An Auburn-based company that runs four of the eight medical marijuana dispensaries in Maine has been named in a court filing claiming it and its major investor breached a contract with its extraction partner.
Wellness Connection of Maine, along with its majority investor Acreage Holdings of New York, were named in a 51-page “demand for arbitration” filed on Aug. 21 in Kent County Superior Court in Rhode Island by CanWell, a company that extracts products for edible marijuana and that has operations in Maine.
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CanWell claims, among other things, that Acreage and Wellness Connection breached a long-standing contract by terminating it on July 12. The company said Wellness Connection owes it upwards of $650,000 in product royalties and has not paid anything in 2019.
Wellness Connection and Acreage alleged CanWell had a long history of not complying with the contract. They said the percentage of cannabinoid extraction was so low that it caused Wellness Connection to lose more than $14 million in potential products.
The filing said, in January 2019, Wellness Connection CEO Patricia Rosi expressed displeasure with CanWell’s yields, which she reportedly said were less than 40 percent. Wellness Connection’s yield targets were 85 percent to 90 percent.
CanWell said it sent a team to Maine and found the yields to be 100 percent. It blamed high turnover and inexperienced workers at Wellness Connection for the discrepancy. CanWell claimed that 20 employees from Wellness Connection’s processing and kitchen departments quit or were fired since Oct. 1, 2015.
The extraction agreement calls for any disputes to be solved by arbitration.
“We are in the process of reviewing the filing and determining how and when we will respond to the numerous inaccuracies,” Rosi said.
Acreage Holdings is one of the largest multistate operators in the U.S. marijuana market.
CanWell also claimed that Acreage breached a noncompete clause in the agreement, signed in 2018.
Acreage, which operates in 20 states, is in the process of acquiring Greenleaf Compassion Center of Portsmouth, Rhode Island. That company extracts and cultivates marijuana, which CanWell alleges would compete with it and violate the current agreement with Acreage.
In a separate ruling on Aug. 23, a Kent County Superior Court judge approved a temporary restraining order that prevents regulators from giving the final go-ahead on that acquisition.
CanWell is requesting punitive damages, legal fees and an injunction that would bar Acreage from competing with it.
Rosi told the Bangor Daily News in June that her company’s medical marijuana sales continue to trend down, and that she is looking to enter the recreational marijuana market. The company recently applied for medical licenses for cultivation and manufacturing in Auburn.
“Eight years after we started, sales now are down 50 percent,” she said. She would not comment on revenue, but said the company is profitable.