Colorado companies awarded $1.14 million over failed CBD biomass deal

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Two Colorado companies have been awarded $1.14 million after bringing suit over a CBD biomass deal that went bad.

A U.S. federal court for the District of Colorado found that Layn USA Inc., and affiliated Indiana-based Hemprise LLC, breached a contract with Moose Agricultural and Colorado Hemp Solutions LLC (CHS), related entities based in Grand Junction, Colorado, when they failed to complete a promised $1.2 million purchase of biomass.

Layn USA is a unit of Guilin Layn Natural Ingredients Corp., Guangxi Province, China; Hemprise operates a CBD processing facility in Jeffersonville, Indiana.

Delay tactics

The plaintiffs charged Layn USA and Hemprise with “using impermissible means” to withhold payment, including requiring onerous testing of the biomass and raising a number of questions after the contract was signed, as delay tactics.

Layn and Hemprise argued that some biomass samples from Moose and CHS failed to contain promised CBD levels of at least 8%, while other samples went beyond the allowable THC level of 0.3% under the definition of hemp in the 2018 U.S. Farm Bill which legalized hemp federally.

While the court agreed with those observations, the plaintiffs successfully argued that the biomass would have been compliant if it had been accepted by Layn and Hemprise in a timely manner. Delaying acceptance caused the CBD content to degrade, leading to the low levels present in the tested material, Moose and CHS said. They also took issue with the lab results that showed the over-the-limit THC results.

Summary judgment denied

After the case was filed in 2020, Layn filed a petition for summary judgment, arguing that it was not liable for breaching the contract because it assigned its rights and duties under the original agreement to Hemprise. But the court denied that petition late last year, and the case proceeded against both companies.

Layn first announced its entry into the CBD market in 2019 with an $80 investment in the Indiana Hemprise facility built to process a minimum of 5,000 tons of hemp biomass and yield 160 tons of CBD and 290 tons of broad and full-spectrum oil annually. Hemprise said at the time it envisioned production of CBD products including food, cosmetics, nutraceuticals and pet products. The 100,000 sq. ft. factory went online in late October 2021 as a global crash in the CBD market that started in 2019 reached its depths.

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