Kentucky-based hemp company GenCanna has filed a lawsuit again hemp processor Vertical Wellness, alleging that the company reneged on a contract to dry up to 12 million pounds of hemp, reports Law360.
GenCanna allegedly asked Vertical Wellness to pause the drying operations in November, as the company had filed bankruptcy and was in the process of selling its assets to MGG Investment Group.
GenCanna alleges that Vertical Wellness initially complied but then resumed drying operations at its Cadiz, KY facility in December without the company’s permission.
GenCanna maintains that the contract gave them an option to halt processing, while Vertical Wellness says the agreement was based on GenCanna’s desire to have the hemp processed by the end of 2020.
In a statement to Law360, J. Smoke Wallin, CEO of Vertical Wellness, said GenCanna and MGG breached the contract and called the lawsuit “completely frivolous.”
“We have refrained from discussing this publicly out of respect in trying to reach a settlement, but, given GenCanna’s actions — filing a frivolous lawsuit in federal court — those constraints are now gone,” he added.
The deal represented a major investment for Vertical Wellness, according to correspondence cited in the lawsuit.
“We have built a business around this contract and have numerous employees and vendors who we pay each week based on it,” Wallin wrote. “We have now been shut down for over two weeks and have made close to 31 layoffs at the Cadiz facility.”
In response, GenCann CEO Andrew G. Barnett told Wallin that he understood pausing drying activities was “not Vertical Wellness’ preferred course of action” but GenCanna would not pay for unauthorized services, reports Law360.
GenCanna told Law360 it formally terminated the agreement earlier this week, and filed a lawsuit on the same day, citing breach of contract. GenCanna is seeking unspecified damages, costs and other relief.
The contract between the two companies was first announced in July 2020.
“We are excited to further our existing relationship with Vertical Wellness, which has proven to be a strong processing partner for our business and shares GenCanna’s values of compliance and quality,” Barnett said at the time.
Historically, Kentucky has been the U.S.’s leading hemp producer, though production was mostly banned for nearly 45 years following federal policies introduced in 1970.