Disputed Defaults and Alleged Broken Promises
In its dismissal motion, AFC insisted at least one default occurred when the Justice entities failed to provide audited financial statements and failed to maintain their Pennsylvania cannabis license, both conditions required under the lending agreement.
Judge Quraishi found otherwise. The complaint, he said, plausibly alleges that AFC waived the financial-reporting requirement after deeming the audits too expensive and unnecessary because AFC already had full access to the accounts.
On the Pennsylvania facility, the judge said the plaintiffs adequately alleged an enforceable oral promise by AFC not to foreclose on the property after the license lapsed. According to the complaint, AFC had instructed the Justice entities to shutter the Pennsylvania operation and consolidate operations in New Jersey — the very decision that led to the loss of the license.
“AFC decided to shut down the facility and have plaintiffs focus on operations in New Jersey,” Judge Quraishi wrote. “Defendants cannot now reverse course and argue that plaintiffs’ lack of a Pennsylvania permit is a breach when defendants had a hand in the nonrenewal.”
