Cannabis testing lab Steep Hill and three Arkansas cultivators are challenging legal accusations of falsifying THC levels in a class action lawsuit.
The latest suit, filed in February by Jakie Hanan, an elderly man with a disability and chronic pain, was moved March 31 from state civil court to federal court at the request of multi-state operator Steep Hill, which claimed $5 million is at stake, according to Law360.
Hanan accuses Overlook Partners LLC, d.b.a. Steep Hill Arkansas and co-owners Brandon Thornton and Brent Whittington, as well as Arkansas cultivators Bold Team; NSMC-OPCO LLC, d.b.a. Natural State Medicinal; and Osage Creek Cultivation, of overstating the amount of THC in marijuana flower by approximately 25% on average and as high as 52%.
Last Wednesday, Steep Hill and NSMC-OPCO filed motions to dismiss, according to Law360. Among their arguments, they said Hanan had no interaction with either Steep Hill or the cultivators. The defendants asserted the Hanan hadn’t demonstrated actual financial loss, and had failed to allege facts to support the fraud claim, such as the actual NSMC products he purchased that were labelled with the allegedly inflated THC levels.
This lawsuit follows a federal racketeering lawsuit that Hanan and two other medical marijuana patients filed against these companies, as well as their law firms, accountants and financial institutions, in July 2022. In October, the plaintiffs’ attorney Luther O’Neal Sutter moved to dismiss the case without prejudice with the intention to refile. In February, U.S. District Judge Kristine G. Baker approved the motion but warned the plaintiffs may have to pay the defendants’ attorney fees.
THC too high?
Hanan said in both complaints that he had purchased marijuana cultivated by these companies and tested by Steep Hill, believing the labeled dosages would treat his condition. He claimed that some products were less potent than labeled and “were unable to reliably provide” the relief he expected.
So he and the other patients had 36 flower samples from these cultivators tested at other unidentified, state-approved labs between January 2021 and February 2023.
“Excluding Steep Hill, local labs produced results within I0% or better of each other. Steep Hill’s results averaged 25%+ higher than the other labs, depending on the lab, sample pool, etc.,” alleged the state complaint, originally filed in Circuit Court of Pulaski County.
Hanan also alleged a scheme in which cultivators could essentially use their own employees to conduct testing of their products at Steep Hill’s Arkansas lab facility, claiming that Steep Hill Arkansas allowed the cultivators to provide the samples and paid cultivator employees “so they could also be ‘Steep Hill employees’; and, therefore, sampling was carried out by the lab.”
Hanan acknowledged in the complaint that Steep Hill Arkansas “may have changed many of their processes” since July 2022 when the original Plumlee v. Steep Hill Inc. case was filed. But he claimed it does not absolve Steep Hill from years of fraudulent testing and the lab cannot be trusted.
“The fraudulent testing comes at the expense of medical marijuana patients. Plaintiff and Class pay for a higher grade of marijuana but are in fact receiving a lower grade of marijuana. This situation, ongoing for years, has created millions of dollars of fraudulent profit,” the complaint stated.
Marijuana patients fight paying attorney fees
Meanwhile, the patients and their attorney are challenging the federal judge’s order to pay attorney fees.
Hanan, along with Don Plumlee and Pete Edwards, initially sued in U.S. District Court for the Eastern District of Arkansas alleging that since marijuana cultivation is illegal at the federal level, the Racketeer Influenced and Corrupt Organizations (RICO) Act applied.
“Dealing in marijuana is racketeering activity under RICO, and those who engage in a pattern of racketeering activity through a corporation or other enterprise are liable for three times the economic harm they cause plus costs and attorney fees,” they stated in their original complaint.
The marijuana businesses filed a motion to dismiss. But instead of responding to that motion, the plaintiffs filed their own motion to dismiss without prejudice. Judge Baker granted it on the condition that if the plaintiffs refiled in state court, the marijuana companies could file a motion requesting the plaintiffs pay “an appropriate amount of costs and fees,” according to Law360. The companies filed such a motion after Hanan filed the state suit on Feb. 23.
The marijuana patients asked for a hearing, stating that the judge abused her discretion.
“Rule 11 and 28 U.S.C.§1927 encourages litigants and lawyers alike to reconsider legal positions. This is what has occurred in this case. RICO damages are limited, and Plaintiff’s state law claims for elder abuse appear to be much stronger. But this Court is not the final arbiter of Arkansas state law issues,” the plaintiffs said in a motion for a hearing on the matter.
“Rather than reward undersigned counsel for his conservative judgment, the Court abused its discretion by failing to follow even the most elementary rule of law. A Plaintiff has an absolute right to dismiss an action without prejudice, pre-answer. In addition, it is simply beyond the Court’s power to direct Plaintiffs who to sue, what laws to sue under, or to create jurisdiction.”
Osage Creek Cultivation Chief Operations Officer Jay Trulove declined to comment. Attorney Lucien Gillham of Sutter & Gillham, representing Hanan, returned a call from CRB Monitor but referred questions to Sutter, who has not responded. Representatives for the other companies and their attorneys have not responded to phone messages for comment.
A spokesman for the Arkansas Medical Marijuana Commission and Department of Alcoholic Beverage Control, which enforces medical marijuana regulations, also declined to comment.
