By Jury Awards $10 Million In License Ownership Fight
A St. Louis jury awarded $10 million Tuesday to three plaintiffs in an ownership battle over six Missouri cannabis licenses. The case involved more than 20 businesses and individuals.
The plaintiffs were AJO MO LLC, Hi-Rise LLC and DMS Facility Management LLC. Over a week of testimony at the Mel Carnahan Courthouse, jurors heard about a tangled series of business agreements and allegations that partners went behind one another’s backs to secure competing deals.
The case hinged on whether the plaintiffs lawfully acquired a company through a transaction that would have made them majority owners of a cannabis cultivation and manufacturing facility in Waynesville. The deal also included a 40% stake in four Heya dispensaries.
Missouri cannabis regulators recognized AJO and Hi-Rise as the owners of the Waynesville facility licenses in May 2024. The state has not approved the disputed ownership changes involving the four Heya dispensaries while a series of lawsuits played out.
The jurors sided with the plaintiffs on counts of breach of contract and tortious interference. “We’re pleased the jury decided in our favor and awarded appropriate damages,” Peter Barden, spokesman for the plaintiffs, told The Independent after the verdict.
Origins Of The Dispute
The case grew out of a partnership between Eric Kirberg and Scott Sterling, who began working together around 2018 on Missouri medical marijuana license applications. When they didn’t win licenses of their own, they offered to build and run facilities for license winners in exchange for equity.
Kirberg, a contractor, built out the cultivation and manufacturing facility in Waynesville. Sterling, a cannabis executive, ran operations as CEO.
In return, their company got 9.9% of the entity holding the licenses and an option to buy the rest from its owner, 1913 Holdings. They did the same with four Heya dispensaries and secured 40% equity.
The two set up three companies, called the Delphi entities, to hold the ownership stakes, the management contracts and the Waynesville property. Sterling resigned in October 2021 as CEO but retained his equity in the parent company.
Soon after, Delphi defaulted on a loan Kirberg had personally guaranteed.
What Comes Next
The decision may not end the company’s struggles for AJO and Hi-Rise. As jurors deliberated last week, Missouri cannabis regulators filed proposed rules that would change how the state handles complicated ownership arrangements.
The proposed rules would give regulators new authority when someone with a history of specified violations is found to be “exercising a controlling influence” over a facility. That could lead to a fine of up to $100,000 or suspension or revocation of a license.
That could be significant for AJO, which owns 50% of Delta Extraction, a marijuana manufacturing company whose license the state revoked in November 2023 after it became the center of a massive product recall. St. Louis Judge Michael Noble barred defense attorneys from telling jurors about Delta Extraction’s license revocation and AJO’s connection to the company.
