Case Studies

Assessment of Alleged Damages Related to a Failed Hemp Farm

J.S. Held’s Inaugural Global Risk Report Examines Potential Business Risks & Opportunities in 2024

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The Situation

A California farmer owned approximately 540 acres in Arizona and marketed the property for sale in 2019. Through a broker, an interested buyer approached the farmer. The buyer represented that she had a consortium of investors poised to fund a project centered on farming and processing hemp for sale in various forms (hemp project). In early 2020 the parties entered into a farm purchase agreement (FPA) whereby the California farmer sold the property to the buyer.

The buyer failed to satisfy the down payment requirements of the FPA. However, the farmer elected to enter three subsequent revenue sharing agreements (RSAs) with the buyer, ostensibly with the goal of project success and ultimately the buyer’s performance on the FPA. Two of these RSAs required the farmer to provide additional funding pursuant to certain parameters being met by the buyer. The farmer provided some funding but discontinued funding when the buyer failed to meet the required parameters.

The hemp project ultimately failed, and the buyer did not perform on the FPA. The farmer foreclosed on the property in 2022 and subsequently filed a lawsuit against the buyer. The buyer countersued the farmer, alleging in the counterclaim that the hemp project failed because the farmer did not provide all the funding outlined in the various RSAs. The counterclaim alleges that the buyer lost potential profits of $81M because the farmer failed to fund $60K.

How We Advised

Professionals in J.S. Held’s Phoenix office who work extensively in the cannabis sector were engaged in evaluating the $81M damage claim articulated in the counterclaim. The buyer provided no expert opinion or support for their claimed $81M damages. Our professionals evaluated the FPA and each of the subsequent RSAs, hemp industry research, and numerous other documents to provide an expert opinion. J.S. Held demonstrated that the buyer’s asserted damages were unsupported, speculative, and not calculated to a reasonable degree of certainty. Additionally, J.S. Held demonstrated that the buyer did not provide any evidence that the alleged lack of funding of $60K for the project resulted or could have resulted in any losses, much less the claimed $81M. Finally, J.S. Held demonstrated that the buyer did not attempt to mitigate their damages properly.

Key Contact

Paula Durham, CFE, CCCE
Director
Economic Damages & Valuations
+1 602 279 7505
[email protected]

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