Cannabis Business Owner Must Pay $6 Million in Contract Dispute

Bloomberg Law

A cannabis business owner can’t vacate his $6.4 million contract dispute judgment but can make a case why being compelled to sell his company stake violates public policy, a split federal appeals panel ruled Monday.

Mackie A. Barch had his request to vacate the judgment against him denied by the US Court of Appeals for the Tenth Circuit, the panel’s majority said in their opinion. The majority rejected the owner of Trellis Holdings Maryland Inc.’s contention that his business partner, David Joshua Bartch, lacked standing to seek the judgment against him.

But the majority vacated a judgment enforcement order against …

Bartch v. Barch, No. 23-1211 (10th Cir. 2024)

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Justia Opinion Summary

Josh and Mackie were partners in a marijuana business, Culta, LLC, in Maryland. Josh temporarily relinquished his ownership due to concerns about a past misdemeanor affecting their license application, with an agreement to be reinstated later. However, Mackie prevented Josh from rejoining. Josh sued Mackie and Trellis Holdings Maryland, Inc. (Trellis), Mackie’s company, for breach of contract. The district court found Mackie and Trellis liable and awarded Josh $6.4 million in damages. Mackie and Trellis did not appeal or pay the judgment.

Josh sought to enforce the judgment. The district court ordered Mackie and Trellis to sell Trellis’s equity in Culta and turn over the proceeds to Josh, and to avoid devaluing the equity until the sale. Mackie and Trellis appealed, arguing for the first time that enforcing the judgment would violate the Controlled Substances Act (CSA) and that the district court lacked authority under Colorado Rule of Civil Procedure (C.R.C.P.) 69(g). They also moved the district court to reconsider the original judgment, which was denied, leading to a second appeal. The appeals were consolidated.

The United States Court of Appeals for the Tenth Circuit reviewed the case. It affirmed the original judgment, rejecting Mackie and Trellis’s argument that Josh lacked standing. The court found that Josh had standing as he suffered an injury from the breach of contract, caused by Mackie and Trellis, and the damages awarded were redressable. The court also held that the district court had authority under C.R.C.P. 69(g) to issue the judgment enforcement order, as a charging order was not the exclusive remedy and Mackie and Trellis had sufficient control over Trellis’s equity.

However, the Tenth Circuit vacated the judgment enforcement order due to concerns that it might require Mackie and Trellis to violate federal drug laws, and remanded the case for further proceedings to address these public policy concerns.

https://law.justia.com/cases/federal/appellate-courts/ca10/23-1211/23-1211-2024-07-29.html

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