The 11th Circuit recently upheld a district court judgment that found George Russo, president of 3 Delta, Inc., individually liable to pay BrewFab, LLC approximately $365,000 in outstanding invoices. That decision is based on a text message Russo sent to a BrewFab owner promising to pay outstanding bills.
In 2018, 3 Delta hired BrewFab to build a machine to extract CBD oil. The parties initially proceeded with the oral agreement without issue until December 2019, when 3 Delta stopped paying BrewFab’s invoices.
The next month, the parties held a conference call to discuss the outstanding invoices, and shortly thereafter, George Russo sent a text message to Rick Cureton, one of the owners of BrewFab, which read: “According to our conversation on the 30 of January 2020, I George (sic ) Russo of 3 Delta undertake to pay brewing in full all outstanding invoices as of this date and all agreed work for the future of 3 delta.Thank you for your patience .”
As a result of the text, work resumed, but the invoices went unpaid, and in June 2020, BrewFab filed a lawsuit against 3 Delta to recover the overdue amount. The lawsuit contained a count against Russo, individually, for breach of his personal warranty stemming from the text message he sent to Cureton.
BrewFab asserted in its summary judgment motion that Russo’s text message was an unequivocal and enforceable personal guarantee. The district court agreed. Russo appealed.
On appeal, Russo tried to argue that he did not send the warrant text message in his personal capacity, but the Eleventh Circuit disagreed. The Eleventh Circuit, agreeing with the District Court, held that the language of the text message only identified Russo as the sender of the text message, which contained no language indicating that Russo was sending the message in his capacity as president of 3 Delta.
According to a Reuters report this summer, commercial disputes account for about 1/3 of all cannabis-related lawsuits. These disputes run the gamut of disagreements and involve claims for breach of contract, landlord-tenant disputes, securities litigation and other commercial torts, such as breach of fiduciary duty. One such lawsuit has been discussed above, but should serve as a reminder to those operating in the cannabis industry that business disputes are common and to remain vigilant and cautious in all business-related communications.
