Apeks Sued for Faulty Extraction Machine Costing $357,000

Apeks is being sued for selling a $357,000 extraction machine that the buyers claim didn’t live up to the sales claims.

Ryan Elmore and Warren Blesofsky, owners of California-based medical cannabis business LB Atlantis, LLC, bought Apeks’s new “High Production Series” machine, which was marketed as being able to process “nearly 60 pounds of raw material per day when operating for 23 hours per day with a 90% cannabinoid extraction rate.”

The cost of this machine was $315,000, but with shipping, the final purchase amount was $357,761.25.

LB Atlantis received the machine in October 2018, but Elmore and Blesofsky allege they had problems from the first day of operation. The lawsuit states, “Among other problems, the machine never processed more than 23 pounds per day and ‘never approached’ a 90% cannabinoid extraction rate.”

In addition to the less-than-promised processing amount, they claim the resulting oil product was consistently discolored and burnt.

Their case filing says, “Finally, in late August 2019, Elmore spoke to Andy Joseph (Apeks president), who told Elmore that Plaintiffs could return the machine for a full refund and Apeks would sell them a different machine at a lower cost. Apeks then reneged, saying that the Plaintiffs could return the machine at a reduced ‘trade-in’ or ‘depreciated’ value, and that Plaintiffs would be given only ‘store credit’ towards a new machine. Plaintiffs retained the machine.”

The pair continued to try to get the faulty machine to work. According to the case, they ordered replacement valves as suggested by Apeks, on the promise of a refund if that did not work. When the replacement valves did not work, the owners claim Apeks refused to refund the cost of the valves.

In June 2020, Elmore and Blesofsky said Apeks remotely installed software updates to the machine, which made it “even less functional.” They say they finally stopped using the machine in July 2020 and filed this lawsuit in March 2022.

The case was amended in June 2022 to include claims for fraudulent inducement/fraudulent misrepresentation, breach of an oral agreement,  and violations of the Ohio Deceptive Trade Practices Act.

Apeks moved to dismiss the claims, saying that the sales contract stipulated that any action had to be within a year and the purchase occurred in 2018. However, according to Law360, District Judge Sarah Morrison disagreed, finding that the sales contract could be nonbinding.

Law360 reported, “Plaintiffs sufficiently allege that Apeks fraudulently induced them into purchasing the machine based on conduct that occurred prior to contract formation,” Morrison’s opinion said, adding later that “if Plaintiffs are successful on their fraudulent inducement claim, the Agreement will be rescinded and the one-year limitation on actions therein is not enforceable.”

The owners had originally planned to buy two machines, costing $115,000, that could collectively process 21 pounds of raw plant material in a 19.5 hour day. However, they were convinced by Apeks to buy the newer machine. They say that the Order Form/Quote contained a warranty that “the equipment would be free from defects in materials and workmanship for three years.” If not, Apeks would repair or replace the defective part or equipment, and failing that, return the equipment and refund the purchase price.

The buyers also claim that the only research that Apeks did on the machine was extracting CBD from hemp, not THC from regular cannabis. The buyers say they made it clear to Apeks that THC extraction was their goal.

Apeks

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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