Hemp and CBD company GenCanna has filed a lawsuit in a Kentucky federal court alleging that hemp processor Vertical Wellness reneged on an agreement to provide drying services for 12 million pounds of hemp.
GenCanna, a seed-to-sale hemp and CBD company based in Winchester, Kentucky, and Vertical Wellness, a Cadiz, Kentucky-based vertically integrated hemp and cannabinoid health and wellness brand firm, entered a biomass toll processing and drying technology deal in July.
According to the lawsuit, GenCanna said it had asked Vertical Wellness to pause its drying services in November, when GenCanna’s chapter 11 bankruptcy plan was approved and MCG Investment Group purchased most of the company’s assets.
Law360 first reported the GenCanna lawsuit.
GenCanna said it had moved more than 16 million pounds of hemp to Vertical Wellness’ facility in Cadiz.
But after Vertical Wells initially agreed to stop the drying operations, it restarted again in December without GenCanna’s permission, according to the lawsuit.
According to correspondence cited in the lawsuit. Vertical Wellness said it resumed the operations based on the agreement that GenCanna’s hemp would be processed before the end of 2020.
The correspondence also shows that Vertical Wellness CEO Smoke Wallin told GenCanna last year that the deal involved a “major investment” for Vertical Wellness and that suspending the drying operations would impact the company and result in layoffs.
GenCanna, for its part, claims it tried to seek assurance from Wallin that Vertical Wellness could complete the contract this spring, but was turned down.
According to GenCanna, it terminated its agreement with Vertical Wellness on the same day it filed the lawsuit, which claims breach of contract and seeks unspecified damages and costs.
In the correspondence, Wallin said that GenCanna and MCG Investment Group breached the contract and filed a “frivolous” lawsuit.