Forensics, Disputes, and Litigation in the Legal Cannabis Industry (8 of 8)

Welcome to the eighth and final post in 4 Corners’ Cannabis Valuations in Washington State Series! Throughout this series, we covered the basics of business valuations, how those may differ for the cannabis industry, and why hiring a business valuation expert would be beneficial to you and/or your client. Today, we’re going beyond business valuations and talking about financial forensics, which involves disputes and litigation in the cannabis industry.

Washington dispensaries began selling cannabis legally to recreational users in July 2014. Since then, more than 1,000 Washington retail business licenses have been issued.[1]

Now that many years have passed since legalization, many cannabis businesses are starting to find themselves struggling to stay afloat or in the midst of business disputes. This is a natural part of the cannabis industry cycle.

Similar to any industry, cannabis business disputes can arise out of any of the following situations:

·      Breach of contract

·      Shareholder disagreements

·      Breach of fiduciary duty

·      Trade secret disputes or

·      Many other circumstances

Eli Neal has testified in a wide range of cannabis-related cases. Recently, he served as the expert witness in a dispensary matter regarding breach of fiduciary duty and shareholder oppression. Specifically, Eli’s testimony required opining on the fair market value of a dispensary and the amount of distributions that should have been paid to the ousted shareholder.

4 Corners has helped numerous cannabis clients over the years, spanning farms, concentrate manufacturers, and dispensaries calculate lost profits and lost business value.

As an attorney engaging our services, you can help 4 Corners better understand the case at hand by providing us with a general overview of the facts, identifying the parties, and providing the pleadings and relevant financial documents.

Next, we will work with you to determine the best course of action and perform a preliminary analysis of the expected damages. Following further review and discussions with you, we can strengthen our analysis and the assumptions therein. Finally, we can serve as an expert witness in mediation, arbitration, or trial.

It is important to involve a damages expert early in your dispute to get an idea of the magnitude of the damages. Far too often, high legal costs are incurred before obtaining a damages estimate which can lead to a very upset client and a surprised attorney. Nobody wants that!

In the cannabis space, the business environment is constantly changing. Our network of attorneys, brokers, CPAs, and business owners is at our finger tips to obtain accurate and up-to-date information that could be critical for your client.

4 Corners is located in the Greater Seattle area, serving clients in Seattle, Bellevue, Redmond, and all throughout the Pacific Northwest. If you own or represent a cannabis business and need a business valuation or financial expert, call 4 Corners Financial Forensics at 425.800.4896 or email us; we’ll listen to your situation and help you scope your project. We’d love to help you.

Thank you for following this series! You can find all previous installments of the Cannabis Valuations in Washington State series at the links below:  

• An Overview of the Washington Cannabis Industry (1 of 8)

• How to Perform a Business Valuation of a Cannabis Business (2 of 8)

• Adjusted Net Asset Approach for Cannabis Businesses (3 of 8) 

• Market Approach for Cannabis Businesses (4 of 8)

• Income Approach & Discount Rates - Cannabis Businesses (5 of 8)

• Income Approach & Forecast Inputs - Cannabis Businesses (6 of 8)

• Strategic Value – Cannabis Businesses (7 of 8)

[1] According to the “Cannabis License Applicants” Excel spreadsheet from the WLCCB website, as of October 22, 2024.