CATALYST VS TRULIEVE
- Jason Beck
- Mar 13
- 3 min read
Dale Schafer Esq.
03-13-2025
On March 11, 2025, Catalyst-Grover Beach (Catalyst) filed a lawsuit
against Truelieve Inc. (Truleive), and several affiliates or subsidiaries, for
damages growing out of the alleged breach of an agreement for Catalyst to
purchase a dispensary in Grover Beach from Trulieve, and the other named
defendants.
In June of 2023, Catalyst signed a Purchase and Sale Agreement (PSA)
with defendants Harvest of California LLC (Harvest) and BRLS Properties
California-Grover Beach LLC (BRLS), to purchase all of the stock of 805
Beach Break Inc (805) for $37,500 and the real property where 805 was
located. It is alleged that Harvest and BRLS were affiliates or subsidiaries
of Truelieve. The purchase was a “fire sale” so Catalyst put multiple
provisions into the PSA to ensure that there was full disclosure of all assets
and debts. Further, there was a Tax Covenant on the PSA, that required all
tax returns, filed on behalf of 805, for any tax periods before the closing of
the PSA to be provided to Catalyst before they were filed so Catalyst could
ensure the tax filings were accurate and approved. This is where things
went off the rails.
After the PSA was signed, but before closing on the deal, Trulieve sought
massive refunds from the IRS based upon a novel theory that IRS code
section 280e does not apply to cannabis businesses. Catalyst became
concerned about Truelieve making any such claims on behalf of 805 so
their attorney began inquiring about whether this was being done. The fire
sale did not include buying an IRS audit, especially when there were
warranties and assurances given during the due diligence period about the
prior tax filings. It turns out that Truelieve filed an amended tax return for
tax year 2021, seeking an almost $305,000 tax refund. Based upon the
novel 280e theory, an audit should be expected. Although the PSA
contained an indemnity provision, Catalyst sought further assurances from
Truelieve that they were not playing this game with the IRS.
The PSA closed in December of 2023 and Catalyst then owned all stock of
805 and the property it sits on. In February of 2024, Truelieve filed an
amended tax return for tax year 2022. Catalyst continued to demand
answers from Truelieve about tax returns, only to be met with crickets.
Catalyst sought information from the tax firm that prepared the 805 tax
returns, only to be told by Truelieve’s attorneys the information was
confidential. Finally, in November of 2024, the defendants sent the tax
returns for 2021-2023 and they had in fact claimed returns for the novel
280e theory. Further, a tax refund check, for almost $305,000, had been
received by Truelive, and cashed through 805 accounts without the
knowledge of Catalyst. To make matters worse, the IRS notified 805, now
owned by Catalyst, that they were going to audit them because of the 280e
theory.
Catalyst filed suit against Truelieve, and the other defendants, for fraud,
intentional and negligent misrepresentations, breach of contract, breach of
the implied covenant of good faith and fair dealing, conversion, violation of
California’s Unfair Business Practices Act, and declaratory relief. Catalyst
wants the almost $305,000 as damages, punitive damages for the
malicious conduct, attorneys fees, declarations about the tax returns and
refund, and injunctive relief to stop any further actions by Truelieve, and the
other defendants. I want to emphasize that this is a complaint with
allegations, not yet proven. The defendants will file an answer and their
positions will be made public. However, if these allegations are proven true,
this is pretty scandalous behavior deserving of a legal spanking. Stay
tuned.
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