Et tu, counselor?
Which may have been the thought operating via the thoughts of Elliot Lewis, chief government officer of Catalyst Hashish, when he filed a movement to disqualify counsel for Glass Home, the opposing occasion in 562 Low cost Med. Inc. v. Glass Home Manufacturers. It’s an motion Lewis filed in June, accusing his competitor of fraudulent enterprise practices and unfair competitors in violation of California’s Enterprise and Professions Code §§17200.
Within the movement to disqualify, 526 Low cost Med asserts Venable LLP, a agency representing Glass Home in a separate defamation lawsuit filed in opposition to Lewis, his enterprise associate Damian Martin and others, “dumped” Lewis and his corporations as shoppers, then “simply nineteen days later sued its newly dumped ‘former’ consumer for defamation and a bunch of different claims.”
The movement claims Venable had been counsel for a number of different entities with which 562 is “corporately affiliated,” helping these corporations with “amongst different issues, the full-blown restructuring of its company group.” On this capability, “Venable was given a veritable treasure trove of extremely confidential paperwork and data” relating to the corporate, together with “entities it holds, controls or oversees (together with 562), their funds, shareholders/members, belongings, operations, licenses, authorized points in addition to numerous different confidential issues.
“Venable was given the figurative ‘keys to the citadel’ in reference to its work,” 562 Low cost Med added in its submitting, calling the state of affairs a “traditional instance of the unethical ‘sizzling potato’ dump-and-sue state of affairs.”
“After Venable was approached by [Glass House] to characterize it, Venable on June 1, 2023, presupposed to terminate its illustration of South Twine by e-mail whereas deliberately retaining all of SCH’s (and 562’s) confidential paperwork and data—a termination expressly designed to attempt to remodel South Twine (and 562) from a present consumer right into a former consumer as a result of Venable knew it couldn’t sue or take any actions opposed to present shoppers,” the aggrieved former consumer said within the movement.
We received’t know for a while whether or not Venable can provide a rebuttal to the movement’s assertions, or a proof for its alleged “dumping” of Lewis and his corporations, because the listening to on the movement to disqualify counsel is scheduled for December 7 in Lengthy Seashore.
Lewis additionally just lately acquired some welcome information in one other lawsuit he filed, this one in opposition to the California Division of Hashish Management (DCC). Filed in September, 2021, the lawsuit basically seeks to power the company to do parts of its job Lewis says the DCC is failing to do, together with complying with “obligatory and/or discretionary authorized duties vis-à-vis the track-and-trace system and their enforcement obligations beneath state regulation.”
Initially, issues didn’t look like going nicely for HNHPC Inc., the company title beneath which Lewis filed swimsuit in opposition to the DCC. In March, the California Superior Court docket in Orange County present in favor of the DCC, holding HNHPC “doesn’t have standing to micro-manage the (division’s) compliance,” and the “method of compliance” is left to the DCC’s discretion. The courtroom additionally denied HNHPC go away to amend its criticism.
HNHPC appealed the ruling and the matter was handed as much as California’s Fourth Appellate District Court docket. That is the place the information began to get higher for Lewis and HNHPC.
In an opinion revealed earlier this month, a three-judge panel from the Fourth Appellate District unanimously overturned the Superior Court docket’s determination, discovering HNHPC “adequately pleaded information to state a explanation for motion for a writ of mandate and for injunctive aid.”
The panel disagreed with the decrease courtroom on the query of whether or not paperwork displaying DCC has entered into contracts with distributors to create the monitoring methods required by state regulation totally glad the company’s statutory duties.
“Opposite to the courtroom’s holding, the paperwork don’t conclusively present the division created an digital database that flags irregularities for additional investigation,” the appeals courtroom discovered.
Later within the opinion, the courtroom noticed whereas the DCC claimed the company had “complied with its statutory responsibility so there’s nothing to compel,” and the decrease courtroom “likewise discovered the judicially seen paperwork demonstrated the Division complied with its ministerial responsibility.”
“Not true,” the appellate panel flatly said in response to these assertions.
“The contracts and finances request don’t finish the inquiry,” the panel discovered. “The Division didn’t have an obligation to enter right into a contract however to determine an digital database that really flags irregularities … The actual fact nonetheless stays the complete efficiency and completion of the contract per its phrases—i.e., that the Division offered flagging standards to the developer who in flip included it into the system—is overtly in dispute.”
In different phrases, even when one accepts the contracts DCC entered into may have resulted within the creation of a system that satisfies the regulation’s requirement for a track-and-trace system, these contracts don’t present the DCC really created such a system, which is what the regulation requires, in keeping with the appellate courtroom.
For the broader California hashish trade, the appellate courtroom’s holding has huge potential implications, significantly if critics of the DCC like Lewis are right in asserting that lax oversight on the a part of the DCC helps to foster the state’s illicit market.
There’s an excessive amount of authorized wrangling left to unfold within the case, however ought to the DCC discover its toes being held to the hearth by the courtroom, extra attentive DCC oversight could possibly be coming to the state’s dispensaries and wholesalers in consequence. Nearer oversight may assist degree the taking part in area and remove illicit competitors for the state’s legit and legally compliant dispensaries.
In fact, neither of those developments signifies a last victory for Lewis and his corporations in these instances, however the reversal of the Superior Court docket’s ruling within the DCC lawsuit is a major improvement in Lewis’s favor, and the movement to disqualify counsel within the different case is, if nothing else, an attention-grabbing twist within the story. The place will all of it lead? Watch this house.