A federal judge in Puerto Rico tossed out local banking cooperative TuCoop’s attempt to get legal cover so that it could shut down the account of a medical cannabis dispensary that the bank claimed was allowing electronic payments for cannabis.
TuCoop sued customer 3G Green Gold Group in June, seeking a declaratory judgment to close out 3G’s account under suspicion of shady transactions for cannabis. TuCoop, a San Juan-based savings and credit cooperative organized under Puerto Rico’s banking laws, claimed that 3G was using a third-party service based out of Florida to process nondescript electronic payments for cannabis, which potentially violates federal banking rules.
Despite TuCoop’s claims, U. S. District Judge Raúl M. Arias-Marxuach was unconvinced that TuCoop’s complaint was more than an attempt to circumvent state law, under which 3G may sue in response to losing their bank account.
“TuCoop seeks declaratory judgment because it wishes to close 3G’s accounts and seeks to forestall anticipated litigation regarding such closure,” wrote Arias-Marxuach in his six-page ruling on Nov. 7. “Plaintiff is using the Declaratory Judgment Act to deliver a ‘preemptive strike’ against a prospective state court action by defendant. In this scenario, the jurisdiction of a federal court is dubious at best.”
In its motion to dismiss, 3G argued that TuCoop failed to reference any laws that would have justified a court-ordered right to close their account without 3G being able to sue in response.
“3G avers that the laws and regulations cited by TuCoop in the Complaint do not confer a private right of action,” said the ruling. “Defendant is correct, and accordingly, Plaintiff cannot transform its complaint into one that raises a federal question.”
In its lawsuit, TuCoop claimed that 3G disguised numerous financial transactions from its dispensaries as non-cannabis-related deposits and transfers.
A ruling in the case could have potentially changed how electronic payments are treated when involved with cannabis companies. As it stands, most banks are skittish about risking federal oversight by accepting electronic payments over their state’s FedWire service, which operates through the local federal reserve. In the case of Puerto Rico, FedWire operates through the New York Federal Reserve.
TuCoop sought a court order supporting its legal right to close the account, but representatives from 3G claimed that the federal court does not have proper jurisdiction over the case and that TuCoop’s complaint assumes criminal acts that have not been proven. The lawsuit also comes shortly after 3G attempted to involve themselves in TuCoop’s annual meeting.
In a response to the original complaint, 3G alleged that it was their attempt to involve themselves in TuCoop’s annual meeting that caused the banking cooperative to lash out with legal action.
“This Court must understand that the real issue behind this case is TuCoop’s retaliation for 3G shareholders’ initiative to nominate and vote for directors at TuCoop’s annual meeting held May 31, 2023,” said 3G’s Aug. 4 motion to dismiss. “As an uncontested fact, TuCoop filed this complaint six days after some 3G shareholders nominated and tried to vote for directors in TuCoop annual meeting, and TuCoop refused to let 3G shareholders participate or vote.”
In response, TuCoop argued that their case was appropriate for federal court, because it will theoretically determine how TuCoop handles cannabis businesses in the future as per federal banking law.
“TuCoop has raised a dispute that involves a pure question of law that would govern the ongoing conduct of financial institutions that serve MRB’s under applicable State law, but which are also bound to comply with federal laws and the applicable guidance,” TuCoop said.
Regardless of the bank’s motivation, the court ultimately ruled that their complaint was improper and the case was dismissed.
Carlos Law, which was the firm that represented TuCoop in the suit, did not respond to a request for comment. But an appeal is unlikely, as the 30-day time limit to appeal a federal ruling in a civil case with the First Circuit Court expired on Dec. 7.
