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Glass House Withdraws Defamation Suit Against Catalyst Cannabis

The company doubted Catalyst's ability to pay a judgment.

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Glass House said it will be voluntarily dismissing its defamation lawsuit against Catalyst Cannabis Co., citing serious concerns about Catalyst’s financial viability, which it said could render a judgment worthless. The company also cited harassment threats by Catalyst to Glass House’s customers, and its customers’ customers.

Glass House sued Catalyst (South Cord Holdings and South Cord Management) and its two principals (Elliot Lewis and Damian Martin) for making defamatory statements accusing Glass House of selling into the unlicensed cannabis market. The company said Catalyst has not provided any credible evidence supporting its defamatory statements, despite promising to do so nine months ago. Instead, Catalyst has said that industry-wide, up to “93% of all legally cultivated cannabis ends up being diverted to the illicit market,” and that licensed operators should be held responsible for downstream diversions to the illicit market.

Glass House noted reports that the cannabis retail market in California is under serious distress, and that Catalyst recently announced layoffs and the closure of one of its stores, citing the need for “some repairs.”

Catalyst’s CEO also revealed that his company is being audited by the State of California and is embroiled in separate litigation challenging emergency regulations enacted by the CDTFA (the State agency responsible for collecting excise tax), which he says are directed at Catalyst and calls the “Catalyst regs.” Catalyst is also involved in several other lawsuits including a case against the Department of Cannabis Control (the State agency charged with enforcing cannabis laws) and is in disputes with municipalities and its employee’s union.

Addressing the customer harassment issue, Glass House said that proceeding with the lawsuit would necessitate revealing details about its customers, even though they are all licensed. Catalyst made clear that its intent was to then serve similarly invasive subpoenas on Glass House customers looking for diversion downstream, even if Glass House’s customers, like Glass House, had no knowledge of any such diversion.

“Given the foregoing, we concluded that from a financial standpoint, there was a high likelihood the judgment against Catalyst, Mr. Lewis and Mr. Martin wouldn’t be worth the paper it was written on. We felt our time and money was better spent serving our customers and growing our business, so that we can continue to provide the best quality cannabis at the lowest price," said a Glass House spokesperson.

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