Judge James C. Chalfant, Case 22STCV23753 2022-08-16 Tentative Ruling

Dr. Greenthumb, Inc. v. LAHC, Inc., and Sevan Derohanian, 22STCV23753

Tentative decision on application for preliminary injunction: denied

Plaintiff Dr. Greenthumb, Inc. (“Dr. Greenthumb”) applies for a preliminary injunction against Defendants LAHC, Inc. (“LAHC”) and Sevan Derohanian (“Derohanian”), enjoining LAHC from removing the DTLA store’s Dr. Greenthumb signage, name, trademark, promotional materials, and other branding material.

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

Plaintiff Dr. Greenthumb commenced this proceeding on July 22, 2022, alleging a cause of action for specific performance of contract. The Complaint alleges in pertinent part as follows.

Dr. Greenthumb licenses its trademark and branding and distributes its products through cannabis dispensaries that agree to do business as Dr. Greenthumb. LAHC is one such dispensary, and Derohanian is its record owner and manager.

The parties entered into a License Agreement (“License” or “License Agreement”) on May 12, 2021, which required LAHC to operate a licensed cannabis dispensary (“DTLA Store”) under the Dr. Greenthumb brand trade name, use its trademark, and dedicate at least 15% of its retail space to Dr. Greenthumb products. Paragraph 10 of the License Agreement authorized enforcement through specific performance in the event of a breach.

On July 15, 2022, Derohanian advised Dr. Greenthumb that LAHC would unilaterally disassociate with DGT and terminate the License if Dr. Greenthumb did not terminate its license with another Dr. Greenthumb-branded location. The License does not permit that, and Dr. Greenthumb could not contractually terminate its license with the other store.

Defendants’ motivation is (1) an unrelated dispute between LAHC and the competitor store and (2) plans to rebrand and associate with one of Derohanian’s other entities. Dissociation with Dr. Greenthumb and its founder, rapper Louis Mario Freese (“Freese”), would cause severe and irreparable harm to Plaintiff.

Dr. Greenthumb seeks (1) specific performance of LAHC’s duties and obligations under the License, (2) injunctive relief prohibiting LAHC and Derohanian from terminating the License and from removing the DTLA store’s Dr. Greenthumb signage, name, trademark, promotional materials, and other branding material, and (3) attorney’s fees and costs.

On July 25, 2022, Dr. Greenthumb served both Defendants with the Summons, Complaint, and an ex parte application for a temporary restraining order (“TRO”) and order to show cause re: preliminary injunction (“OSC”).

On July 26, 2022, the court granted Dr. Greenthumb’s ex parte application and issued a TRO/OSC enjoining LAHC from removing the DTLA Store’s Dr. Greenthumb signage, name, trademark, promotional material, and other branding material.

An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court. CCP §525. An injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act. See Comfort v. Comfort, (1941) 17 Cal.2d 736, 741. McDowell v. Watson, (1997) 59 Cal.App.4th 1155, 1160.[1] It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right. Meridian, Ltd. v. City and County of San Francisco, et al., (1939) 13 Cal.2d 424.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. See Scaringe v. J.C.C. Enterprises, Inc., (1988) 205 Cal.App.3d 1536. Grothe v. Cortlandt Corp., (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn., (1992) 7 Cal.App.4th 618, 623. The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court, (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402.

A preliminary injunction is issued after hearing on a noticed motion. The complaint normally must plead injunctive relief. CCP §526(a)(1)-(2).[2] Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. See e.g. Ancora-Citronelle Corp. v. Green, (1974) 41 Cal.App.3d 146, 150. Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts. See CCP §527(a). For this reason, a pleading alone rarely suffices. Weil & Brown, California Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007). The burden of proof is on the plaintiff as moving party. O’Connell v. Superior Court, (2006) 141 Cal.App.4th 1452, 1481.

A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565. The concept of “inadequacy of the legal remedy” or “inadequacy of damages” dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff. Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California, (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital, (1994) 25 Cal.App.4th 628, 636. Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief. Doe v. Wilson, (1997) 57 Cal.App.4th 296, 304. The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Thornton v. Carlson, (1992) 4 Cal.App.4th 1249, 1255.

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. See CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn., (1992) 11 Cal.App.4th 916, 920.

Dr. Greenthumb licenses its trademark and the attendant goodwill to state and locally licensed cannabis dispensaries. Fowler Decl., ¶3. Freese, whose stage name B-Real, is the source of the Dr. Greenthumb trademark and a renowned rap writer and performer. Fowler Decl., ¶4.

