Recently, the 11th Circuit upheld a district court ruling that decided George Russo, president of 3 Delta, Inc., is individually responsible to pay BrewFab, LLC roughly $365,000 in outstanding invoices. This ruling is premised upon a text message Russo sent to a BrewFab owner promising to pay the outstanding invoices.
In 2018, 3 Delta hired BrewFab to construct a machine to extract CBD oil. The parties initially proceeded under the oral agreement without issue until December 2019 when the 3 Delta stopped paying BrewFab’s invoices.
Next month, the parties had a conference call to discuss the outstanding invoices, and soon thereafter, George Russo sent a text message to Rick Cureton, one of BrewFab’s owners, which read, “As per our conversation on Jan 30 2020 I george (sic) Russo from 3 Delta do promise to pay brew fab in full all outstanding bills as of this date and all agreed upon work for 3 delta future forward. I thank you for your patience.”
As a result of the text, work resumed, but the invoices did not get paid, and in June of 2020, BrewFab brought suit against 3 Delta to recover the past due amount. The lawsuit contained a count against Russo, in his individual capacity, for breach of his personal guaranty stemming from the text message he sent to Cureton.
BrewFab asserted in its summary judgment motion that Russo’s text message was an unambiguous and enforceable personal guaranty. The district court agreed. Russo appealed.
On appeal, Russo attempted to argue that he did not send the guaranty text message in his personal capacity, but the Eleventh Circuit disagreed. The Eleventh Circuit, agreeing with the District Court, stated that the language in the text message merely identified Russo as the one sending the text message, which contained no language to indicate that Russo was sending the message in his capacity as 3 Delta’s president.
According to a report from Reuters this summer, commercial disputes make up about 1/3 of cannabis related lawsuits. These disputes cover the gamut of disagreements, and involve breach of contract lawsuits, landlord-tenant disputes, securities related litigation, and other business torts such as breach of fiduciary duty. One such lawsuit is discussed above, but should serve as a reminder to those operating in the cannabis industry that business disputes are prevalent, and to remain vigilant and cautious in all business related communications.