Cannabis company’s lawsuit against state dismissed

Cannabis company’s lawsuit against state dismissed

A Missouri judge denied on Wednesday a marijuana company's effort to stop the recall of 62,000 products containing the company's THC concentrate that the state deemed a "potential threat to health and safety."

The company, Delta Extraction, is a Robertsville-based licensed marijuana manufacturer that specializes in making THC distillate, a highly potent and pure form of THC used for things like vape pens, infused pre-rolled joints and edibles.

On Aug. 2, the state regulating agency suspended Delta Extraction's license after accusing the company of sourcing untested "marijuana or converted hemp from outside of a Missouri licensed cultivation facility."

The state issued an administrative hold on the products days after and then a full product recall Aug. 14.

Delta Extraction argued in its Aug. 16 motion for a temporary restraining order that the state's actions were an "unlawful campaign to destroy Delta's business through arbitrary, unjustified, and unexplained administrative actions targeting Delta's products."

Cole County Circuit Judge Cotton Walker ruled Wednesday the company did not have grounds to challenge the recall because it has not exhausted the administrative appeal process.

The day after the state suspended its license, Delta filed an appeal with the Administrative Hearing Commission. That decision is still pending.

"Were this court to exercise jurisdiction over the hold and the recall, the parties would adjudicate the same factual disputes concurrently in this court and the Administrative Hearing Commision," Walker wrote in his judgment. "This creates an absurd result. The plaintiff's failure to exhaust its administrative remedies deprives the court of jurisdiction."

In Delta's lawsuit, it states the company has two brands under which it distributes products -- Midwest Magic and Conte.

Conte Enterprise Holdings submitted a motion to intervene in the case Monday, represented by St. Louis attorney Alec Rosenblum.

The motion states these are "misleading descriptions of (Delta's) relationship with Conte." They describe it as having agreements concerning "services and trademarks used in cannabis products."

In Delta's petition, it states that as part of its manufacturing process, Delta removes THCa from marijuana flowers in order to use it in infused products, such as vape cartridges, gummies, drinks and concentrates. They were also "utilizing industrial hemp in the manufacturing of some of its products, as well as THC-A oils," it states.

THCa is a cannabinoid found in raw marijuana, and it only becomes intoxicating when heated. There are tiny amounts of THCa in industrial hemp that one could attempt to extract, but more often people take the CBD extracted from hemp flower and chemically convert it to THCa. It's a process that's become increasingly popular after industrial hemp became a federally legal substance in 2018.

Missouri cannabis regulators argued in the case that they haven't allowed the practice of combining hemp-derived and marijuana THC in the regulated market. But Delta argued the state only specifically banned it when the new cannabis regulations went into effect July 30.

The company says it stopped this practice after July 30.

In a hearing with the commission, Delta officials said these hemp-derived THCa oils were only added to the Conte products.

On Aug. 21, an Arkansas-based company, Dark Horse Medicinals, that purchased nearly $325,000 in Conte distillate in May through Delta Extraction has sued both companies.

"Dark Horse would not have purchased the distillate if it was not in compliance with Missouri marijuana laws and regulations," the lawsuit states, "and could not be used or sold in Missouri."

The company added the distillate as an ingredient in its own products, like many other manufacturers did statewide, and is suing for damages because of the "considerable capital" it stands to lose.

"If Dark Horse is prohibited from selling or otherwise using these products," it states, "the financial consequences will be extreme."

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Region: Missouri

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