On May 12, 2021, Dr. Greenthumb and LAHC’s owner, Derohanian, executed the License Agreement in which LAHC received a non-exclusive license to operate the DTLA store in downtown Los Angeles using the Dr. Greenthumb trade name and trademark for a monthly licensing fee. Fowler Decl., ¶6, Ex. 1. The DTLA store must dedicate at least 15% of retail floor space to Dr. Greenthumb licensed and affiliated products. Fowler Decl., ¶6, Ex. 1. Dr. Greenthumb must (1) provide a commercially reasonable list of a wide variety of products; (2) use commercial best efforts to provide, promote and market the store; and (3) maintain high quality in the products provided and in licensed property. Fowler Decl., ¶6, Ex. 1.

Paragraph 7.1 allows a party to terminate the License following a curable breach of a material term after first giving 30 days’ written notice and opportunity to cure. Fowler Decl., ¶6, Ex. 1. Paragraph 7.2 waives all damages for termination of a License and damage to goodwill or anticipated profits, unless Dr. Greenthumb establishes or licenses another branded store within the DTLA store’s exclusivity zone. Fowler Decl., ¶6, Ex. 1. Paragraph 10.10 of the License Agreement authorizes its enforcement through specific performance in the event of a breach. Fowler Decl., ¶6, Ex. 1.

On June 10, 2022, Dr. Greenthumb received a letter from Derohanian alleging that Dr. Greenthumb had breached the License Agreement in several ways and outlining specific remedies for each. Fowler Decl., ¶7, Ex. 2. The letter claimed that Dr. Greenthumb did not provide a commercially reasonable list of licensed and affiliate products available for LAHC’s purchase and resale. Fowler Decl., ¶7, Ex. 2. This included failure to change its products over two years despite the market demand, make the most popular products available, and release adjacent merchandise such as clothes. Fowler Decl., ¶7, Ex. 2. The fact that the DTLA store could only stock five Dr. Greenthumb products – which was often all Dr. Greenthumb had in stock – in the required 15% of floorspace was problematic. Fowler Decl., ¶7, Ex. 2. LAHC accused Dr. Greenthumb of offering non-branded retail stores more variety. Fowler Decl., ¶7, Ex. 2.

The letter also claimed that Dr. Greenthumb provided no brand support, including onsite visits from Freese or brand training officers and social media shoutouts, to help with marketing any store other than the one at the Los Angeles International Airport (“LAX store”). Fowler Decl., ¶7, Ex. 2.

The letter further claimed that Dr. Greenthumb had failed to use commercial best efforts to maintain the high quality and standards of its brand, licensed property, and licensed products. Fowler Decl., ¶7, Ex. 2. Dr. Greenthumb consistently provided merchandise of a limited variety and stale quality such that the DTLA store often had to sell it at a steep discount. Fowler Decl., ¶7, Ex. 2.

Greenthumb’s affiliation with another location, Dr. Greenthumb Sylmar (the “Sylmar store”), harmed the DTLA store’s image because the Sylmar store is indebted to various vendors. Fowler Decl., ¶7, Ex. 2. At a Hall of Flowers event, various vendors approached LAHC representatives to demand payment of debts that the Sylmar store owed. Fowler Decl., ¶7, Ex. 2. LAHC would only accept one form of remedy – Dr. Greenthumb must sever all business ties with the Sylmar store. Fowler Decl., ¶7, Ex. 2.

Per Paragraph 7.1 of the License Agreement, the letter gave Dr. Greenthumb 30 days to cure the breaches or LAHC would terminate the License. Fowler Decl., ¶7, Ex. 2.

On July 8, 2022, Dr. Greenthumb’s counsel responded that the alleged breaches were fabrications to justify terminating the License. Rothschild Decl., ¶3, Ex. 1. Dr. Greenthumb offered training on multiple days in each of the last few months, which LAHC declined. Rothschild Decl., ¶3, Ex. 1. Dr. Greenthumb also provided menus, promotions, and budtender incentives and samples that LAHC failed to respond to without fail. Rothschild Decl., ¶3, Ex. 1. Freese had made promotional appearances at the DTLA store, and the store’s large customer base proved that the promotion and quality of products were not subpar. Rothschild Decl., ¶3, Ex. 1. While the Sylmar store had no bearing on the contractual obligations of either party, LAHC’s accusation coincided with LAHC personnel causing the temporary closure of the Sylmar store, which spoke to the real motive for LAHC’s complaints. Rothschild Decl., ¶3, Ex. 1.

