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August 16, 2023

Holland & Hart Defeats Bad-Faith Negotiation Claims To Secure Victory in Cannabis-Related Contract Dispute


JERB Limited is a Colorado business formed to start a cannabis cultivation facility in Denver. In 2021, JERB signed an asset purchase agreement (APA) to acquire an existing cannabis license from Havana Operator, LLC. As part of the deal, JERB agreed to assume a commercial lease held by 51st Property Management Group, LLC and subleased to Havana, if JERB, 51st Property, and the landlord could agree to mutually acceptable terms for the lease assignment. JERB’s priority was obtaining a lease extension with affordable rental rates that would provide JERB with sufficient long-term security for its intended business investment.

After execution of the APA, JERB and the landlord immediately began lease negotiations. Despite negotiating over six months, JERB and the landlord could not agree on mutually acceptable lease terms, and JERB decided to terminate the APA.


Havana and 51st Property sued JERB in Colorado state court in Denver, claiming the APA did not give JERB the right to negotiate new lease terms with the landlord and instead JERB had to assume the existing lease as-is. Havana and 51st Property also claimed that JERB negotiated in bad faith, asserting claims for breach of contract, promissory estoppel, and unjust enrichment. Havana and 51st Property also refused to release JERB’s $820,000 deposit (held in escrow while the APA was pending) as required by the APA.


JERB mounted a vigorous defense denying all of the Plaintiffs’ claims. Getting its deposit back was JERB’s primary concern, as those funds were the company’s primary capital and had been unavailable for the past six months.

Holland & Hart filed a motion asking the Court to immediately consider the escrow funds dispute, and the Court agreed. After an evidentiary hearing, the Court determined that JERB was entitled to the immediate return of the funds. After JERB received its deposit, litigation on the merits of the Plaintiffs’ claims against JERB and JERB’s counterclaims against Havana and 51st Property for preventing the return of the escrowed funds then continued.

Holland & Hart knew every detail of the six-month negotiation between JERB and the landlord was crucial to demonstrate JERB had always negotiated in good faith. Holland & Hart created an extensive graphic timeline to visually demonstrate JERB acted honestly and consistently with accepted commercial practices and the deal fell apart for reasons outside of JERB’s control.


Before trial, Holland & Hart obtained summary judgment on the issue of JERB’s right to negotiate new lease terms with the landlord. This set JERB up favorably at trial to explain how JERB exercised its discretion in good faith. At the outset of the trial, Holland & Hart succeeded on its motion for a directed verdict on the Plaintiffs’ claims for promissory estoppel and unjust enrichment.

The remaining issues for the jury to consider were the Plaintiffs’ claims of breach of contract and negotiating in bad faith. Holland & Hart’s strategy to demonstrate JERB’s good faith under the APA was a complete success. The graphic timeline and strong testimony from two members of JERB’s negotiation team and its real estate consultant exposed Havana and 51st Property’s bad faith. After four days at trial and less than two hours deliberating, the jury returned a complete verdict in favor of JERB, dismissing the Plaintiffs’ contract claims, finding JERB had performed its contractual obligations while Havana and 51st Property had not.

Denver-based litigators Matthew Smith and Nick Katz comprised Holland & Hart’s trial team.


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