One of the main aspects of a healthy market is the ability to mobilize the justice system to protect your business. In this sense, are cannabis lawsuits signalling a maturing market?
Recently, Benzinga reported that a CBD Chain could sue Visa for “terrorizing” its business. Reportedly, MNG 2005, Inc. a Missouri-based CBD chain was withheld of $66.000 in payments, fined for $25.000, and cut off transactions involving the business after the financial services company wrongfully determined that it was involved in illegal activities. Furthermore, the plaintiff claims that his company was arbitrarily placed on a transaction blacklist.
This is a big issue for CBD companies and it has to do with the federal regulations connected to banks. In fact, this is a direct effect caused by the confusion produced by the lack of federal legalization of cannabis. Fortunately, District Judge John A. Ross ruled that the CBD chain can sue Visa for unjust enrichment and defamation.
The owner of MNG said that he was pleased with the judge’s decision, but said he was also frustrated that his business is still suffering from Visa’s actions.
Every day when I wake up in the morning, I want to know if our account is still alive (…) I wonder, ‘Is today the day that they shut us down again?’ This is what we have to live with, even though we sell the exact same products they allow others to sell without this fear.”
According to MNG’s attorney, depending on how the case plays out, both in Missouri and other potential jurisdictions, it could have a major impact on how CBD and hemp companies are treated by financial institutions.
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Less than a week before that report, Benzinga also reported that a pet CBD manufacturer was deemed able to proceed with most of its claims in a $10M lawsuit against a pet product company it had previously partnered with, according to a Connecticut ruling.
Sage Fulfillment LLC, a Seattle-based CBD manufacturer, sued Earth Animal Ventures in April, alleging the company breached a contract that made Sage the exclusive maker of CBD pens for pets that would be sold by Earth Animal Ventures. The lawsuit states that Earth Animal Ventures agreed to purchase 1.2M pens over four years, but instead walked away after purchasing just 75,000. Sage claims it earned only $1.1M through the deal, well short of the $5.95M per year in 2019, 2020, and 2021 that was stipulated by the contract.
Earth Animal Ventures tried to have the claims dismissed, arguing that the CBD pens in question were defective and that their poor quality had led to customer complaints and had damaged deals with distributors.
The court allowed Sage to continue with a Connecticut Unfair Trade Practices Act (CUPTA) claim but, in order for a breach of contract to rise to a violation of the CUPTA, aggravating circumstances must be proved.
In his ruling, Judge Bolden noted that Sage had not yet proved any aggravating circumstances beyond the contract breach, but he allowed the claim to continue, “at least for now,” so that Sage can flesh out the claim after discovery has been performed in the case.
The proliferation of these lawsuits may be a signal that the cannabis market is gaining force in the judicial spectrum. The decision of these lawsuits may create precedents that aid in the growth of the cannabis market. Time will tell.
