ScanSource Claims Dutchie Owes $24.7 Million

Cannabis software company Dutchie is being sued by technology company ScanSource for not paying a bill valued at $24.7 million.

According to Law360, Dutchie placed an order with South Carolina-based ScanSource for touchscreen monitors, computers, and components that ScanSource purchased from a company called Elo Touch Solutions.

ScanSource said in its lawsuit that the order included customizations, such as the Dutchie name etched into the devices, which made the products nonrefundable and not cancelable. Dutchie signed a supplemental agreement in 2021 stating it understood the policy.

ScanSource initially ordered 13,000 of the products from Elo, a move that Dutchie wasn’t happy about. Dutchie wrote in an email: “We need to have the entire volume on the PO placed to Elo immediately. Please also place the full order for the [Customer Displays]. There should be no risk to Scansource [sic] in doing this as there is an executed sell over agreement between Dutchie and Scansource.”

Through June 2022, the lawsuit claims that Dutchie continued to place more orders. However, on Nov. 10, 2022, Dutchie asked ScanSource to quit placing orders and to stop all production. At this point, ScanSource had already taken delivery for many of the custom products and was warehousing them until Dutchie could tell it where to ship the products.

In addition to that, ScanSource said that in December 2022, Elo told the company that it had already completed some of the orders from June. Elo also said it wouldn’t accept any cancellations or refunds.

ScanSource says in its complaint that it paid Elo $10.6 million for the products.

The Bill is Due

The complaint notes that Dutchie paid some money toward its original 2021 order, but it didn’t state how much or when. It also states that in January 2023, Dutchie stated it would not purchase any of the unproduced custom products but was willing to work with ScanSource and Elo regarding payment for warehoused products and was willing to cover “minimal costs” for the Elo-held custom products.

ScanSource told Dutchie there was be 12% interest charged on the unpaid bill, which was $12.9 million for the original order. Elo also told ScanSource it was willing to knock down the price for the unshipped products from $10.6 million to $8.2 million payable over five months.

ScanSource said in its complaint that by March 2023, Dutchie wasn’t even paying for the products already sent to Dutchie customers. This amount was $850,680.29.

Altogether ScanSource claims that Dutchie owes it $20,485,077.27 for the already-ordered products that are being warehoused and $4,288,683.28 for the Forecast-Based Custom Products.

Legal Woes

Dutchie is also being sued by California-based Fortis Advisors, which is representing the former stockholders of Leaf Logix Technologies Inc. Law360 reported back in May that a year after acquiring Leaf Logix, Dutchie made last-minute claims to funds in an indemnity holdback trust created as part of the merger agreement and refused good faith attempts to resolve the amounts in dispute.

The article stated, “The indemnity holdback amount was supposed to be used to indemnify Dutchie in the event it incurred losses from certain types of direct or third-party claims that were not otherwise accounted for in the merger agreement, the complaint says. Dutchie was supposed to distribute the funds in the holdback trust one year after the merger closed on March 15, 2021.”

The complaint noted, “Dutchie’s eleventh-hour claim for indemnification is nothing more than a transparent attempt at a money grab for funds that rightfully belong to the now-former Leaf Logix shareholders as part of the purchase price.”

Leadership Change

As ScanSource was trying to get Dutchie to pay for orders, the latter company was undergoing a change in the top leadership.

In December 2022, Green Market Report wrote that Dutchie ousted its founders Ross and Zach Lipson. The Lipsons later claimed that they were improperly kicked out of the company by the current board and were insisting they were still directors and officers of the company.

New York Provider

In December 2022, Dutchie announced it was working with the Dormitory Authority of the State of New York to be the exclusive provider of technology and point-of-sale hardware solutions for the state’s conditional adult-use retail dispensary licensees. The social justice applicants have been told they won’t have to pay for the Dutchie products for the first year.

Despite the goodwill gesture, Dutchie also faced technology problems as its systems went down on April 20 this year.

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