Quick jury verdict might solidify how cannabis distribution deals are formed

A unanimous jury verdict in Ukiah could solidify how distribution deals are formed in the cannabis industry.

Vista Distribution Inc. beat back a lawsuit from cannabis grower First Cut Farms LLC, alleging Vista agreed to purchase cannabis in bulk but refused to pay.

Mendocino County Superior Court Judge Jeanine B. Nadel oversaw the trial, which ended Jan. 27 after just four days and required only one hour of deliberation by the jury.

Andrew W. Stroud of Hanson Bridgett LLP, who represents Vista, said in an interview Thursday, "It really came down to one question: Did the parties enter into a purchase contract? If the answer was no, then that's it, the case is over."

Dominic S. Ripoli, based in Antioch, declined to comment on behalf of his client, First Cut Farms, which sought about $156,000 in damages in this breach-of-contract suit.

Vista's attorneys successfully showed the jury that what existed between the two companies was not a payment agreement but a consignment agreement, meaning the farmers do not get paid until the product is sold to a buyer.

Stroud was also able to dismiss Blair Lamar, the CEO of Vista, as a defendant because he was able to show Lamar was being sued in her individual capacity and not as the CEO and should bear no personal liability for the contract.

Stroud said distribution agreements involving marijuana are different from agreements for other crops because cannabis needs to be tested on various metrics such as potency, THC percentage and safety.

"It requires it to be done this way because of testing standards," Stroud said, "Because you wouldn't want to buy upfront a bunch of cannabis and then have it turn out: a) not to pass the safety procedures and b) not to be nearly as potent as you would expect it to be."

According to Stroud, this verdict should help solidify the norm for cannabis distribution through consignment agreements instead of buying all of the product upfront. First Cut Farms LLC v. Vista Distribution Inc., SCUK-CVG-19-72818, (Mendocino Sup. Ct., filed June 20, 2019).