Arizona Court Grants Judgment on the Pleadings in Hemp Industry Machinery Dispute

On Friday, the District of Arizona granted the defendants’ motion for judgment on the pleadings and denied the plaintiff’s leave to amend in a case arising from a disputed contract for a hemp distillation machine.

According to the complaint, plaintiff O-Factor is in the business of processing hemp oil, and in December 2019, O-Factor entered into a contract with a non-party to rent a commercial distillation unit. The order states the distillation unit was not delivered on time or in an operable state causing O-Factor to sustain more than $1.5 million in economic damages because it was unable to fulfill its processing obligations under a second contract to process hemp oil into a refined product for another non-party.

The order states O-Factor sought to recover its economic damages from two companies it did not have contractual privity with Mass2Media, LLC, doing businesses as PX2 Holding, who manufactured the distillation unit, and Precision Extraction Solutions, the distributor that supplied O-Factor’s contractual partner with the distillation unit. In O-Factors’ complaint against Precision Extraction Corporation and PX2 Holdings, it alleged negligence under product liability and breach of implied warranty of merchantability. 

According to the court, the defendants subsequently moved for judgment on the pleadings. The court held that the plaintiff’s negligence claims failed as a matter of law because O-Factor did not allege that its injury was a result of an inherently dangerous or hazardous product that caused an accident resulting in personal injury or damage, but rather its injury arises from “an alleged failure of the product to perform as expected.” Additionally, the court held that the plaintiff’s implied warranty of merchantability claims also failed because an alleged breach of the implied warranty of merchantability requires privity of contract in Arizona which the party lacked. 

Further, the court held that the plaintiff failed to request leave to amend in the event the defendants’ motion was granted and even if it did such a request would be denied because  amendment would be futile as no set of facts can be proved under the amendment that would constitute a valid and sufficient claim.

O-Factor was represented by Dumond Law Firm, PLLC, and the defendants were represented by Hymson Goldstein Pantiliat & Lohr, PLLC.