Oregon Hemp Litigation: Unhealthy Contract = Huge Federal Courtroom Claims

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One-page MOU for $7.5 million deal?!?

We steadily write on hemp litigation and the methods farmers and purchasers can mitigate the dangers inherent on this new trade. Together with others, we’ve harassed the significance of strategic and cautious pondering earlier than coming into right into a hemp-related contract.  Our cannabis attorneys steadily write and converse on these and associated matters.

A few my current posts have highlighted litigation arising after harvest. This submit discusses a federal lawsuit filed final week within the District of Oregon, Jupiter Pharma, LLC et al. v. Lafayette Land Firm, LLC, et al. that arises from a pre-harvest dispute between the events. (Be at liberty to electronic mail me in the event you’d like a duplicate of the criticism.)

The lead plaintiff (Jupiter) is a Delaware restricted legal responsibility firm constructing a “Soil to Oil” industrial hemp/ CBD operation in Oregon that features the cultivation, processing and advertising of business hemp. The lead defendant (Lafayette) is a farmer residing in Oregon.

The events entered right into a contract in March 2019 to farm and domesticate industrial hemp for the 2019 season that included, at Jupiter’s choice, the 2020 and 2021 seasons. Lafayette agreed to farm and domesticate roughly 950 acres of hemp and agreed to assign to plaintiffs its pursuits in two particular parcels of land for use for cultivating industrial hemp. In change, Jupiter agreed to pay defendants $7.5 million for supply of a minimum of 2 million kilos of biomass and to switch to Lafayette farming tools bought by the plaintiffs, which tools can be credited towards the $7.5 million fee obligation. Jupiter additionally agreed to pay Lafayette sure incentives based mostly on hemp manufacturing and a month-to-month stipend through the rising season.

After coming into the contract, Lafayette allegedly failed to supply the required documentation regarding the task of pursuits for the 2 parcels of land. Jupiter then made a number of journeys to the farm to debate the undertaking and operations. Throughout these visits, Lafayette allegedly made representations that he would offer the land and farm it for plaintiffs. In the meantime, Jupiter has allegedly entered into contracts with third events value $15 million to construct a CBD processing facility and buy tools per the contract in addition to invested over $1 million into the undertaking.

The gravamen of the criticism is that Lafayette repudiated the alleged hemp manufacturing contract in late Could 2019 and in early June 2019 started planting hemp seed for a 3rd occasion in violation of the contract with Jupiter. The criticism is fast to notice that the Oregon hemp rising season begins in June and if not planted, Jupiter’s season shall be misplaced. The criticism alleges this can trigger Jupiter to lose its vital investments within the undertaking and that Jupiter can not safe various farm lands for the 2019 season.

The criticism seeks declaratory reduction (a ruling that the contract is enforceable) in addition to injunctive reduction and particular efficiency (forcing Lafeyette to assign the rights within the land). Within the various, Jupiter alleges Lafayette defrauded it by inducing it to enter a contract for the manufacturing of hemp and seeks at least $1 million in damages.

So is there an enforceable contract? The contract is titled a “Memorandum of Understanding” (MOU).  This could possibly be higher for Jupiter—one Oregon appellate resolution, citing Farnsworth’s treatise, notes: “On the issue of figuring out whether or not contracting events intend to bind themselves both within the presence or absence of phrases corresponding to ‘letter of intent’ and ‘memorandum of understanding,’ it has been stated, ‘It will be troublesome to discover a much less predictable space of contract legislation.’” The title of the doc doesn’t management, nonetheless, the final word query being whether or not there was a gathering of the minds as to the phrases of the deal supported by consideration. On this regard, the MOU appears fairly particular.  However litigation positive is an costly option to get a solution to the query of enforceability.

A number of different feedback on the MOU. It’s a brief, one-page doc for a purported $7.5 million take care of kickers for a biomass harvest exceeding 2 million kilos. (Perhaps the defendants believed they discovered a greater deal elsewhere?) The MOU says nothing about THC content material or CBD content material of the hemp. Nothing concerning the danger of the USDA deciding to not approve Oregon’s hemp manufacturing plan. Nothing about state record-keeping necessities or who’s accountable for testing of hemp for human consumption – presumably the objective of this Seed-to-( CBD) Oil enterprise or concerning the chain-of-custody of documentation to make sure nothing is seized throughout cargo or what occurs if Oregon suspends or revokes Lafayette’s license to develop hemp. Notably, the MOU comprises no categorical deadline by which Lafayette should ship proof of the purported assignments of agricultural land. I hate to be too essential of the MOU, however there appears a lot right here that might have been performed otherwise and, maybe, higher.

Keep tuned for updates.

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