Three Colorado-based Curaleaf (OTCQX: CURLF) manufacturing partners filed a lawsuit against the corporate cannabis giant, accusing it of unilaterally ceasing operations in Colorado without proper notice.
The lawsuit was filed in state court, where the companies claim that Curaleaf, which also owned four other cannabis businesses in the state, failed to abide by agreements established in 2021, Law360 reported. These agreements were in place to manage the processing and manufacturing of retail and medical marijuana products.
According to the plaintiffs, the arrangement included a fulfillment agreement, which allowed either party to terminate the deal with a six-month notice. Despite the alleged harmony in 2022, the relationship deteriorated when Curaleaf announced in January that it would close the majority of its operations in Colorado, along with California and Oregon.
This move, Curaleaf said, was due to the lack of adequate regulatory enforcement against illicit cannabis sales in these states, a situation which prevented the company from “generating an acceptable return on our investments.”
Curaleaf CEO Matt Darin had said in a statement at the time, “We are confident that these moves, made to improve our cashflow and margins, are the right ones to bolster the future success and profitability of Curaleaf.”
Despite the assurances, the plaintiff companies argue that Curaleaf abruptly ended all services via an email notification on Feb. 6, which they say did not follow the agreed six-month termination notice. The plaintiffs also allege that Curaleaf failed to articulate any intent to terminate the agreements or provide any reason for demanding an immediate halt to their operations.
The companies accused Curaleaf and its Colorado subsidiaries of reneging on their obligations, preventing them from fulfilling their orders as agreed, and leaving them with more than $800,000 in unpaid invoices.
The plaintiffs claim they were invoicing the Curaleaf parties about $694,000 each month prior to the sudden termination. Additionally, they allege damages of approximately $4 million, a figure they expect would have been billed over the six-month termination period initially agreed upon.
Curaleaf did not immediately respond to a request for comment.