Colorado Hemp Company Sues for Millions in CBD Lawsuit

It's not quite liquid gold, but CBD oil is being valued almost as high in one hemp-related lawsuit.

According to documents obtained by Westword, two Colorado hemp companies are battling it out in court over their share of more than 8,300 pounds of CBD crude oil, an unrefined hemp concentrate. The oil carries a value of up to $7.56 million, according to price estimates for CBD crude oil.

In the lawsuit, which was filed on June 6 in Denver District Court, Denver hemp extractor ADM Labs accuses Colorado Cultivars, a hemp farm and processing plant that describes itself as the "largest hemp farm in Colorado," of not following through on an extraction agreement between the two companies.

The suit claims that the two companies agreed last year that ADM Labs would supply Colorado Cultivars with hemp biomass — stalks and leaves remaining on the hemp plant after the flowers and seeds are harvested — for CBD extraction, with ADM Labs getting 65 percent of the yield and Colorado Cultivars retaining the remaining 35 percent. According to ADM Labs, the hemp biomass that Colorado Cultivars received was sourced from a variety of third-party suppliers, all of which expected a certain amount of CBD oil in return via separate agreements with ADM Labs. However, Colorado Cultivars sent the CBD oil infrequently returned and in smaller-than-expected batches, the suit argues, and was not assigned to the specific biomass supplier to which it was supposed to be returned.

"Problems developed shortly after ADM began sending Cultivars hemp biomass in October 2018. In particular, Cultivars failed to timely process the hemp biomass, timely deliver crude oil to ADM, and provide ADM with supporting documentation for processed biomass. As a result, Cultivars began to cause ADM significant downstream delays that severely affected ADM'S business and its customers," the lawsuit reads.

By January 2019, ADM Labs says, it had only received 242.5 kilograms of CBD crude oil. The company then sent trucks to Colorado Cultivars to retrieve the remaining hemp biomass, but claims that Colorado Cultivars had sent the plant matter out of state, and still hasn't informed ADM Labs where it went.

CBD crude oil continued to arrive at ADM Labs, which received nearly 2,600 kilograms of CBD oil as of March, according to the lawsuit. But that total was about 1,000 kilograms lower than expected, ADM argues, and the oil was "below industry standards, contained unsafe chemicals, or was otherwise unusable."

"As a result, ADM has been threatened with litigation by various suppliers and has been forced to make sizable out-of-pocket payments to suppliers in an attempt to mitigate the fallout," the lawsuit reads. "ADM has been unable to perform its obligations to third parties as a result of Cultivars' conduct and has suffered millions of dollars in damage."

ADM Labs is seeking a civil trial, hoping to win damages from Colorado Cultivars.

ADM Labs CEO Arman Motiwalla declined to comment, saying that the company is "precluded from commenting on ongoing litigation." Colorado Cultivars did not respond to requests for comment.