Dr. Greenthumb noted Defendants’ breaches of the License, including failures to purchase sufficient Dr. Greenthumb products, inform Dr. Greenthumb of applicable events, maintain a website, collaborate on sale plans, account for and pay monthly license fees, and provide financial reports. Rothschild Decl., ¶3, Ex. 1. Dr. Greenthumb requested that LAHC schedule a meeting to resolve all disputes informally before an arbitration required by the License. Rothschild Decl., ¶3, Ex. 1. Dr. Greentumb’s counsel added that, because of the loss of revenue and goodwill that would result from the DTLA store dissociating itself, Dr. Greenthumb was ready to pursue all available legal remedies. Rothschild Decl., ¶3, Ex. 1. However, it was amenable to a reasonable schedule for dissociation that would not hurt Dr. Greenthumb’s goodwill. Rothschild Decl., ¶3, Ex. 1.

During a conference call on July 15, 2022, Derohanian admitted that LAHC had operating and business problems and promised to remedy the issues identified by Dr. Greenthumb’s July 8, 2022 letter. Fowler Decl., ¶¶ 8-9. This included hiring a new bookkeeper and arranging for more prompt responses to Dr. Greenthumb communications. Fowler Decl., ¶9. In turn, Dr. Greenthumb agreed to address the marketing and advertising issues raised in LAHC’s June 10, 2022 letter. Fowler Decl., ¶9.

At the end of the call, LAHC insisted that Dr. Greenthumb terminate the Sylmar store’s license within ten business days to prevent LAHC from terminating the License Agreement. Fowler Decl., ¶10. LAHC continued to claim that the Sylmar store’s poor management was impacting the DTLA store’s business. Fowler Decl., ¶10. The License Agreement does not give LAHC the right to demand termination of another license. Fowler Decl., ¶11.

Derohanian and other LAHC staff had a business relationship with the Sylmar store’s principal which soured, and the Sylmar store owes one LAHC officer and his affiliates money. Fowler Decl., ¶10. Dr. Greenthumb believes that LAHC’s claims of poor management at the Sylmar store are pretextual. Fowler Decl., ¶10.

Additionally, Derohanian is the CEO of multiple competing brands such as Crush Cannabis, Famouski Farms, and Drippz, some of whose products were prominently displayed in the DTLA store as of April 20, 2022 and again in July 2022. Apodaca Decl., ¶¶ 4-7, Ex. 1-3; Garcia Decl., ¶4. Derohanian labels and manufactures these products onsite, and a white board in the store lists these products to be promoted by employees, not Dr. Greenthumb products. Garcia Decl., ¶¶ 4-5. Dr. Greenthumb suspects that LAHC seeks to dissociate from Dr. Greenthumb to rebrand with a competitor. Fowler Decl., ¶12.

Any loss in revenue by the DTLA store stems not from the Sylmar store, but from LAHC’s own mismanagement. Fowler Decl., ¶13. The end of the pandemic, increased taxation, and other economic factors also have led to an industry-wide decrease in revenue. Fowler Decl., ¶13, Ex. 3.

Termination of the License would cause Dr. Greenthumb to lose customers, goodwill, promotional value, and its substantial investment in time and resources for the DTLA Store. Fowler Decl., ¶14. The customer base would immediately go to whichever competitor the DTLA store associates with next. Fowler Decl., ¶15.

During the existence of the License Agreement, Dr. Greenthumb has failed to offer a variety of products for sale at DTLA Store, has delivered poor quality products, and has delivered months-old product instead of fresh. Lomeli Decl., ¶¶ 3, 7. Freese has failed to appear at the DLTA Store for any promotion since October 2021, including on April 20, 2022 (“4/20”). Lomeli Decl., ¶4. Since Dr. Greenthumb opened the LAX Store in April 2022, it has focused its efforts on that store to the detriment of the rest, often abandoning marketing or brand projects with the DTLA store halfway through. Lomeli Decl., ¶¶ 5-6.

LAHC attributes its loss in revenue and inability to issue dividends since November 2021 to Dr. Greenthumb’s failure to provide the benefits promised in the License. Derohanian Decl., ¶4. Continued breach will likely result in closure of the DTLA store. Derohanian Decl., ¶5.

