Elevele, a Highland Park, Ill., medical cannabis dispensary, is suing Harvest Enterprises, a multi-state cannabis operation based in Tempe, Ariz. The dispensary’s owners have attempted to terminate a purchase agreement that would have seen Harvest acquiring 100-percent equity in Elevele and increasing its footprint in Illinois.
And there’s the rub: In attempting to terminate the purchase agreement, Elevele’s owners allege that Harvest’s ongoing acquisition spree gives the conglomerate more than Illinois’ cap of five medical cannabis dispensary licenses per owner. During negotiations with Elevele, the Arizona company’s management “repeatedly acknowledged to Elevele that it and its affiliates had the contractual right to acquire more than five dispensary licenses in the State of Illinois,” according to the lawsuit. Earlier this year, Harvest acquired Chicago-based Verano Holdings and its three Illinois retail licenses. By violating Illinois regulations, according to the lawsuit, Harvest would put the purchase agreement (and Elevele’s own operations) in jeopardy.
Read the full lawsuit below.
Harvest disputed Elevele’s attempt to terminate the purchase agreement. “The Termination Notice is invalid,” Harvest assistant general counsel Lazarus Rothstein wrote in a July 23 email to Elevele’s attorney. “Elevele has no basis to terminate the Agreement, and Elevele is not relieved of its obligation to close the contemplated Membership Interest purchase as soon as possible.”
Elevele filed its lawsuit on July 24. The complaint asks that the U.S. District judge compel Harvest to terminate the deal.
“Despite Elevele’s repeated requests,” the lawsuit states, “Harvest has provided Elevele with no plan for how it intends to relinquish any of the excess licenses it has acquired and thus enable the transaction to close.”
Beginning Jan. 1, 2020, adult-use cannabis will be legal in Illinois. The law allows all current medical dispensary license holders to acquire a second site within the first two months of the new adult-use program. Elevele’s owners insist, however, that the “condition of uncertainty” now surrounding its first license will prevent the company from pursuing new opportunities in the adult-use marketplace.
Elevele points out in its lawsuit that this dispute isn’t occurring in a vacuum; the same sort of Harvest ownership conflicts arose in Pennsylvania and Ohio. In Pennsylvania, Harvest ran afoul of state regulators when it pronounced in public statements that it held seven medical cannabis dispensary licenses—more than the allowable five, much like the Illinois situation.
In Ohio, state records suggest that the company had misrepresented its ownership structure in a cannabis cultivation business by “claiming the [Ohio] company was 51-percent owned by a member of an ‘economically disadvantaged group,’” according to the Cincinnati Enquirer. In fact, the owner and CEO of Ohio-based Harvest Grows is Harvest CEO Steve White, who, according to the Ohio Department of Commerce, wields “all powers, functions and obligations customary for a chief executive office of a company.” The state has threatened to revoke that cultivation license.