Marijuana litigation: Colorado federal court upholds marijuana partnership dispute under the Colorado River waiver principle
Earlier this week, the U.S. District Court of Colorado decided to retain (ie suspend) the cannabis lawsuit (Leago v Ricks, No. 20-CV-03297) on disputes between cannabis business partners because of similar pending lawsuits in state courts.The legal basis for the court’s decision is Colorado River Abstentionism. We have written articles on how the Federal Court uses various waiver doctrines on several occasions:
The doctrine of waiver provides guidance to the federal courts on whether to suspend or dismiss federal proceedings for various reasons unrelated to the claims. As we wrote when discussing the Ninth Circuit’s decision to waive a case involving the transportation of marijuana through Idaho, on the basis of Younger’s abstention:
“The waiver principle includes Colorado River Abstention-this is related to avoiding repeated litigation; this Luke Feldman Principles-involving federal court review of state court decisions; Pullman Abstention-This involves avoiding decisions based on unclear state laws; and Burford Abstentions-This involves postponing the review of complex national administrative procedures. “
My colleague, An Jihui, Describe how Colorado River The waiver may apply to International Marijuana litigation.The ruling is in Lego Shows how the federal court applies this principle when the pending state court litigation is basically similar to the federal court litigation.
fact Lego Describe something that is too common these days: a problem with cannabis cooperation. The plaintiff claimed that Leago and Ricks reached an oral cooperation agreement to purchase hemp seeds, plant clones, and then sell hemp clones to farmers. (Note: Oral cooperation agreement, as we mentioned Here with Here, May be the most common form of business relationship for litigation). Leago alleges that Ricks violated their verbal agreement by not donating US$400,000 for cannabis seeds or paying approximately US$4.5 million for cannabis clones sold and distributed to Ricks and his other businesses.
At the same time, lawsuits involving some of the same entities and the same basic circumstances are being heard in Colorado courts.So in the federal lawsuit, Ricks based Colorado River Abstentionism.
The Federal Court began its analysis by noting that it exercised its “unwavering” obligation to give it jurisdiction, although it may be appropriate to waive that obligation under certain circumstances.One of them is the principle of avoiding duplication of litigation, which is its core Colorado River Abstained.Assess whether Colorado River Whether abstention is appropriate requires consideration of eight non-exclusive factors. No single factor is decisive, but the court applies a balance test, which should be applied in a pragmatic and flexible manner, focusing on the actual situation of the case.
I will not bore you with the review of each factor and the technical legal analysis of how the court applies these factors. After all, this is not a cannabis blog for lawyers, but a cannabis blog for businesses.
The court appropriately reviewed each factor and found that these factors favored the waiver. However, the court did not dismiss the federal court’s case, but suspended the proceedings and waited for the settlement of the state court proceedings. Therefore, if the state court proceedings cannot completely and ultimately resolve all issues between the parties (and various third parties), the federal court may reopen the case.
Due to the court’s ruling, neither party in the federal lawsuit has recovered its attorney fees. So the money spent on petitions, other motions, etc. are sunk costs. Therefore, when a lawsuit in a state court is already underway, please consult your legal counsel before rushing to the federal court because you think you will be smarter than your opponent. And please do not participate in verbal cooperation agreements (or agreements of any kind!) that may involve millions of dollars.