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After a tentative ruling released Friday, the Los Angeles Superior Court is expected to dismiss a lawsuit against Glass House Brands Inc. (OTCQX:GLASF) (OTC:GHBWF), which has been accused by a competitor of profiting from the illicit cannabis market in California. The decision came ahead of a scheduled hearing this Tuesday, signaling a likely end to the case filed on June 2023.
The lawsuit, initiated by Catalyst Cannabis Co., a retail chain from Long Beach, claimed that Glass House was indirectly contributing to the underground cannabis market by dealing with “burner distributors.” These distributors allegedly funnel legally produced cannabis to illegal markets across the country, undercutting prices that lawful businesses like Catalyst cannot match.
However, the Judge noted the impracticality of enforcing a halt on Glass House’s alleged activities. He pointed out the responsibility lies with the state’s Department of Cannabis Control (DCC), which is tasked with regulating such matters.
Elliot Lewis, CEO of Catalyst and the lawsuit’s backer, expressed disappointment but acknowledged the complexity of enforcing such an injunction. "The court, it's easier for them to punt it back to the DCC than rule on it. So it's not totally nonsensical. I think there are some other ways to skin this cat," Lewis told Green Market Report on Monday, hinting at potential further legal actions despite his reluctance to appeal the current decision.
Critics of the court’s stance argue that this decision might allow questionable business practices to persist under the guise of legality. Lewis’s attorney, Jeff Augustini, criticized the ruling as overly lenient, urging a more substantive review on the merits of the case rather than dismissing it based on procedural challenges.
Meanwhile, Glass House has denied the allegations and had previously filed a defamation suit against Lewis, which was dropped last May. According to Lewis, Glass House's defamation suit was withdrawn to avoid further legal entanglements over disclosing distributor identities. "Had we made it through this, we would have been back to where we were in the defamation case, which was getting their list of distributors, which is clearly what they don't want to give up and why they dismissed the (defamation lawsuit)," Lewis stated.
This case unfolds against a broader backdrop of Lewis’ ongoing legal battle against the DCC, which he sued in 2021 for inadequate oversight in the industry. Green Market Report also noted this lawsuit targeting the DCC is slated for trial next April, aiming to compel more stringent enforcement against illegal cannabis distribution networks.
Amid these legal entanglements, the unfolding situation exemplifies one of many significant regulatory challenges still pervading California’s cannabis industry.
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