Marijuana chew business partnership ends in lawsuits
A Nevada marijuana company is suing a California cannabis chew maker, alleging that the company “grossly inflated” its revenue projections and defaulted on more than $1 million worth of loans.
Clark County-based Solace Holdings LLLP has filed a trio of lawsuits against Cannadips CEO Case Mandel, with the most recent complaint accusing him of making “blatantly false representations, including through the use of make-believe projections, to lure in Solace and its affiliates into deals Mandel never intended to fulfill.”
Two of the lawsuits were filed last month in state courts in Clark County and Humboldt County, Calif., and a federal lawsuit making similar accusations was filed Wednesday in Nevada. The lawsuits name as plaintiffs California-based Cannadips, Mandel and Cannadips’ parent company Trinidad Consulting LLC.
Cannadips makes THC and CBD infused pouches that resemble tobacco chewing pouches, but Cannadips says its products are tobacco- and nicotine-free. The company took first place in the High Times’ Nevada Cannabis Cup for the hemp-derived CBD product category in December, and the company recently expanded its distribution to Europe.
Neither Mandel nor his attorney could be reached for comment Wednesday.
In a letter sent to Solace last month, however, Cannadips’ attorney claimed it was Solace that breached the agreement terms and threatened its own legal action.
According to the federal lawsuit filed by Solace, the two sides entered into an agreement in May 2018 that said Solace — which has associated marijuana cultivation and production licenses in Las Vegas — would have the exclusive license to produce and sell Mandel’s product in Nevada.
To entice Solace to enter into that agreement, the lawsuit said, Mandel showed them projections that stated his products would produce $150,000 in gross profits per day. But Solace said that those margins were in reality closer to $8,400 per day.
Solace initially loaned Mandel $500,000 in 2018, and upped that loan to $1 million a few months later. In July 2019, Mandel went to an affiliate owned by Solace to ask for an additional $200,000 for marketing expenses. Those loans were due to be paid back in October of 2019, but Mandel has yet to repay the funds, according to the lawsuit.
Solace also accused Mandel of using a portion of those loans “for his personal benefit and to fund his lifestyle choices,” according to the lawsuit.
Mandel’s attorney Brian Hafter sent Solace a letter last month before any lawsuit was filed stating Mandel was terminating the agreement, but Solace called that “improper” because the loans have yet to be repaid.
In that letter, Mandel’s attorney claimed Solace breached the contract by “failing to pay royalties owed to Cannadips and/or provide the required royalty reports.”
Hafter wrote that Cannadips had scheduled an in-person meeting in Los Angeles for the two sides in hopes of coming to an informal resolution. “Solace, however, abruptly and unilaterally cancelled the meeting before it commenced,” the letter said.
Hafter also threatened to “seek appropriate damages and relief,” if Solace uses Cannadips’ intellectual property moving forward.
Solace is seeking an unspecified amount of damages in the lawsuit.