Last year’s massive product recall rocked Missouri’s cannabis industry, affecting 62,000 infused cannabis products. The aftermath is still unfolding. Delta Extraction, a marijuana manufacturer, had its license revoked by the Missouri Division of Cannabis Regulation after the recall and now faces a $20 million lawsuit from SND Equipment Leasing, as first reported by the Missouri Independent.
Cannabis Product Recall in Missouri
Delta Extraction, based in Robertsville, Missouri, found itself in hot water when state regulators discovered issues with its THC concentrate oil. The recall led to over 60,000 marijuana products being pulled from shelves and Delta Extraction losing its manufacturing license. Now, the company faces a $20 million lawsuit from SND Equipment Leasing, which claims it is owed millions for producing the oil and lost revenue due to the confiscation of its equipment.
Delta Extraction was once a larger player in Missouri’s cannabis market. The company specialized in producing THC concentrate oil, a crucial ingredient for many marijuana products such as gummies and vapes. Their operations were integral to supplying around 100 other Missouri manufacturers, making them a significant cog in the state’s cannabis ecosystem.
SND Equipment Leasing, a Missouri-based company, was contracted by Delta Extraction to produce THC concentrate oil. According to SND, they manufactured approximately 1,100 liters of THC distillate for Delta Extraction.
In August of last year, Missouri regulators issued a massive recall, pulling over 60,000 marijuana products off the shelves. The recall was prompted by concerns over the THC concentrate oil produced by SND for Delta Extraction.
The state argued that the oil combined unregulated hemp-derived THC with heavily regulated Missouri-grown marijuana. The state deemed this combination a health risk, leading to the recall and the subsequent revocation of Delta Extraction’s manufacturing license.
Why the Lawsuit?
SND Equipment Leasing claims that Delta Extraction owes them more than $13 million for the production of the THC concentrate oil. Additionally, SND is seeking $5 million for lost revenue after the state confiscated its extraction equipment housed at Delta Extraction’s facility. SND’s attorney, Joy Primoli, argues that Delta Extraction was responsible for ensuring compliance with state regulations, not SND.
Primoli likened the situation to a homeowner contracting a business to paint their house. If the homeowners’ association later says the color doesn’t meet regulations, the contractor should still receive payment for their work. SND argues that they fulfilled their contractual obligations and deserve compensation, regardless of the state’s compliance concerns.
“It doesn’t matter what the state says or if it was within compliance or not,” Primoli said, “they still contracted with SND to produce a product.”
At the heart of this lawsuit is a complex debate over regulatory compliance. Delta Extraction argues that hemp-derived THC is not a federally controlled substance and therefore should not undergo the same regulations as marijuana-derived THC. However, state regulators insist on regulating any THC product, regardless of its source, to ensure consumer safety.
Delta Extraction is appealing the state’s decision to revoke its manufacturing license. The case is before the Administrative Hearing Commission, and a decision is still pending. The outcome of this appeal could significantly impact the lawsuit and the future of Delta Extraction’s operations.
Missouri Cannabis Industry Impact
The lawsuit and recall have had a substantial economic impact on both Delta Extraction and SND Equipment Leasing. For Delta Extraction, the loss of its manufacturing license has halted its operations and affected its relationships with other manufacturers. For SND, the unpaid invoices and lost revenue have created financial strain, prompting the lawsuit for compensation.
One of the primary reasons for the recall was concern over consumer safety. State regulators argued that mixing hemp-derived THC with marijuana-derived THC posed a health risk. While Delta Extraction disputes this claim, the recall highlights the importance of rigorous testing and compliance in the cannabis industry to ensure products are safe for consumers.
The recall and subsequent lawsuit have sent ripples through Missouri’s cannabis industry. Delta Extractions supplies 100 other manufacturers in the state, and they’re likely to be closely watching the case, as its outcome could set important precedents for regulatory compliance and contractual obligations
