California's Corporate Weed Beef: Glass House Withdraws Defamation Suit Against Catalyst Cannabis

The California-based cannabis company Glass House Brands Inc. GLASF GHBWF announced Monday the voluntary dismissal of its defamation lawsuit against Catalyst Cannabis Co, a dispensary chain from the same state. Glass House cited concerns about Catalyst's financial viability and the potential for harassment threats to its customers.

Background Of The Countersuits

Initially, Catalyst filed a lawsuit against Glass House in Los Angeles County Superior Court on June 2023, accusing them of profiting from the illicit cannabis market. Glass House then filed a countersuit in the same court against Catalyst and its principals, Elliot Lewis and Damian Martin for defamatory statements alleging Glass House’s involvement in the illicit cannabis market.

Stay ahead in the cannabis industry's news and views by joining industry leaders and experts at the upcoming Benzinga Cannabis Capital Conference in Chicago on Oct. 8-9. Get your tickets now before prices go up by following this link.

Glass House Challenges Catalyst’s Credibility And Actions

According to Glass House’s press release, Catalyst failed to provide credible evidence supporting its claims, instead suggesting industry-wide diversion of legally cultivated cannabis to the unlicensed market.

Despite confidence in prevailing, Glass House expressed concerns about Catalyst’s ability to pay a judgment. According to Glass House, Catalyst recently faced layoffs, store closures and audits by the State of California. Furthermore, the company highlighted that Catalyst’s CEO, Eliot Lewis, openly discussed paying less excise tax than required and boasted about the company's audits and litigation with state agencies.

Moreover, Glass House highlighted that Catalyst intended to serve invasive subpoenas on its customers if the lawsuit proceeded, aiming to reveal customer identities and accuse them of downstream diversion. In its press release, Glass House emphasized its commitment to licensed operations through California's METRC system and dismissed the notion of its customers’ involvement in illicit activities.

Glass House Management Commentary

Addressing the decision to withdraw, Kyle Kazan, co-founder, chairman and CEO of Glass House, stated, "Despite the difficulty of the retail market in California, our business continues to thrive. The first quarter of 2024 was another very successful quarter for Glass House where we exceeded Q1 guidance across all operating metrics including cash, sales, production and adjusted EBITDA.”

A Glass House spokesperson added, "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,"

Ongoing Industry Disputes In The Golden State

Catalyst’s CEO has been vocal about his company's stance, accusing legal cannabis companies of diverting products to the illicit market and driving down prices. His statements at the Benzinga Cannabis Market Spotlight event in California the past February and subsequent legal actions have fueled ongoing disputes in the state's cannabis industry.

Glass House aims to refute Catalyst's claims through separate litigation regarding unfair competition.

GLASF Price Action
GLASF's shares were trading 0.43% lower at $9.31 per share at the time of this writing around 3:35 PM ET Tuesday.

Related News: EXCLUSIVE: CEO Of This California Company Has Advice On How To Beat The Illicit Cannabis Market, Shares His Formula At Benzinga Conference