On May 5, 2022, when Freese texted Derohanian about payments owed by LAHC for the last five months, Derohanian explained that business had been slow to the point of providing no dividends. He therefore asked Dr. Greenthumb multiple times to help with marketing. Derohanian Decl., ¶10, Ex. 3. Reese promised to make sure that Dr. Greenthumb’s president, Edwin Fowler (“Fowler”), responded. Derohanian Decl., ¶10, Ex. 3.

On June 7, 2022, Derohanian and Fowler met to discuss LAHC’s grievances about Dr. Greenthumb’s performance under the License; the parties did not reach any agreement. Derohanian Decl., ¶7.

On July 5, 2022, Fowler responded to LAHC’s June 10, 2022 letter. Derohanian Decl., ¶11, Ex. 4. As to lack of variety of products, he maintained that Dr. Greenthumb had the absolute right to determine product offerings. Derohanian Decl., ¶11, Ex. 4. At the same time, he contended that the DTLA store was not taking advantage of the wide variety of products that Dr. Greenthumb offered. Derohanian Decl., ¶11, Ex. 4. Fowler linked this to the DTLA store’s lack of attention. Dr. Greenthumb had posted online about it and sent “influencers” to the store. Derohanian Decl., ¶11, Ex. 4. Dr. Greenthumb’s marketing department also had tried many times to schedule training sessions with LAHC staff, and Fowler advised that they should coordinate to schedule future events. Derohanian Decl., ¶11, Ex. 4.

As for Dr. Greenthumb’s failure to manage its brand reputation, Fowler asserted that LAHC’s promotion of in-house brands – which were of average quality at best – over Dr. Greenthumb products was responsible. Derohanian Decl., ¶11, Ex. 4. Fowler also cited the dispute between the Sylmar store and LAHC officers and maintained that Dr. Greenthumb took all reasonable measures. Derohanian Decl., ¶11, Ex. 4. Asking to terminate its license constituted a tortious interference of contract. Derohanian Decl., ¶11, Ex. 4. Fowler did, however, concede that Dr. Greenthumb had to switch distributors. Derohanian Decl., ¶11, Ex. 4.

Fowler’s letter concluded by noting that LAHC had breached the License Agreement by not paying licensing fees or provide an accounting since the beginning of the year. Derohanian Decl., ¶11, Ex. 4. He asked that LAHC remedy this and other breaches and stated that he was looking forward to resolving those issues together and creating a good working environment for the remainder of the License. Derohanian Decl., ¶11, Ex. 4.

The parties met to try and resolve their grievances on July 14 and 15, and August 1, 2022. Derohanian Decl., ¶¶ 13-15. During the July 14 meeting, Dr. Greenthumb acknowledged that the Sylmar store was causing problems for the Dr. Greenthumb brand. Derohanian Decl., ¶13. During the August 1 meeting, Dr. Greenthumb asked for 30 days to decide if it would agree to termination of the License and, if so, additional time to obtain LAHC’s customer and vendor lists, which are trade secrets. Derohanian Decl., ¶15. This led LAHC to suspect that Dr. Greenthumb seeks to breach the License by establishing a competing location in the exclusivity zone. Derohanian Decl., ¶15.

In between these meetings, Dr. Greenthumb filed the Complaint and sought the TRO/OSC. Derohanian Decl., ¶17. On July 26, 2022, the court issued the TRO. Derohanian Decl., ¶18, Ex. 6. The TRO only enjoined Defendants from removing Dr. Greenthumb signage, trademark, and other branding material from the DTLA store; it did not enjoin Defendants from terminating the License Agreement. Derohanian Decl., ¶18, Ex. 6.

On December 10, 2021, Reese posted on his website about all Dr. Greenthumb stores, including the DTLA store. Fowler Reply Decl., ¶11, Ex. 5. He has also posted about the stores on Instagram. Fowler Reply Decl., ¶11, Ex. 6. Reese has visited the DTLA Store before and offered to do so again. Fowler Reply Decl., ¶11.

On March 3, 2022, Dr. Greenthumb emailed LAHC about a variety of new merchandise such as t-shirts and hats to resell and LAHC did not respond. Fowler Reply Decl., ¶13; Cohen Decl., ¶12, Ex. 6.

On March 16, 2022, Dr. Greenthumb offered budtender incentive samples to LAHC, but it never responded. Cohen Decl., ¶10. Although Dr. Greenthumb dropped off these samples in April 2022, LAHC never acknowledged receipt. Cohen Decl., ¶10.

