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Law360 (March 24, 2020, 8:32 PM EDT ) A Kentucky hemp farming company is asking a federal judge to void its contract with an Oregon hemp processor after it was hit with a $9 million bill, saying the spread of the coronavirus triggers the contract's force majeure clause.
Third Wave Farms says it had an agreement to act as a broker for CBD oil made by Oregon hemp company Pure Valley Solutions, but now neither company is able to fulfill their portion of the deal.
And yet Pure Valley is demanding $9 million from Third Wave, plus 9% interest and nearly $10,000 in storage fees for every day Third Wave fails to ship the oil, according to the lawsuit.
Third Wave has rejected the invoice and is asking a Kentucky federal judge to declare the contract dead.
The lawsuit stems from a deal the two companies made in May 2019, under which Third Wave said it would act as a broker to facilitate the sale of Pure Valley's winterized CBD oil.
The contract set specifications for the oil and required that Third Wave sell up to 5,000 liters of it, according to the suit.
Also in the contract, Third Wave said it was still raising $2 million in capital needed to uphold its side of the agreement.
But Pure Valley never had the capacity to make 5,000 liters of CBD oil, and the oil that it did make didn't meet the contract's specifications, the suit says.
Plus, Third Wave never raised that $2 million it needed, the company says.
When Third Wave received Pure Valley's invoice, it didn't believe the contract was still in place, it says.
With neither side able to meet the contract's requirements, it should be terminated, Third Wave says.
Alternatively, the contract's force majeure clause should be invoked due to the coronavirus crisis, canceling both sides' obligations, the suit said.
Kentucky Democratic Gov. Andy Beshear declared a state of emergency in the state on March 6, as the virus began spreading rapidly throughout the United States. Oregon's governor has made a similar declaration, setting in motion a clause that would end the agreement based on a natural catastrophe, Third Wave said.
Representatives for Third Wave did not immediately respond to requests for comment Tuesday.
Gina Johnnie of Sherman Sherman Johnnie & Hoyt LLP, counsel for Pure Valley Solutions, said the lawsuit was "desperate" and without merit.
"My clients upheld their end of the bargain and look forward to a court ensuring that Third Wave upholds its promises as well," she said.
Third Wave is represented by Matthew B. Bunch of Bunch & Brock PSC.
Counsel information for Pure Valley Solutions was not immediately available Tuesday.
The case is Third Wave Farms LLC v. Pure Valley Solutions LLC, case number 6:20-cv-00069, in the U.S. District Court for the Eastern District of Kentucky.
Update: This story has been updated with comment from counsel for Pure Valley Solutions.
--Editing by Stephen Berg.
For a reprint of this article, please contact reprints@law360.com.
