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CATALYST VS TRULIEVE

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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