Judge Rules in Medical Marijuana Breach of Contract Suit

An opinion was filed by Judge R. Brooke Jackson on Wednesday in the District of Colorado in a suit filed by plaintiff David Bartch against defendants Mackie A. Barch and Trellis Holdings Maryland, Inc. Plaintiff Bartch alleged in the complaint that the defendants had refused to return Bartch’s interest in a medical marijuana company called Doctor’s Orders Maryland (DOMD).

Plaintiff Bartch ran a small marijuana business in Colorado called Doctor’s Orders Denver. He collaborated with defendant Barch in regard to the business as well as a potential new business venture in Maryland since defendant Barch had a more traditional business background, and Maryland had recently legalized marijuana.

In June of 2015, with the assistance of Vicente Sederberg LLP and defendant Barch, the plaintiff founded DOMD. The plaintiff owned 70% of the company in dilutable shares, while the other 30% was owned by a philanthropic family in non-dilutable shares.

In attempting to get growing, processing, and distribution licenses with the Maryland Cannabis Commission, DOMD listed the owners of the company as individuals other than the plaintiff, since the plaintiff’s minor drug possession charge would have “torpedoed” the application. After obtaining pre-approval, the individuals transferred their ownership to defendant Trellis.

The plaintiff still advocated that half of the interest in the company owned by Trellis was rightfully his, and that he had listed other owners on the applications in an effort to gain approval more quickly. However, the plaintiff explained that the interest in DOMD was never transferred from the defendant to the plaintiff, and that the defendant transferred the interest into a trust when the plaintiff filed suit.

Plaintiff Bartch’s initial suit sought judgment that Trellis was legally obligated to transfer 50% of its interest to the plaintiff. The complaint cited civil theft, conversion, constructive trust, breach of contract, and unjust enrichment. The claims addressed in Wednesday’s opinion were civil theft, conversion, unjust enrichment, and breach of contract (damages).

The defendant’s argued that the contract was made for an improper purpose and improperly sought to hide the plaintiff’s ownership interest from the Maryland Cannabis Commission. However, Judge Jackson determined that the plaintiff had demonstrated an enforceable contract, which the defendant had breached, and determined $6.4 million in damages.

Judge Jackson declined to award the plaintiff any damages on their civil theft, conversion, and unjust enrichment claims since they had not demonstrated that the defendant had a tort duty to them independent of their contractual duty. Further, the plaintiff could not recover damages for a quasi-contract on the same matter as the express oral contract.

The defendants were found guilty of breach of contract. Judge Jackson determined that they would be responsible for awarding the plaintiff with $6.4 million in damages on Wednesday.

On Thursday, the plaintiff filed a follow-up lawsuit in which he alleges claims of fraudulent transfer, constructive fraudulent transfer, and conspiracy to violate the Colorado Uniform Fraudulent Transfer Act and the Maryland Uniform Fraudulent Conveyance Act.

The plaintiff is represented in the litigation by Lahti Helfgott.