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A North Carolina marketing firm is suing a cannabis shop for allegedly breaching a contract to transfer ownership following a successful marketing campaign that led to unexpectedly large sales.

Castnet Marketing LLC has filed a lawsuit in North Carolina against Celestial Wellness LLC, and its majority member Tylere White. According to Law360. Last week, the case was transferred to North Carolina Business Court.

According to the complaint, Castnet and Celestial signed an agreement on June 15th, 2023 where Castnet would provide a marketing service in exchange for a stake within the hemp shop. Castnet was to receive a 10% interest at the time of signing. Additional interests would be 15% after $2.5 million of sales, 10% after $3 million and 14% after $3.5 million.

The complaint stated that “Castnet worked tirelessly to perform the contract and the sales of Celestial drastically increased to the point where it was obvious, before the passage even of one year, that several, if no all, sales milestones were likely to be met and that, therefore, Castnet would become an important owner of Celestial and that Castnet will be entitled to substantial commissions.”

Castnet claims that Celestial management terminated the contract prematurely in order to prevent Castnet reaching the ownership milestones.

According to the complaint, “In May 2024 Celestial, via White, informed Castnet it wanted to “exit” the contract or ‘dissolve it.” “Castnet refused the proposal.”

Castnet claims that the situation began to escalate at this point.

The complaint stated that White, acting for Celestial, demanded in a long meeting that the contract be terminated, and that Castnet sign an entirely new contract that had significantly less favorable terms to Castnet. “White went as far as to say that ‘Nobody will leave this room until this contract is signed’ in reference to his proposed agreement to terminate the existing contract.

Castnet also accuses White that he deliberately delayed “substantial” orders to prevent reaching milestones in sales. The lawsuit claims that such actions are a breach of fiduciary duties, as Castnet claims it is at least a 10% minor member in Celestial and would have been 25% minor member without White’s alleged misconduct.

According to the complaint Castnet made loans as per their contract to Celestial. The principal and interest on these loans will total $75,154 by June 29, 2024.

Castnet was also entitled to commissions. Castnet would receive “12.5% of new sales of CW product (Celestial), for which it was responsible.” The benchmark for new sales was defined as monthly sales exceeding $105,000. Castnet reported that it received these commissions from October through December 2023.

The complaint also stated that White, as the majority shareholder, owed Castnet a fiduciary obligation as a minority Celestial member. Castnet claims that this duty was breached by “bad faith negotiation, breach of contract and unfair trade practices.”

Castnet seeks various forms of relief. These include repayment of loans made to Celestial, plus interest, as well as an accounting to determine the commissions owed. Castnet estimates that at least $68,198 is owed for January to March 2024. The lawsuit also includes claims of unfair trade practices under North Carolina’s Unfair and Deceptive Trade Practices Act.

Castnet is suing for damages, treble damage, punitive damages, and attorneys’ fees. The firm has also asked for a jury trial.

The dispute is not about marijuana, which remains illegal in all 50 states, but hemp and CBD products. What are the current hottest topics? The only commercially available cannabis-derived products in North Carolina Outside of tribal lands Celestial Wellness’ website claims to offer “the very best THCv Delta 8, CBD Hemp Products available on the internet.” It also sells marketed versions THCA is a THCA.