Florida-based cannabis inventory tracking vendor Metrc LLC is asking a Colorado state court to toss a dispensary’s lawsuit challenging its process for charging so-called “support fees” as violative of state anti-trust and consumer protection laws.
The lawsuit against Metrc, filed by National Green Source LLC in Denver District Court in June, seeks declaratory and injunctive relief and damages. National Green, a state-regulated marijuana business that presently holds marijuana cultivator, processor, and dispensary licenses from Colorado’s Marijuana Enforcement Division (the division) claims that, since April, Metrc has refused to honor its orders for the RFID inventory tags that National Green needs to comply with Colorado’s marijuana regulations amid a dispute over a bill for allegedly unpaid “support fees.”
Under Colo. Code Regs. 212-3 § 3-805(A), licensees like National Green “are required to use RFID tags issued by a division-approved vendor that is authorized to provide RFID tags for the inventory tracking system.” The regulation provides that “[e]ach licensee is responsible for the cost of all RFID tags and any associated vendor fees.”
Metrc holds state contracts to serve as the inventory tracking vendor in Colorado and approximately two dozen other states, and is the only division-approved vendor in Colorado that can provide RFID tags.
National Green, whose lawsuit alleges it has been a licensed Colorado marijuana business since 2018, claims that through counsel Metrc contacted it in February 2022 to collect what Metrc then described as $28,800 in unpaid “support fees.” National Green’s complaint further alleges that it disputed the bill in March 2022, but that Metrc did not provide supporting statements until March 2023. According to National Green’s lawsuit, the statements Metrc provided sought payment for “monthly reporting fees” amounting to $26,640, discrepancies that Metrc did not explain, and that some of the statements sought fees as far back as March 2014, approximately four years before National Green obtained its first state cannabis license. National Green alleges that, after it refused to pay the bill in April, Metrc refused to continue honoring its RFID tag orders.
In its lawsuit, National Green argues that Metrc breached its contract with National Green, that Metrc should be estopped from refusing to honor National Green’s RFID tag orders, and that Metrc’s conduct violates the Colorado Consumer Protection Act and the Colorado State Antitrust Act of 2023, which Colorado Governor Jared Polis signed into law approximately three weeks before National Green filed suit.
Metrc’s motion to dismiss, filed July 31, seeks dismissal of all of National Green’s claims, arguing that under the terms of the parties’ contract, any dispute over contract terms must be litigated in Florida state court and that the lawsuit in any event fails to state a breach of contract or promissory estoppel claim. Regarding the consumer protection claim, Metrc argues that National Green fails to sufficiently allege that Metrc’s representation of the price of the RFID tags is a deceptive trade practice or that its alleged acts have had a significant public impact. Regarding National Green’s claims under Colorado’s newly amended state anti-trust law, Metrc’s motion contends that the company is immune from suit because the Colorado statue has an exception for activity “supervised by the state itself” and, further, that the agreement between Colorado and Metrc explicitly permits Metrc to demand payment for fees, such as those in the National Green case and to withhold service should a dispensary not settle up.
In a July 17 order, a Colorado district court judge denied National Green’s request to enjoin Metrc from refusing to sell it new RFID tags during the pendency of the lawsuit, ruling that she was unconvinced by National Green’s arguments that it cannot pay the disputed fees without waiving its right to recover them, but she also determined that National Green has a reasonable probability of succeeding on its breach of contract and Colorado Consumer Protection Act claims.
Why It Matters
The resolution of the dispute between National Green and Metrc could influence inventory tracking vendor contracts for state-regulated marijuana industries in jurisdictions across the U.S.
Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law.