After a planned merger between the two companies failed to materialize, a cannabis refinery sues edibles manufacturer for $5 million.
LP Capital, a refiner of cannabis products based in Henderson, Colorado, filed suit this week against Mountain High Products. Doing business under the name Wana Brands, Mountain High Products creates marijuana edibles in Boulder, Colorado.
The lawsuit filed in Boulder County District Court also names Wana CEO and part-owner Nancy Whiteman as a defendant.
According to Steven M. Feder, attorney for LP Capital, Wana and Whiteman harmed his client when they failed to complete a planned merger of the two companies. The suit also alleges that the defendants stole business strategies and a key employee, and violated a non-disclosure agreement.
The legal action claims that LP Capital has incurred damages of more than $5 million that the company is seeking to recover. LP Capital also wants the court to stop Wana from continuing to employ key personnel and use its strategic business information.
Firms Had Planned To Merge
According to the suit, the two companies began merger talks in July 2017. Wana Brands sought to acquire LP Capital, a maker of cannabis distillates and concentrates, in order to enter the vape market. Before that time, Wana had no vape strategy and no employees working on a vape product line.
In September 2017 the two companies entered into a non-disclosure agreement (NDA). The NDA prohibited the firms “from maintaining, using, or disclosing confidential information received from the other party if the acquisition did not come to fruition.”
The agreement was also meant to prevent the companies from stealing each other’s customers. The “solicitation and/or hiring of either party’s employees” was off limits, as well.
After signing the NDA, LP shared its vape strategies and planning with Wana, believing the merger was imminent. The suit says that Wana had even held a meeting for all LP Capital employees to announce the acquisition. After that meeting, LP Capital allowed a key marketing and design employee to transfer to Wana.
But instead of completing the deal, Wana ended merger talks in 2017. The suit alleges that the company then began its own vape line with information stolen from LP Capital.
When Wana pulled out of the merger, prospects looked bleak for LP Capital. Both current and projected sales had fallen dramatically by that time. Many of the company’s employees had left or transferred to Wana. Others had been terminated after Whiteman suggested LP Capital do so. Wana had also urged LP to sever business relationships with out-of-state suppliers, the lawsuit says.
Final Hit: Cannabis Refinery Sues Edibles Manufacturer For $5 Million
With its suit, LP Capital is hoping to recover damages the company estimates at $5 million, which includes its costs to develop its vape strategies. The company had hired an employee and spent a year on brand and packaging design. LP Capital had also brought a chemist onboard to create a lab and product formulations.
The company had hired a sales force and two cannabis industry veterans in charge of hardware and production, as well.
Additionally, LP Capital had spent $2 million to hire an outside firm to create a marketing campaign.