Missouri-based consultants reach settlement in conflict of interest lawsuit
The first intra-industry lawsuit, alleging breach of contract based on conflict of interest between facility applicant consultants, has been filed and settled in Missouri.
In a lawsuit filed by Amendment 2 Consultants (A2C) against MoGreens Wellness (MoGreens), A2C alleges George Nolen of MoGreens violated an internal conflict of interest policy and “conspired to take A2C’s business.”
Nolen denied the accusations of the suit in a statement to Greenway Magazine.
The suit states that due to the limit on facility licenses, A2C “agrees not to assist two or more companies pursuing medical marijuana dispensary licenses within the same Missouri State House of Representatives district.”
The suit shares that Nolen brought Eden Empire was brought to A2C’s attention on or around August 11 for application preparation services.
According to a press release, Eden is “an award winning brand, established, and nationwide with a history of 17 stores across Canada. Supported by a dedicated management team with 20+ years combined experience. Focusing on diversified revenue streams across Canada and international opportunities.”
“Eden offered a 51% equity interest as payment for assistance with preparing the applications, and because Eden is a Canadian corporation who is prohibited by Missouri law from applying for medical marijuana license individually or in connection with any company that is not majority -owned by Missouri residents.”
The suit says A2C’s agreement with Nolen limited equity interest at 15% for Nolen.
“Eden and Nolen agreed that Eden would invest in Nolen’s company, MoGreens, which would then apply for medical marijuana licenses.”
The suit states the dispensary applications filed were in conflict with A2C’s conflict of interest policy regarding state representative districts. State rules for the medical marijuana program designate point “bonuses” based on scoring in each district. The top scoring dispensary application not only receives a bonus over other applications in the same district, it also sets a 25 mile perimeter bonus, where, if the facility is more than 25 miles from another dispensary, the application receives another bonus. The point bonuses were a valuable tool in application strategy.
“A2C did not know that MoGreens applied for any medical marijuana licenses until the State of Missouri published the names of all medical marijuana license applicants on September 10, 2019.”
On September 11, A2C “demanded” MoGreens withdraw their applications on or before September 13.
“A conference call was held on September 13, 2019, that included A2C member Michael Hill, Nolen, Nolen’s attorney, and Eden CEO Gerry Trapasso. Trapasso stated at the beginning of the call that Eden did not want to be involved in a public dispute because Eden was ‘going public in the coming weeks.’”
Traspasso said the conflicting dispensary applications would be withdrawn on the call. Hill requested copies of the three license applications. MoGreens emailed the State on September 13 to withdraw the dispensary applications, but maintain the cultivation application. The suit alleges that copies of the applications were not provided to A2C.
The suit alleges three counts of breach. First, it alleges Nolen and MoGreens misappropriated trade secrets proprietary to A2C, which limited A2C in remedy options.
“A2C does not have an adequate remedy at law because money damages are insufficient, on their own, to compensate A2C for defendants’ unauthorized use of A2C’s proprietary processes and templates.”
The second count is “Computer Tampering in Violation of Section 537.525, RSMo, Against Nolen,” due to the use of the processes and templates through A2C’s computer network.
The third count is breach of contract.
”MOGreens Wellness vehemently denies all accusations raised by Amendment 2 Consultants’ lawsuit,” Nolen said. “Amendment 2 Consultants was fully aware of MOGreens Wellness’ intent to apply for facility licenses and, upon review of the evidence, the lawsuit was quickly settled out of court. MOGreens Wellness agrees with DHSS that a diverse, competitive marketplace is the best for patients’ access to the highest quality, most affordable medicine but, unfortunately, some still do not share that philosophy. We will continue to nurture the community, advocate for access to safe and affordable medicine, and strive to provide Missourians with resources and education.”
A2C is led by Hill and John Payne.
“We are pleased with the outcome of the settlement, as it protects our contractual rights and the best interests of our clients. We wish George all the best in his future endeavors,” Payne said.
The suit was filed on September 26, 2019, and settled on October 24, 2019. The terms of the settlement were not disclosed by either party. The suit requested the Court award A2C damages of at least $200,000 plus pre-and post-judgment interest, attorney fees, costs, and that the Court enjoin “Nolen from using A2C’s proprietary processes and templates,” enjoin continuation of the cultivation application, and award “further relieve that is appropriate.”
