Glass House Claps Back at ‘Black Market’ Accusations with Defamation Lawsuit

California-based Glass House Brands Inc. (NEO: GLAS.A.U) (OTCQX: GLASF) returned fire against a competitor last week, filing a lawsuit claiming that Long Beach-based Catalyst Cannabis Co. and its leadership defamed them by charging both on social media and in a separate lawsuit that Glass House was illegally trafficking marijuana to the underground market.

Catalyst and its CEO, Elliot Lewis, filed a formal complaint in Los Angeles Superior Court on June 6 alleging that Glass House is “one of the largest, if not the largest, black marketers of cannabis in the state of California, if not the country.”

The company asserted in its suit that Glass House is selling enormous amounts of cannabis to so-called “burner distributors” that divert marijuana illegally across state lines, and said its claims could be easily proven with state track-and-trace data from METRC.

When the suit was first filed, Glass House declined to comment. But now, the company is apparently ready to defend itself.

In the defamation suit – filed June 20 in Los Angeles Superior Court – the company dismissed Lewis’s allegations as “fabricated” and “false,” and chalked them up to “misplaced anger and hostility.”

“Glass House has a well-earned reputation for compliance and has taken great strides to make sure that its cannabis and cannabis products are appropriately tracked and traced and do not find their way into the illicit market,” the company asserted, adding, “To date, no state or local regulator has imposed any regulatory violations or assessed any penalties relating to any alleged violations against Glass House.”

Glass House Catalyst Defamation Lawsuit

According to the new suit, calculations used by Lewis in multiple online videos posted to social media that he alleges proves diversion to the illicit market are “entirely manufactured and unsubstantiated,” and Lewis’ “math” doesn’t accurately factor in the company’s consumer packaged goods sales on top of its cannabis wholesale figures.

Rather, Glass House contends that Lewis and Catalyst are driven by market competition and the desire to snatch more market share from Glass House than they are by a concern for honest dealing.

“Defendants are masquerading as righteous whistleblowers when, in reality, they are doing nothing more than spreading falsehoods about a direct competitor all for Defendants’ own financial gain, including to entice their investors and lenders to make additional capital investments into Catalyst,” the defamation suit claims.

From a competitor standpoint, Catalyst’s lawsuit has been successful, Glass House admitted in its defamation claim. The company said it has suffered “significant economic damages,” including a loss of customers, a decrease in revenue, and a “substantial interruption” in daily business operations.

The suit requests both punitive damages as well as an injunction prohibiting Lewis, Catalyst, and attorney Damian Martin from further defaming Glass House.

Lewis immediately fired back in yet another video on social media and said Glass House has “opened up the discovery floodgates” with the defamation suit. He promised to subpoena various witnesses and records to prove their case.

“Thank you. Now we got a fucking truck to drive through this discovery,” Lewis said. “We’re going to call witnesses, we’re going to subpoena fucking records, because we’re fighting for … truth. So you’ve opened the door on discovery. We didn’t even survive demurrer on our other complaint. You just opened it wide open. So thank you. We’re going to continue with this fight.”

Regarding the defamation suit, Lewis said “I wipe my ass with it.”

Hearings in the defamation case are scheduled for Aug. 23 and Oct. 20 in L.A., and hearings in the original suit filed by Catalyst against Glass House are slated for Aug. 29 and Nov. 13 in Long Beach.