Glass House Responds to “Black Marketeer” Allegations with Lawsuit

June 29, 2023 · MG Magazine

A dispute between California cannabis competitors has resulted in dueling lawsuits containing extraordinary allegations of black marketeering and reckless disregard for the truth.

In a complaint filed June 20 in Los Angeles Superior Court, Glass House Brands Inc. claims Long Beach-based Catalyst Cannabis Co and two of the company’s principals defamed Glass House by alleging the company is “the biggest black marketeer in American history,” among other unsavory accusations.

Catalyst, under the company name 562 Discount Med Inc., filed an action of its own in the same court on June 6, in which the company asserted Glass House “has become one of the largest, if not the largest, black marketers of cannabis in the State of California, if not the country.” The lawsuit, which alleges unfair and fraudulent business practices, also asserts Glass House “has purposefully structured its business so as to massively profit from the illegal sale of cannabis to the substantial financial detriment of legal operators.”

Catalyst Chief Executive Officer Elliot Lewis also has been vocal on social media in pressing the same accusations, and several of the videos he has published are cited in the defamation suit.

Glass House describes the defamation action as a “dispute between competitors arising out of defendants’ outrageous, baseless, defamatory statements falsely accusing plaintiffs of illegally diverting and distributing cannabis and cannabis products throughout California and the United States.”

“Defendants … have launched a misguided and systematic defamatory social media campaign falsely accusing Glass House and its co-founders, Kyle Kazan and Graham Farrar, of being ‘the biggest black marketeer in the entire American History,’ likening plaintiffs to a Mexican drug cartel,” the defamation complaint continues. “Nothing could be further from the truth. Defendants made the statements without any evidence, knowing them to be false or, at the very least, with reckless disregard for the truth.”

Glass House contends the defendants “have no viable defense for their misconduct,” adding that their statements both on social media and in the lawsuit filed by 562 Discount Med “are provably false and therefore defendants cannot rely on truth as a defense.”

Throughout the defamation action filed last week, Glass House strongly denies the assertion the company is breaking the law and skirting California’s regulations in the ways Lewis and Catalyst have asserted.

“To date, no state or local regulator has imposed any regulatory violations or assessed any penalties relating to any alleged violations against Glass House,” the company states. “Plaintiffs run a compliant business that closely monitors its business from cultivation to manufacturing, to distribution to retail sales, and participates exclusively within the legal cannabis market in California. Defendants’ wild statements that plaintiffs operate the largest illicit cannabis business in United States history are completely and categorically false.”

Glass House also takes aim at the reasoning Catalyst and its leaders have offered in support of their accusations, noting the defendants “attempt to justify their conclusion by relying on ‘math.’”

“However, this ‘math’ is entirely manufactured and unsubstantiated, to say nothing of the bias resulting from defendants’ willful decision to ignore reliable sources, and their failure to investigate or acknowledge the ramifications of AB 195—a law which eliminated the cannabis cultivation tax effective July 1, 2022, and which made retailers (rather than distributors) responsible for collecting and remitting the cannabis excise tax staring (sic) January 1, 2023,” Glass House argues.

Glass House alleges the Catalyst defendants are liable for both defamation and violation of California Business & Professions Code §17200. The company seeks a variety of damages, including actual, compensatory, consequential, punitive, and exemplary damages, as well as pre- and post-judgment interest. The company also asks the court for “injunctive relief mandating that defendants remove any defamatory content and enjoining defendants, or any of them, from posting or publishing any similarly defamatory comments in the future.”

In a video posted to LinkedIn after being served with the defamation lawsuit, Lewis makes clear that, far from being concerned about the legal action filed against him, he’s thankful for what he sees as a strategic blunder on the part of Glass House.

“This part here is super important: Discovery. Thank you … Now we got a fucking truck to drive through this discovery,” Lewis says. “We’re gonna call witnesses, we’re gonna subpoena fucking records … So, thank you.”

Lewis then picks up a copy of the defamation lawsuit, saying “Frankly, this little Glass House pile of shit? I wipe my ass with it.”

An initial hearing in the defamation suit filed by Glass House is scheduled for August 23 in Los Angeles. A hearing in the suit filed by Catalyst (DBA as 562 Discount Med Inc) is scheduled for Aug. 29 in a Long Beach court. (Full Story)

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