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Injunctive Relief in Marijuana Business Disputes: What It Is and How to Get It

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Our team of cannabis litigation attorneys works with a wide range of business disputes. When we take on a case, one of the first things we evaluate is what would constitute a “win” for our clients. In a broad sense, courts grant two basic types of relief. The most common type of relief is the money judgment, which establishes that the judgment debtor (that is, the person who owes money; usually the party who lost the case) owes the judgment creditor (the person who is owed money under the judgment; usually the party who won the case) a specified amount of money. The second, less-common type of relief is called equitable relief.

WHAT IS INJUNCTIVE RELIEF?

Equitable relief is, in a nutshell, any type of relief ordered by a court which does not involve a money judgment. There are three main varieties of equitable relief: specific performance, restitution, and injunctive relief. This two-part series focuses on injunctive relief, as it applies to many cannabis business disputes our firm handles on a regular basis.

The defining trait of equitable relief is that it is only available when a money judgment would not be an adequate remedy. An order granting injunctive relief is called an “injunction,” which is an order from the court requiring a party to do something, or to refrain from doing something. (Such was the case when our firm successfully overturned Oregon state’s ban on cannabis vaping products.)

If the party seeking equitable relief can be made whole via the issuance of a money judgment for a specified amount of money, a court will not grant equitable relief. Courts have generally found this requirement to be met in these common scenarios:

  1. An employee who is subject to a non-compete agreement leaves his employer and sets up a competing business that violates the non-compete agreement. Upon motion of the employer, a court could enter an injunction against the former employee prohibiting her from continuing to operate the competing business.
  2. One of the members of a limited liability company (LLC) decides to pay herself of the cash till and sexually harasses the business’s employees. The other members of the LLC could obtain a court order preventing the bad member from continuing those bad acts, and from entering or remaining on the LLC’s premises.
  3. A buyer purchases all of the stock in a private corporation from its sole shareholder, but the shareholder refuses to turn over the corporation’s physical property. The buyer could seek an injunction requiring the turnover of the property, as well as imposing a over any business property still in the hands of the seller.
  4. One of the members of an LLC locks the other members out of their business and refuses to allow the other members to exercise their management rights. The other members could ask the court to enter an order prohibiting the bad member from preventing them from running the business.
  5. One of the members of an LLC refuses to sign OLCC renewal paperwork without getting a distribution. The other members could ask the court for an order requiring the member to sign the renewal paperwork to keep the business alive while the members argue over the requested distribution.
  6. A state agency promulgates a rule banning the sale of flavored vape cartridges without engaging in the proper rulemaking process. A company affected by the ban could (successfully) ask the Court of Appeals to enter an order preventing the agency from enforcing the rule.

WHY DOES INJUNCTIVE RELIEF APPLY?

In the first example, ongoing damages to the business and loss of reputation from the former employee’s competing business are usually considered to be too difficult to accurately calculate, so courts will normally agree that a money judgment is inadequate and will enter an injunction. This is especially appropriate where the equitable relief was contemplated by the parties in the first place; in the case of a non-compete agreement, the parties to the agreement bargained for the employee not to run a competing business, so an injunction prohibiting the former employee from doing so aligns with the parties’ intent.

In other cases, a court will find that monetary relief is inadequate when the threatened or contemplated action at issue risks the loss of a unique asset; for example, if one member of licensed business is threatening to do something that will make the business lose its license (as is the case in the OLCC example), a court ordering equitable relief is usually justified in doing so, rather than entering a judgment for the full (probably ambiguous) value of the now-unlicensed business. An even more obvious example is when management rights are involved (as in the 2nd and 4th example); it is nearly impossible to quantify the value of a person’s right to manage a business, so courts regularly hold that the loss or potential loss of management rights cannot adequately be compensated with a money judgment.

WHEN AND HOW DO I OBTAIN INJUNCTIVE RELIEF?

So now that we’ve discussed WHAT injunctive relief is, savvy readers will be congratulating themselves on already having figured out HOW to get it: convince the court that a money judgment would not be an adequate remedy. But more interesting than this is the question of WHEN is injunctive relief available? Is it the same as a money judgment – i.e., you only get it at the end of the case? Court cases notoriously move at a glacial pace, so does an injunctive relief claimant have to wait all the way through trial to stop wrongful conduct? The answer is, not always.

With the right set of facts and arguments, sometimes a court will enter a temporary injunction before the party is even aware they’ve been sued.

In the next article in this series, we will explore specific types of injunctive relief: temporary restraining orders and preliminary injunctions, and how a savvy litigant can use these types of relief to win their lawsuit before it has begun.

You can contact Andrew DeWeese at info@gl-lg.com or 503-488-5424.

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1 In this case, the imposition of a constructive trust would establish that the shareholder is holding all of the business property in trust for the buyer, and would allow the buyer to recover against any assets the shareholder has co-mingled the business assets with.