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Worcester Dispensary Owner Sues Cookies

Plaintiffs claim “Buyer has refused to close and pay for the interest that it seized” and “refused to release executed closing documents.”

Cookies, the national cannabis brand founded by cannabis rap mogul Berner, is being sued by yet another business partner. This time the complainant is the Massachusetts-based New Dia, which owns and operates the Cookies-brand dispensary in Worcester as well as the New Dia weed mall on Lansdowne Street in Boston.

According to a complaint filed on July 1 in Suffolk Superior Court, it all started in 2020, when “New Dia was introduced to the ‘Cookies’ business.” “Cookies,” it adds, “along with [CR Operator Holdings] and other related entities, have a business model of acquiring companies with cannabis licenses in states where cannabis is recreationally legal, and then licensing the ‘Cookies’ name to the entity and controlling the operations through another Cookies-related entity.”

The complaint continues, “Applicable regulations prohibited New Dia, as a social equity licensee, from selling more than 50% of its business. Buyer initially stated that it was against the Cookies business model not to have a controlling interest in a business that it was partnering with, but that in this circumstance, it would concede in light of regulatory requirements. … After negotiating and executing the [Membership Interest Purchase Agreement] and Note with Buyer, and ancillary agreements including a licensing agreement with other entities related to Buyer, Seller agreed to the sale of 49% of New Dia in exchange for $2,000,000 ($400,000 due at closing under the MIPA and the remaining $1,600,000 due under the Note).”

But that never happened. New Dia now alleges the “Defendants have been engaged in a pattern of misconduct to seek to take an interest in New Dia and its unique social equity applicant cannabis license in Massachusetts without paying for the same. After having solicited New Dia and Seller to induce Seller to sell an interest in New Dia, and after obtaining necessary regulatory approval for that transfer of interest, Buyer has refused to close and pay for the interest that it seized. It has also refused to release executed closing documents but Buyer, TRP, Cookies RE, and CH hold themselves out as having an interest in New Dia (including in other securities offerings and attempts to raise funds and obtain investments). Defendants seek [to] reap the benefits of owning an interest in New Dia without paying for those benefits.”

Per the complaint: “Buyer is disgruntled with only being able to obtain 49% of New Dia even after agreeing in light of regulatory limitations requiring that social equity applicants maintain over 50% control of New Dia under Massachusetts law. That state of affairs is exactly what Buyer knew, should have known, and bargained for. Now, consistent with its business model to control the operations of the companies it enters into agreements with (which it has done in other circumstances, with other companies), Buyer (and TRP, Cookies RE, and CH) is attempting to seize control of New Dia by claiming ownership interest and the benefits of the parties’ deal publicly, without paying and while refusing to close on the deal.

“After refusing to close, it then engaged in coercive attempts to re-trade the deal, while admitting that it has an obligation to pay, including in statements such as ‘[w]e simply don’t have $2M in cash to pay you,’ and that the parties had a ‘deal.’ It has also publicly made contradictory statements, touting substantial profitability. Buyer’s inequitable conduct is a breach of the parties’ agreements, and is remedied by an order granting specific performance, and requiring Buyer to close on the deal that it agreed.”

New Dia is asking for the court to “award their interest, costs, and attorneys’ fees, if appropriate; Grant specific performance requiring Defendants to close on the deal and pay the amounts due under the MIPA and Note; Order that Buyer … and any other entity necessary to close take all actions necessary to close, including delivering executed Buyer Closing Documents, and making payment to Seller in the amount of $2,000,000 plus interest; Declare that Defendants have an obligation to close on the deal and pay the amounts due under the MIPA and Note; and Any such further relief that the Court deems just and proper.”

Earlier this year, Cookies was sued by a California retail partner for “violation of state and federal franchise laws and fraudulent misrepresentations and claims at least $100 million in damages,” according to reporting by MJ Biz Daily. The company has also been sued for an alleged breach of agreement in New York.