VIBE and Local Cannabis file class action suit alleging retail operations network violated Missouri ownership cap

Putative class action alleges Good Day Farm and affiliated companies control at least 61 dispensaries and used market power to suppress wholesale prices

CPC of Missouri-Smithville LLC and GF Saint Mary LLC, Missouri-licensed cannabis cultivators and manufacturers doing business as VIBE Cannabis and Local Cannabis, respectively, filed a class action lawsuit Tuesday in Jackson County Circuit Court.

The suit alleges Good Day Farm and a network of companies, investors, and affiliated operators violated Missouri antitrust law and the Missouri Constitution.

The lawsuit, filed April 28, alleges Good Day Farm and its co-defendants created what the complaint describes as the “GDF Cartel,” a coordinated network that owns, controls, or manages an unlawfully high share of Missouri dispensary licenses and uses that retail power to influence the state’s wholesale cannabis market.

The claims have not been proven in court.

The case is a putative class action, meaning a court has not yet certified the class.

According to a press release announcing the lawsuit, the plaintiffs filed the case on behalf of independent Missouri wholesalers who allege they have been harmed by “a deliberate, coordinated, and unconstitutional scheme” by Good Day Farm and the network of companies and investors with which it allegedly conspired. The release states that the complaint alleges the network used its market power to manipulate Missouri’s $1.52 billion cannabis market for its own gain.

The petition names CPC of Missouri-Smithville LLC and GF Saint Mary LLC as plaintiffs and Good Day Farm Retail Management LLC, multiple affiliated business entities, and individual defendants as parties to the case.

At the center of the lawsuit is Missouri’s constitutional cap on common control of marijuana business licenses.

The plaintiffs allege the Good Day Farm network exercises effective control over at least 61 dispensaries in Missouri, nearly triple the 22 dispensaries the plaintiffs say would be permitted under the 10% cap, based on 224 currently licensed dispensaries statewide.

The press release identifies five brands the plaintiffs allege are part of a single coordinated operation: Good Day Farm, with 21 dispensaries; CODES, with 20 dispensaries; Greenlight, with 10 dispensaries; Fresh Karma, with six dispensaries; and 3Fifteen Primo, with four dispensaries.

The lawsuit alleges Good Day Farm and its co-conspirators built the network by arranging for third parties to invest in LLCs that acquired dispensary, cultivation, and processing facilities, all allegedly owned, managed, or controlled by Good Day Farm.

The plaintiffs argue that structure allowed the defendants to evade regulatory scrutiny and the constitutional restriction barring more than 10% of dispensary licenses from being under “substantially common control, ownership or management.”

The complaint also alleges the network’s influence extends beyond its license count.

The plaintiffs allege the network’s dispensaries account for upward of 40% of wholesale cannabis purchased in Missouri, giving the defendants leverage over independent cultivators and manufacturers that rely on dispensaries to reach consumers.

Missouri’s cannabis market is structured around licensed cultivators, manufacturers, and dispensaries. Cultivators and manufacturers cannot sell directly to consumers, making access to retail shelves a critical issue for wholesale operators.

The plaintiffs allege Good Day Farm and its affiliated network used that retail leverage to suppress competition in the wholesale market.

   

The lawsuit alleges the defendants purchased cannabis products from non-network wholesalers at artificially depressed prices, stocked their dispensaries with substantially similar products, primarily those produced by the network’s cultivators, compelled independent wholesalers that also operate dispensaries to purchase the network’s finished products as a condition of getting their own products on network shelves, and boycotted wholesalers that refused to agree to the network’s demands.

Independent operators and non-vertical brands have increasingly pointed to reciprocity as a growing pressure point in Missouri’s cannabis market, particularly as retail shelf space has become more concentrated and more valuable.

In practice, operators have described reciprocity as a demand, explicit or implied, that a wholesaler purchase products from a retailer’s affiliated cultivation or manufacturing arm, or otherwise provide favorable shelf access in its own stores, in order to secure or maintain placement in that retailer’s dispensaries.

For independent cultivators and manufacturers without broad retail networks, those arrangements can create a competitive disadvantage, forcing brands to weigh whether to accept unfavorable purchasing terms, reduce margins, or lose access to key dispensary shelves.

The lawsuit echoes those concerns, alleging that independent wholesalers who also operate dispensaries were compelled to purchase finished products from the alleged Good Day Farm network as a condition of getting their own wholesale products onto the network’s retail shelves.

The complaint alleges the defendants’ collective market power depressed wholesale prices by more than 20%. That figure is attributed to the complaint and has not been independently proven in court.

Bob Hoffman, one of the lawyers leading the litigation, said, “The GDF Cartel is suppressing competition in the wholesale cannabis market and enriching itself with illegal profits through an unconstitutional and clandestine business conspiracy,” Hoffman said. “Missouri’s cultivators and manufacturers have been suffering under this scheme for too long, many of them know something is wrong but don’t realize the scope of the Cartel’s market manipulation.

“We filed this suit to restore the fair, competitive marketplace that Missourians voted for when they approved recreational cannabis in 2022. Missouri-licensed cannabis companies who have experienced these practices should join us, as they may be entitled to significant damages.”

The complaint quotes a document Good Day Farm allegedly provided to potential investors acknowledging possible legal risk under Missouri’s ownership cap.

According to the release, the document stated: “Assurances cannot be made that the Missouri Department of Cannabis Regulation will not take issue with the number of marijuana dispensaries operated or supervised by the Manager or its affiliates…”

The lawsuit is brought on behalf of a putative class that includes independent Missouri-licensed wholesalers that are not members of the alleged Good Day Farm network, for purposes of injunctive relief. According to the lawsuit website, wholesalers who believe they have been harmed must join the litigation in order to receive damages. The proposed class is represented by Feuerstein Kulick LLP and Bryan Cave Leighton Paisner LLP.

The plaintiffs are seeking damages and injunctive relief.

If granted, injunctive relief could limit or unwind business arrangements the plaintiffs allege allow common control over more dispensaries than Missouri’s Constitution permits, and could restrict alleged coordinated pricing, purchasing, and retail access practices.

The case could become one of the most significant private legal challenges to Missouri’s marijuana market structure since medical marijuana was legalized in 2018.

As of publication, the defendants have not filed a response in the case. The allegations remain pending before the court.