A legal battle is brewing in the California cannabis industry, Catalyst-Grover Beach LLC has filed a lawsuit against Trulieve Inc., Harvest of California LLC, and BRLS Properties CA-Grover Beach, LLC, accusing them of fraud, contract breaches, and outright theft. The lawsuit, filed in the Superior Court of Los Angeles County, alleges that Trulieve and its affiliates secretly amended tax filings, misrepresented financial records, and ultimately stole over $300,000 in tax refunds that rightfully belonged to Catalyst.
“We will not tolerate being stolen from then blown off. Trulieve tactics will not work on Catalyst. We plan to expose them at trial,” said Elliot Lewis
Elliot Lewis the CEO of Catalyst took to social media earlier this week to make his case for the fraud that Trulieve is being accused of, which you can watch at the end of the article.
Read the complaint for yourself below.
The Alleged Scheme: A Fraudulent Tax Maneuver
At the core of the lawsuit is a complex scheme involving Trulieve and its subsidiaries’ alleged manipulation of IRS tax filings. According to the complaint, Catalyst purchased all of Trulieve’s ownership interests in 805 Beach Break, Inc., a cannabis dispensary in Grover Beach, California, as well as the real estate it operated from. The sale was finalized in December 2023.
However, unbeknownst to Catalyst, Trulieve had, in October 2023—after signing the purchase agreement but before the transaction closed—quietly amended 805 Beach Break’s 2021 tax returns, seeking a $304,960.17 refund based on a disputed interpretation of IRS Section 280E. This section of the tax code prohibits cannabis businesses from deducting most ordinary business expenses due to federal prohibition.
Trulieve Allegedly Concealed the Tax Refund from Catalyst
Catalyst contends that Trulieve and its affiliates deliberately concealed the amended tax return from them to ensure they could receive and retain the tax refund themselves. By March 2024, months after the purchase had closed, Catalyst began inquiring about 805 Beach Break’s tax filings. Despite repeated requests, Trulieve allegedly withheld the amended return, only providing Catalyst with the original 2021 filing while actively obstructing their ability to obtain the updated records.
By late April 2024, the IRS had issued the $304,960.17 refund check. However, rather than forwarding the check to Catalyst—the rightful owner of 805 Beach Break—Trulieve allegedly deposited the funds into its own accounts, effectively stealing the money.
Legal Claims: Fraud, Breach of Contract, and Theft
Catalyst’s lawsuit outlines eight causes of action against Trulieve, including:
- Promissory Fraud – Alleging that Trulieve knowingly misled Catalyst during the sale by misrepresenting the company’s tax liabilities.
- Intentional and Negligent Misrepresentation – Claiming that Trulieve deliberately provided false information about 805 Beach Break’s financial condition.
- Breach of Contract – Accusing Trulieve of violating the purchase agreement, which required full disclosure of tax filings.
- Breach of the Implied Covenant of Good Faith and Fair Dealing – Alleging that Trulieve acted in bad faith by amending the tax return in secret.
- Conversion (Theft) – Charging Trulieve with unlawfully taking Catalyst’s rightful tax refund.
- Violation of California’s Unfair Competition Law – Alleging that Trulieve engaged in fraudulent and deceptive business practices.
- Declaratory Relief – Seeking a legal ruling affirming that Trulieve has no right to 805 Beach Break’s tax refunds.
A Pattern of Financial Desperation?
Catalyst paints a picture of a desperate financial situation at Trulieve, arguing that the company’s secretive refund claim was part of a broader scheme to extract cash from distressed assets. The complaint references a widely publicized $113 million tax refund Trulieve received based on its controversial 280E tax position. Catalyst suggests that Trulieve’s aggressive tax strategies and concealment of information reflect a company struggling to stay afloat amid mounting financial pressures.
Furthermore, Catalyst claims that Trulieve has gutted its former subsidiaries—Harvest of California and BRLS Properties—turning them into shell companies with no assets. This maneuver, Catalyst alleges, is intended to prevent creditors, including Catalyst itself, from recovering stolen funds.
Implications for the Cannabis Industry
This lawsuit raises serious concerns about financial transparency and ethical business practices in the cannabis industry. The alleged conduct by Trulieve—one of the largest multi-state operators (MSOs) in the country—could further erode trust in corporate cannabis entities, particularly at a time when the industry is facing heightened regulatory scrutiny.
Trulieve’s alleged tactics not only harmed Catalyst but could also set a dangerous precedent for other operators engaging in dubious financial maneuvers to stay solvent. The case also underscores the risks associated with IRS Section 280E, which cannabis companies have long challenged but remains a significant financial burden under federal law.
Catalyst’s Demand for Justice
The Catalyst lawsuit is seeking the return of the $304,960.17, along with punitive damages, legal fees, and a court ruling affirming its rights to future tax refunds related to 805 Beach Break. The lawsuit also demands a permanent injunction preventing Trulieve from further manipulating tax filings or withholding financial information related to 805 Beach Break.
This case could become a landmark legal battle in California’s cannabis industry, potentially reshaping tax compliance, corporate accountability, and industry trust.
As the case unfolds, all eyes will be on Trulieve’s response—and whether it can defend itself against these damning allegations of fraud and theft.
