care struck a deal with Sun Bulb to take MCBD’s place on the application. Columbia Care had itself submitted two unsuccessful applications in Florida in 2015, according to the complaint, and then negotiated with Sun Bulb in 2017 to secure a license through a partnership with the nursery.
In order to effectuate the deal, Columbia Care and Sun Bulb had to request variances to the application with the Florida Department of Health, but the complaint alleges that the Department of Health was never notified that MCBD would be removed from the application altogether and no longer involved with the operation. Instead, according to the complaint, the companies simply said they were adding Columbia Care to the application.
Then, the complaint alleges, Columbia Care transferred the license from Sun Bulb to its subsidiary, Columbia Care Florida.
Moreover, when Columbia Care entered into the joint venture with Sun Bulb in 2017, it agreed to indemnify Sun Bulb for any losses, damages or legal fees stemming from the agreement, as well as any lawsuits or claims brought by MCBD or other parties, according to the complaint.
“Columbia Care’s egregious conduct and illegal acts have defrauded MCBD of its rightful ownership interest in a highly valuable Florida cannabis license, and denied MCBD millions of dollars,” Sarmad Khojasteh, partner at Kasowitz Benson Torres, said in a public statement. “We look forward to proving in court that Columbia Care and its executives are liable for significant damages, including punitive damages.”
Khojasteh also accuses Columbia Care in the complaint of “a pattern of racketeering and tortious activity” in other states, such as Arizona and Massachusetts. (Columbia Care did not respond to a request for comment for this story.)
“The industry is highly competitive, and as more and more states legalize, the race to obtain licenses could result in further misconduct,” Khojasteh told Cannabis Business Times and Cannabis Dispensary. “It’s important that the commercial cannabis players understand that they will held to precisely the same legal standards as market participants in any other industry."
