We recently wrote about hemp production contracts, noting that scope and scale of commercial hemp production and the related contracts and lawsuits are likely to dwarf the dollar values we typically see in recreational marijuana. That post discussed a $57 million lawsuit arising from a hemp production contract and lists some issues for growers and buyers to consider before contracting for the production and sale of hemp.
A multi-million dollar lawsuit filed last week in Oregon confirms our view that litigation concerning hemp production is on the rise. According to the complaint, the plaintiff, Big Bush Farms (“Big Bush”), is a licensed grower of industrial hemp, the defendants, Boones Ferry Berry Farms (“Boones”) and other individuals operate a large farm in Hubbard Oregon. Big Bush alleges that Boones had no experience or familiarity with growing industrial hemp before working with Big Bush and had previously purchased bad, unfeminized seed. Big Bush provided Boones with good seed and instructed defendants on “best hemp farming practices” so that Boones could grow hemp for Big Bush. (Just what are best hemp farming practices?)
In late May 2018, Big Bush and the defendants entered into a production contract. Boones agreed to plant, grow, dry, and harvest 27,000 plants for Big Bush. Boones agreed to pay all costs relating to the grow (note that in the prior post on hemp contracts the purchaser paid those costs) and Big Bush agreed to pay $25/lb for all the hemp harvested from the 27,000 plants, plus a bonus of $1/lb for every 2% CBD oil content over 10%. Payment for the crop was due at several intervals on or after the delivery of the crop. The contract called for Boones to use “best farm practices, knowledge and experience to produce the maximum yield and highest quality product.” Boones also agreed to grant Big Bush access to the farm as requested.
Big Bush alleges that Boones harvested 108,000 lbs of dried biomass which tested at 14.5% cannabidiol (“CBD”) oil content. This made a for a contract price of $27.25/lb, when including the CBD % bonus. Big Bush alleges that Boone’s demanded a price in excess of the contract price and falsely claimed the harvest yielded on 14,582 lbs of biomass. Boones apparently delivered only around 4,200 lbs of the crop even though Big Bush had prepaid $150,000. Big Bush claims that Boones failed to deliver the remaining 103,747 lbs of hemp and failed to deliver other hemp grown pursuant to an oral agreement.
Big Bush brought the usual contract related claims and alleged more than $267 million in damages. (Note: This figure seems a bit odd since 103,747 x $27.25 = $2,827,105.75 and the damages under the alleged oral agreement don’t make up the difference.) Although a farmer’s refusal to deliver a crop is not a typical issue, one wonders if the parties’ contract couldn’t have been structured to provide the buyer more protections.
Stay tuned for updates on this and other hemp-related litigation. There will be a lot of it.