Tonkon Torp Wins Arbitration for Cannabis Farm Manager
Tonkon Torp has secured an award of $647k for a cannabis farm management company based on its work in 2017.
2017 was the first year a large number of outdoor cannabis farms were licensed by the OLCC. This combined with favorable weather conditions resulted in a record bumper crop, and the wholesale price of sungrown cannabis dropped by more than half. With revenue far below expectations, the worst global cannabis market on record wiped out farms and strained many business arrangements.
One soured arrangement occurred between our client, a farm management company, and the landowner with whom they had signed a three-year exclusive management agreement. Under the contract, the manager would cover all operating expenses to produce, harvest, and sell the product and would share in net revenues.
After it harvested and began marketing the first year’s crop, the manager was entitled to be reimbursed for expenses in excess of $200,000, and to receive half of the net revenue. Faced with the reality of lower prices, the landowner refused to reimburse the manager for its expenses, or to make any payment for its services. Instead, perhaps hoping that it could replicate the operation’s success without paying a manager for crop years two and three, the landowner locked the manager out of the farm, its security cameras, and its compliance system.
Seeking the compensation it had earned, the manager came to Tonkon Torp in late January of 2018. In September of 2019, after a year and a half of litigation, Alex Tinker and Jeff Bradford conducted a six-day arbitration in Medford which included competing expert testimony on cannabis production and Oregon’s cannabis market. The arbitrator found in our client’s favor on every disputed fact issue, and awarded damages based on reimbursement of out-of-pocket costs plus 60% of the first year’s net revenue.
The case exemplifies Tonkon Torp’s approach to solving our cannabis industry clients’ problems: By applying lessons learned from decades of complex business litigation and combining it with a deep understanding of this newly-regulated industry, we provide top-shelf quality counsel and we get results.
2017 was the first year a large number of outdoor cannabis farms were licensed by the OLCC. This combined with favorable weather conditions resulted in a record bumper crop, and the wholesale price of sungrown cannabis dropped by more than half. With revenue far below expectations, the worst global cannabis market on record wiped out farms and strained many business arrangements.
One soured arrangement occurred between our client, a farm management company, and the landowner with whom they had signed a three-year exclusive management agreement. Under the contract, the manager would cover all operating expenses to produce, harvest, and sell the product and would share in net revenues.
After it harvested and began marketing the first year’s crop, the manager was entitled to be reimbursed for expenses in excess of $200,000, and to receive half of the net revenue. Faced with the reality of lower prices, the landowner refused to reimburse the manager for its expenses, or to make any payment for its services. Instead, perhaps hoping that it could replicate the operation’s success without paying a manager for crop years two and three, the landowner locked the manager out of the farm, its security cameras, and its compliance system.
Seeking the compensation it had earned, the manager came to Tonkon Torp in late January of 2018. In September of 2019, after a year and a half of litigation, Alex Tinker and Jeff Bradford conducted a six-day arbitration in Medford which included competing expert testimony on cannabis production and Oregon’s cannabis market. The arbitrator found in our client’s favor on every disputed fact issue, and awarded damages based on reimbursement of out-of-pocket costs plus 60% of the first year’s net revenue.
The case exemplifies Tonkon Torp’s approach to solving our cannabis industry clients’ problems: By applying lessons learned from decades of complex business litigation and combining it with a deep understanding of this newly-regulated industry, we provide top-shelf quality counsel and we get results.
