Cannabis shop owner launches lawsuit against partner

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This article was published 29/06/2022 (1374 days ago), so information in it may no longer be current.

A Manitoban cannabis shop owner is suing his Albertan business partner and Delta 9 Cannabis over an alleged contract breach.

On March 31, Delta 9 Cannabis announced its purchase of “all or substantially all” 17 Uncle Sam’s Cannabis stores in Alberta (some were under the name Discounted Cannabis).

The deal breaks a legal contract Uncle Sam’s owners in Alberta and Manitoba previously made to sell their sites together, Josh Giesbrecht, the lawsuit’s plaintiff, alleges.

“This is a significant betrayal,” Giesbrecht, president of the three Uncle Sam’s Cannabis stores in Winnipeg, said. “I’m looking for justice.”

He filed a statement of claim with the Manitoba Court of Queen’s Bench June 7. Giesbrecht’s legal team lists the staying of Delta 9’s purchase as a claim, and a reversal of any Albertan stores already transferred to the company.

The claim also seeks compensation of $2.4 million to cover “specific damages for loss of interest” in the consolidated Uncle Sam’s Cannabis sale, alongside other damage claims.

Giesbrecht said he and Wissam el Annan, director of Uncle Sam’s Cannabis in Alberta, had mutual connections prior to becoming business partners.

In February of 2021, el Annan recommended Giesbrecht establish Uncle Sam’s stores in Manitoba, Giesbrecht alleges. The Manitoban was planning to enter the retail cannabis market.

“I was on the lookout for potential partners, because obviously there was a lot of work to be done to create a brand from scratch,” Giesbrecht said. “I needed help on that.”

On March 29, 2021, Uncle Sam’s Cannabis Ltd. (the Alberta corporation), Giesbrecht and USC Manitoba Ltd. (the newly established Uncle Sam’s branch) signed an agreement to work together.

The plan was to build 10 Uncle Sam’s shops in Manitoba over 18 months, Giesbrecht said. Afterwards, the Albertan and Manitoban companies would merge and sell their consolidated business, he said. An independent body would evaluate the company’s worth, according to the March 29 agreement.

“Both of the lawyers worked on (the agreement), beared witness to it,” Giesbrecht said.

He opened the first store on Bannatyne Avenue in May of 2021. The Ness Avenue location opened last September, and a third on McLeod opened in late November, Giesbrecht said.

The purchase agreement between Uncle Sam’s Cannabis in Alberta and Delta 9 Cannabis happened Nov. 1, 2021, according to Delta 9’s March 31 news release.

Three amendments occurred — in December, February and March — before the $12.5-million cash purchase.

Giesbrecht said he learned of the deal on the news.

“I was in a state of shock for almost two weeks,” he said.

Giesbrecht said he then sought legal counsel. He holds 60 per cent of the Manitoba company’s shares, while Uncle Sam’s Cannabis in Alberta has 40 per cent, as outlined in their March 2021 shareholder agreement.

Giesbrecht said he’s invested $500,000 into the company. He’ll continue to run the three locations but won’t, at this time, open any more, he said.

He said he’ll focus on expanding his cannabis delivery service, The Half Circle.

El Annan and Uncle Sam’s Cannabis in Alberta didn’t reply to interview requests by print deadline.

“We’ll respond to this in court, but we deny any wrongdoing,” said Ian Chadsey, Delta 9’s vice-president of investor and media relations.

Delta 9 didn’t know about the deal between the two Uncle Sam’s employees, Chadsey said.

“We were completely unaware of this whole situation,” he said. “Realistically, it’s between the person here in Winnipeg and Uncle Sam’s in Alberta. We just bought the assets in Alberta.”

Delta 9 launched two lawsuits of its own this month.

It filed the first against Element Limited Partnership, and Element GP, the Alberta-based corporation’s wholesaler, on June 10.

Delta 9 is suing for $150,327. It provided climate-controlled grow pods, but Element GP hasn’t fully paid, Delta 9’s statement of claim alleges.

The company filed a second civil lawsuit on June 22 against Thomas H. Clarke’s Distribution. It’s calling for $23,232 from the Newfoundland cannabis shop, citing overdue payment.

“We’re very flexible if people want to at least communicate and set up a payment plan,” Chadsey said. “These people aren’t even responding.”

Jeff Brookman, Element GP’s CEO, said his side will be unveiled when he files a statement of defence.

“I don’t think it’s appropriate till I do that to talk,” Brookman said.

He didn’t give a date for when he’d submit the document, though it has to be within a 40-day window, he said.

Thomas H. Clarke’s Distribution could not be reached for comment.

gabrielle.piche@winnipegfreepress.com