Hemp Company Files Complaint After Seed Agreement is Breached

Exotic Canopy Solutions LLC, (ECS) a California business which sells hemp seeds and plants, filed a complaint in the District of Colorado on Tuesday alleging that two companies and their presidents did not fulfil an agreement to provide seeds to ECS. The company asked for over $10 million in damages, based on three times the value of the seed crop.

ECS entered an agreement with Eastern Colorado Hemp Operations (ECHO) and Curnativ Farms LLC in January of 2020, where ECHO would “grow, harvest, process, and deliver a seed crop” consisting of four million Hempress 3, or H3, seeds. The agreement said the seeds would have, at minimum, a germination rate of 80 percent and contain no mold or other contaminants. Curnativ connected the two companies and, according to the complaint, “insisted on being made a party to the contract and was willing to accept joint and several liability with ECHO in exchange for its participation.”

ECS provided 6,200 H3 seeds to ECHO to use as a stock in producing the four million seeds. The parties agreed that ECHO would provide the seeds by June 12, 2020 which would give the plaintiff time to plant the seeds for the next harvest. If the crop failed, which it did according to the requirements, ECS would not owe any payment, Curnativ would repay the entire working capital of $50,000, and, “if crop destruction is not deemed necessary,” the defendants would send 90 percent of the seed crop.

The plaintiff claimed that ECHO and Curnative did not fulfil their contract, and are “now holding hostage nearly four million seeds that rightfully belong to ECS, threatening to sell those seeds unless ECS pays a price beyond the parties’ bargain.” The defendants sent a small sample of six pounds of seeds, as of the filing of the complaint, had not sent any additional seeds. Tests showed the seeds contained mold and heavy metals and they did not meet the agreed germination rate.

The complaint alleged that “ECHO has refused to accept that a crop failure has occurred – despite clear evidence to the contrary – and has demanded monetary compensation before agreeing to deliver the seed crop to ECS.” Additionally, Curnativ “disclaimed all responsibility” for the crop.

ECS claimed that the defendants “misrepresented” ECHO’s experience with hemp and ability to complete the agreement. The complaint stated “as a result of ECHO’s failure to follow industry standard practices, the seed crop was blighted by mildew and had a high dormancy rate. ECHO’s incompetence led to a late harvest, making delivery by June 12, 2020 impossible.”

The complaint purported that because of the laws in the United States, including the 2018 Farm Bill and state laws, a reputable source for hemp seeds is necessary because of strict THC regulations. The H3 seed is “especially desirable” because it contains a high CBD concentration while maintaining a low THC concentration.

The plaintiff, represented by Vicente Sederberg LLP, claimed that because of the defendants’ actions it has “suffered dire financial consequences,” asserting that its reputation was damaged and it was forced to sell the 6 pounds of seeds it received at a discount. The company filed claims of breach of contract, unjust enrichment, civil theft, and fraud.