Case Studies
J.S. Held Acquires Technorm, Québec’s Leading Forensic, Building Safety & Compliance Experts
Read MoreA cannabis operator in Arizona contracted with a third party to provide the infrastructure, expertise, labor, and other consulting services necessary to assist the license holder in cultivating medical cannabis to subsequently be sold at the license holder’s dispensary and other Arizona dispensaries. Shortly after executing the contract, the cultivation consultant secured a lease agreement for a large warehouse space and performed the necessary tenant improvements to cultivate cannabis. Approximately six months later, the facility received approval from state regulators for cannabis cultivation and began operating. All tenant improvements and cultivation costs were borne exclusively by the cultivator.
The parties began experiencing difficulties almost immediately, and two years into the contract period, the contract was amended. In the third year of the contract, the parties entered into a Transfer and Termination Agreement with the goal of ending their relationship. Pursuant to Arizona law, the license holder was the only entity legally allowed to own cannabis, although the cultivator bore all costs related to its production. The Transfer and Termination Agreement addressed the ownership issue by allowing the cultivator to identify another Arizona license holder to which the cannabis could be legally transferred while remaining at the cultivator’s facility.
The cultivator identified a willing license holder. However, before an agreement with the new partner was finalized, the original license holder notified the Arizona regulator that it was de-certifying the facility. The license holder subsequently accessed the cultivation facility and destroyed the growing plants (the Alleged Wrongful Acts).
Professionals in J.S. Held’s Phoenix office, who work extensively in the cannabis sector, were engaged in calculating the economic damages suffered by the cultivator due to the Alleged Wrongful Acts. Our professionals evaluated the contracts, all amending documents, numerous regulator inspection reports, financial information, etc., to provide an expert opinion.
To estimate the cultivator’s lost profits, J.S. Held estimated what profits should have been realized, absent the Alleged Wrongful Acts (i.e., the “Should Have Been” or “But-For” scenarios) and compared that estimate to what profits were achieved. The difference between the “Should Have Been” profits and the actual profits resulted in the lost profits. Using this methodology, J.S. Held calculated potential lost profits and issued an expert report.
Paula Durham, CFE, CCCE
Director
+1 602 279 7505
[email protected]
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