Capital Pure Assets, Ltd. v. CC Technology Corporation ( 2024 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 7 CAPITAL PURE ASSETS, LTD., Case No. 2:24-cv-00680-NJK 8 Plaintiff(s), ORDER 9 v. 10 CC TECHNOLOGY CORPORATION, 11 Defendant(s). 12 Pending before the Court is an order to show cause why the Court should not abstain in 13 whole or in part in light of the marijuana-related aspects of the case. Docket No. 31. The parties 14 have briefed the issue. Docket Nos. 32-35. For the reasons discussed below, the Court will not 15 abstain and the order to show cause is discharged.1 16 I. BACKGROUND 17 CC Technology filed counterclaims predicated on its allegations that, inter alia, (1) it is a 18 subsidiary of Cannatrac Financial Corp., which is a company focused on “payment processing 19 systems in the cannabis industry,” Counterclaims (Docket No. 5) at ¶ 16; (2) CC Technology was 20 “developing and marketing ‘CannaCard,’ a cashless payment and reward system that could be used 21 in the cannabis industry,” id. at ¶ 17; and (3) CC Technology and the Counter-Defendants entered 22 into a joint venture agreement “to further develop and build the CannaCard brand,” as well as other 23 projects, id. at ¶ 24.2 The gist of the dispute turns on the allegations that CC Technology was lured 24 25 1 In light of this ruling, the Court does not require abstention argument at the hearing set for September 20, 2024. The hearing remains on calendar, however, as to the motion for 26 preliminary injunction and the motion to compel deposit. 27 2 For its part, Plaintiff alleges that it declined to form a joint venture as to the cannabis business, Compl. at ¶¶ 12-14, and that the joint venture was actually related to investing in a 28 Chicago real estate project, see, e.g., id. at ¶¶ 15-22. 1 into depositing funds into an escrow account, but that the joint venture otherwise failed to launch. 2 See, e.g., Counterclaims at ¶ 25-60. The counterclaims include various tort and contract causes of 3 action. See id. at ¶¶ 62-147. The counterclaims seek myriad forms of relief, including damages, 4 declaratory relief, injunctive relief, attorneys’ fees, and interest. See id. at p. 36. 5 Given that the sale of marijuana continues to be unlawful pursuant to federal law, the Court 6 ordered the parties to show cause in writing why the Court should not abstain from hearing this 7 case. Docket No. 31. That is the matter currently at hand. 8 II. ANALYSIS 9 As a starting point, the Court notes that the parties agree that Pullman abstention, Burford 10 abstention, Thibodaux abstention, and Colorado River abstention are all inapplicable to the 11 circumstances of this case. See Docket No. 33 at 6-9; Docket No. 34 at 2. Having reviewed the 12 parties’ briefing and the case law, the Court agrees that these abstention doctrines do not apply in 13 the circumstances of this case. See, e.g., Bart Street III v. ACC Enterps., LLC, 2018 WL 4682318, 14 at *7 (D. Nev. Sept. 27, 2018). 15 The parties disagree, however, on whether abstention is warranted pursuant to general 16 comity concerns. See, e.g., Docket No. 34 at 3-6. As Counter-Defendants point out, some courts 17 have abstained from hearing marijuana-related cases without a finding that any particular 18 abstention doctrine applies, resorting instead to general principles of comity. E.g., Wildflower 19 Brands Inc. v. Camacho, 2023 WL 3150091, at *3 (C. D. Cal. Mar. 20, 2023). The Ninth Circuit 20 has recently cast doubt on such an approach, noting case law that federal courts have “no 21 discretion” to abstain when none of the traditional abstention doctrines apply, see Peridot Tree, 22 Inc. v. City of Sacramento, 94 F.4th 916, 932 (9th Cir. 2024) (quoting Fireman’s Fund Ins. Co. v. 23 City of Lodi, 302 F.3d 928, 939 (9th Cir. 2002)), but see Noel v. Hall, 341 F.3d 1148, 1160 (9th 24 Cir. 2003) (“a federal court may stay its proceedings based on comity even when none of the 25 abstention doctrines requires that it do so”), and this Ninth Circuit panel cabined the earlier comity- 26 based abstention cases as involving specific circumstances not present here, such as suits that 27 interfere with the validity of state tax systems, see Peridot Tree, 94 F.4th 932-33. Given that the 28 1} Ninth Circuit recently declined to “invent” a new comity-based abstention doctrine to apply to 2|| marijuana-related cases, see id. at 934, the Court is not inclined to do so either. 3 At any rate, it does not appear that abstention would be warranted even were the Court to 4] follow the cases relying on general principles of comity. The crux of the issue is whether the remedy requested is not unlawful under federal law. See Wildflower Brands, 2023 WL 3150091, 6] at *2 (quoting Gopal v. Luther, 2022 WL 504983, at *3 (E.D. Cal. Feb. 18, 2022)). The 7|| counterclaims here seek at their heart financial recourse in the form of the return of escrow funds 8] and various types of damages. See Counterclaims at p. 36 (prayer for relief).> Regardless of 9| whether the monetary relief sought in this case may bear some relation to marijuana-related 10]| business activity,’ the Court could fashion relief without requiring a violation of federal law. See Bart Street IIT, 2018 WL 4682318, at *6; see also Shulman v. Kaplan, 58 F Ath 404, 409 (9th Cir. 2023) (addressing redressability in Article II] challenge in case involving business dispute related 13] to growing, marketing, and selling marijuana).° 14) 1. CONCLUSION 15 For the reasons discussed above, the Court will not abstain and the order to show cause is 16] discharged. 17 IT IS SO ORDERED. 18 Dated: September 16, 2024 19 7 x — Nancy J. K 20 United States Magistrate Judge 21 22 23//_—__"D9@/_ > The counterclaims also seek injunctive relief, but that remedy appears to be limited to an 24! order for the return of the funds in escrow. See Counterclaims at §§ 85, 146. 25 4 While it previously highlighted marijuana-related uses, Counterclaimant clarifies in the latest briefing that its CannaCard technology can also be used (and actually is used) outside the 26] marijuana industry, including in food, retail, and other services. Docket No. 33-1 at § 3. 27 > Counter-Defendants’ reliance on Wildflower is unpersuasive, as that case involved relief in the form of profits from the cultivation, distribution, and sale of marijuana. See 2023 WL 28] 3150091, at *2; see also Docket No. 34 at 5.