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Leading cannabis brand Cookies is in a widening legal dispute with its partner in dozens of adult-use marijuana stores.
Cookies Retail LLC alleged in a lawsuit filed in California Superior Court in Orange County last month that Cookies breached California franchise law, made misrepresentations and caused “not less than one hundred million dollars” in damages, court records show.
The cannabis industry entity that the public knows as Cookies is a network of legally distinct companies.
Some of those operations – including San Francisco Bay Area-based Cookies SF – are associated with Gilbert Milam Jr., the brand’s co-founder and social media personality who also is known as Berner.
Others, such as Newport Beach, California-based Cookies Retail, are independently owned companies that, according to court records, signed agreements with Milam’s companies to open Cookies-branded retail stores.
Cookies Retail’s principal is Brandon Johnson, a former real estate professional who is also the co-founder and CEO of TRP, a cannabis cultivation, manufacturing and distribution company that operates marijuana stores under other brands in 14 states.
According to the Jan. 12 lawsuit filed in California Superior Court in Orange County, Johnson and Cookies Retail signed licensing agreements with Berner’s businesses beginning in January 2020 that would allow Johnson and his companies to open Cookies-branded marijuana stores in California, Colorado, Florida, Massachusetts, Oklahoma and Oregon.
To do so, Johnson’s Cookies Retail “invested over $100 million,” the suit alleges.
Since then, according to the lawsuit, Cookies Retail “has discovered countless lies and blatant misrepresentations made by Defendants about their business, including the profitability of Cookies stores, the cost to open each store, and Defendants’ illegal self-dealing.”
The suit alleges violation of state and federal franchise laws and fraudulent misrepresentations and claims at least $100 million in damages – the amount Cookies Retail alleges it invested in 33 Cookies-branded stores it opened across the country.
The suit, filed by Cookies Retail, names as defendants:
- Cookies Creative Consulting & Promotions LLC.
- Cookies Creative Consulting & Promotions Inc.
- Cookies SF.
- Cookies Creative PT.
- Cookies Creative Productions & Consulting Inc.
- Biggerbizz.
- Lemonnade.
- Mesh Brands.
- 1212 Ventures.
The suit also names Cookies executives Milam, Matt Barron, Parker Berling, Ian Habenicht and breeder Lesjai Personnet (sic) Chang, who is credited with developing the company’s proprietary genetics.
Through a spokesperson, Milam’s Cookies declined to comment to MJBizDaily about the legal proceedings.
Johnson and Cookies Retail did not respond to MJBizDaily requests for comment.
San Diego-based attorney Thomas O’Connell, Cookies Retail’s counsel of record in the case, also declined to comment.
Second Cookies lawsuit
The Orange County lawsuit was filed shortly before Cookies Retail sued Milam’s Cookies in New York.
The New York suit alleges that Cookies violated an agreement that would offer Cookies Retail exclusive rights to Cookies’ iconic intellectual property, including strain names as well as the brand’s signature “C” logo.
At the center of that dispute is a corner storefront in Manhattan’s Herald Square, where an adult-use marijuana store called “Culture House” opened for business earlier this month.
According to the New York suit, that store – operated by an individual who won one of the state’s Conditional Adult-Use Retail Dispensary Licenses – is using trademarks in violation of exclusive rights that Cookies signed over to Cookies Retail.
These recent lawsuits are separate from other pending actions brought against Cookies last summer by company investors. The investors’ suit claims Milam and other Cookies executives, including Berling, used investor cash to finance personal expenses.
One of those suits claimed Cookies burned through a $23 million investment round last year and “ran out of money” before “wildly missing its numbers.”
That led to the company failing to support a $275 million valuation, the investor suit alleges.
Franchise allegations
The California suit alleges that Cookies intentionally failed to register as a “franchise,” as defined by state and federal law, in order to evade certain disclosure requirements.
Licensors market their intellectual property for a fee but generally do not involve themselves in a business’ day-to-day decisions.
Under a franchise agreement, one party exercises significant control over the other.
In the Orange County suit, Cookies Retail alleges that Milam and other Cookies principals meddled “in nearly every aspect of Plaintiff’s business operations, from hiring employees, to marketing to inventory.”
For example, the suit alleges that Milam’s Cookies controlled every detail of grand openings – including guest lists, what music would play and what security guards would be hired.
Milam’s Cookies also forced Cookies Retail to purchase “clothing merchandise above fair market value” and “to buy more Cookies branded (cannabis product), which had to be grossly marked down in order to sell,” according to the suit.
“Ultimately, this lawsuit turns on whether Cookies is a ‘franchisee’ or whether it merely ‘licenses’ its trademark to other parties,” said California-based attorney and cannabis industry business consultant Hirsh Jain, who reviewed the filings at MJBizDaily‘s request.
If the allegations are true, and Cookies took control over aspects of business operation, “It would be difficult to make the case that this was merely a licensing agreement between the two parties,” Jain added.
Disputes escalate
When disputes arose, Cookies principals threatened Cookies Retail “with physical violence,” forced Cookies Retail to purchase Cookies products “that it never ordered,” withheld product or flooded “surrounding markets with product” and “bullied” Cookies Retail “with threats to prevent … stores from opening,” the Orange County suit alleges.
“Had Plaintiff been aware of this information or the true nature of the parties’ relationship prior to January 21, 2020, it would have never entered into any agreements with Defendants, let alone invested over $100 million dollars to open its own Cookies-branded stores,” the suit alleges.
Meanwhile, Cookies’ empire continues to expand.
The “grand reopening” of Cookies Melrose, an adult-use cannabis store in West Los Angeles, is scheduled for Saturday.
The original location of Cookies Melrose, which was operated by Los Angeles-based owners and not by Johnson or Cookies Retail, according to state records, closed last fall in a landlord dispute.
Meanwhile, Culture House, the Manhattan marijuana store at the center of the New York lawsuit, celebrated its grand opening on Feb. 11.
With employees decked out in Cookies-branded gear and the store covered in Cookies colors, Culture House’s social media posts promised “Top Spenders … a chance to meet Berner in NYC.”
Whether that infringes on previous agreements is up to the courts.
Chris Roberts can be reached at chris.roberts@mjbizdaily.com.
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