BTG Files Lawsuit Against One Of The Largest Florida-Licensed Cannabis Companies

Firm News Emily Zulz

The Business Trial Group has filed a lawsuit on behalf of an engineer who built custom machinery for one of the largest Florida-licensed cannabis companies, Cansortium, and then was shorted on a significant portion of his compensation package.

In 2017, Cansortium engaged Querrey Group, a small engineering and construction firm, to create unique machinery for use in the manufacture of its cannabis products. In exchange, the Querrey Group was to receive a $5 million compensation package that included monthly payments, equity, stock options, and royalties.

Unfortunately, once Cansortium obtained the valuable machinery and intellectual property of Daniel Querrey, an experienced and skilled engineer, it refused to compensate Querrey in accordance with the parties’ agreements.

According to the Complaint, at the same time Cansortium and its executives were stringing Querrey along with false promises, they raised $56 million with a public offering.

“To this day, Defendants continue to reap the benefits of Plaintiffs’ labor, while owing Plaintiffs in excess of two million dollars,” the Complaint states.

BTG attorneys Joshua Alper, William Lewis and Arletys Hernandez filed the suit in Miami, Florida against Cansortium and its executives.

Why Querrey’s Intellectual Property Was Valuable to Cansortium

In September 2017, Querrey had a meeting with two Cansortium executives — Jose Javier Hidalgo and Jeffrey Reath — in Winter Garden, Florida, at one of Cansortium’s facilities.

Cansortium, which is one of the few licensed cannabis (often referred to as medical marijuana) sellers in Florida, operates the fifth-most dispensaries in the state, according to Seeking Alpha.

After Querrey observed Cansortium’s cannabis manufacturing process, he believed he could design and build machines that would dramatically accelerate the cannabis-terpene production process and, thereby, increase the companies’ profits.

The terpenes contained in cannabis buds are valuable and highly profitable; thus, separating and collecting the terpenes as fast as possible with little waste incurred is critical to a profitable operation. Querrey’s machine would use complex scientific and technical methods to separate and collect the terpenes more quickly than traditional methods, and would do so in a manner that resulted in minimal waste.

“This intellectual property would be valuable because the method previously used by Cansortium to create medicinal cannabis products (by separating the terpenes contained in the cannabis bud by hang-drying the plant) was time consuming and wasteful,” the Complaint notes.

In exchange for serving as a consultant for Cansortium and selling the above mentioned intellectual property to Hidalgo’s companies, Cansortium’s executives put together an agreement that was to give Querrey compensation of $5 million within 18 months. This agreement included monthly payments, equity, stock options, and royalties.

Based on the representations of Hidalgo, Reath, and Patrick Maloy, the chief operating officer of Cansortium, Querrey agreed and accepted these offered deal terms.

Cansortium Breached Querrey’s Consulting and Repurchasing Agreements

The Complaint alleges that Hidalgo, Reath, and Maloy fraudulently induced Querrey to enter into the transaction, and that Cansortium committed multiple breaches of the parties’ agreement.

For instance, Querrey never received any payments from its 5% interest in the net proceeds from the sale of products that were developed using Querrey’s machinery. Querrey also never received multiple monthly payments that were part of the Consulting Agreement.

The Defendants also agreed that Cansortium Inc. would repurchase Querrey’s 300,000 shares at $2.00 per share. To date, Cansortium Inc. has not repurchased Querrey’s shares at the IPO price.

Additionally, Consortium has failed to pay Querrey’s companies for certain services, including, but not limited to, maintenance and repair of existing equipment not designed or engineered by Querrey; unrelated construction and engineering work; prospecting for additional locations on which the cannabis operations would be built; and designing the infrastructure for these other locations.

In total, the Complaint alleges that Cansortium owes Plaintiffs over $2 million.

Experienced Business Attorneys for Cannabis Industry Lawsuits

Since medical marijuana was legalized in a 2016 ballot question, the marijuana industry has been growing in Florida and is expected to only get larger. Florida is getting closer to legalizing recreational marijuana, with some reports saying legal recreational marijuana could be a reality in Florida as soon as 2020.

As the legalization of marijuana continues to expand, the Business Trial Group is seeing more frequent claims in this nascent industry. If you have a business or commercial dispute related to the cannabis industry, our attorneys can help.

The Business Trial Group attorneys have extensive experience handling contact, fraud, and other commercial disputes involving a wide variety of industries, including cannabis production. Our attorneys have represented businesses and individuals who have suffered losses due to improper business tactics — and our track-record of victories speaks for itself.

To determine your legal options, get in touch with the Business Trial Group for a free case review. We handle all cases on a contingency fee basis, which allows you to pursue your claims against the most well-funded opponents, without fear of high hourly attorneys’ fees.