On March 22, 2022, Uproxx.com ranked Dr. Greenthumb’s “Insane OG” as the best rapper-owned weed brand. Fowler Reply Decl., ¶¶ 3, 7, Ex. 1.

An Instagram post on May 11, 2022, shows that Dr. Greenthumb has approximately 30 different products. Fowler Reply Decl., ¶9, Ex. 2. Sylmar also sells a wide variety of Dr. Greenthumb products. Fowler Reply Decl., ¶9, Ex. 3.

On May 16, 2022, Dr. Greenthumb sent an email to licensees offering storewide incentives and asking for sales information to make incentive payments to budtenders. LAHC never replied. Cohen Decl., ¶11, Ex. 5.

Between March and July 2022, Dr. Greenthumb has posted about the DTLA store multiple times, including when celebrities have come to visit. Fowler Reply Decl., ¶10, Ex. 4.

The Insane and Dr. Greenthumb brand menus sent to every licensee, including LAHC, include far more than five varieties, even as the exact offerings change by the season. Cohen Decl., ¶4, Ex. 1. LAHC failed to respond to text messages after the menus were sent. Cohen Decl., ¶5, Ex. 2.

Heavily promoting a new licensee store like the LAX store does not mean that Dr. Greenthumb is abandoning the rest. Dr. Greenthumb offered the DTLA store the same courtesy when it first opened. Fowler Reply Decl., ¶12.

Dr. Greenthumb’s marketing support tools and support for licensees include brand books about products and promotions, an extensive budtender training manual, an extensive style guide with detailed guidelines for retail product staging and presentation, efforts to schedule monthly meetings with individual licensees to discuss business plans and management issues, regular marketing updates, hosted consumer events, costly Insane brand pages on Weedmaps.com and Leafly.com, and promotion by sponsoring the largest cannabis friendly Jiu Jitsu tournament in California. Fowler Reply Decl., ¶14. Cohen also offers Zoom brand trainings and coordinates with LAHC managers and personnel via text. Cohen Decl., ¶7, Ex. 3. LAHC has refused to partake in in-person trainings, and it has availed itself of only some of the offered product demonstrations. Cohen Decl., ¶¶ 8-9, Ex. 4.

On June 17, 2022, LAHC general manager Pedro Lomeli sent end of the month reports for January through May 2022. Fowler Reply Decl., ¶15, Ex. 7. These reports showed a substantial profit margin in all but one month. Fowler Reply Decl., ¶15.

When Derohanian’s associate, Arman, said on July 15, 2022 that Dr. Greenthumb needed to drop the Sylmar store to prevent LAHC from removing the Dr. Greenthumb branding from the DLTA store, he called it an “ultimatum” and not a threat. Fowler Reply Decl., ¶17. Arman was a silent partner in the Sylmar store until one of one of the silent partners filed license document that shut down the Sylmar store for several months. Fowler Reply Decl., ¶20. The Sylmar store only reopened after resolving the matter through litigation. Fowler Reply Decl., ¶20. This history, not Dr. Greenthumb, is the reason why others perceive an association between the Sylmar store and LAHC. Fowler Reply Decl., ¶20. No other Dr. Greenthumb licensee has reported issues with the Sylmar store. Fowler Reply Decl., ¶20.

Dr. Greenthumb has no record of orders that LAHC contends were stale; it can address those concerns once it has more complete information. Cohen Decl., ¶13.

Plaintiff Dr. Greenthumb seeks a preliminary injunction against Defendants to prevent LAHC from removing Dr. Greenthumb signage, trademark, and other branding material from the DTLA store.

Dr. Greenthumb asserts that the License Agreement is valid and enforceable. The parties expressly agreed to specific performance of the License as a remedy and the court should honor the parties’ intent. When the parties have stipulated to a remedy, the trial court should honor the agreement unless it would be contrary to a rule of law or public policy. See DVD Copy Control Ass’n v. Kaleidescape, Inc., (2009) 176 Cal.App.4^th 697, 725-26. App. at 6.

Defendants assert that Derohanian is not a party to the License Agreement; he signed it only in his capacity as an LAHC officer. Fowler Decl., ¶6, Ex. 1. They contend that no breach of contract or cause of action for specific performance can succeed against him because the License does not apply to him as an individual. Opp. at 13-14.

Dr. Greenthumb argues that Derohanian is a property party for injunctive relief because the gravamen of its Complaint is that Derohanian and Arman threatened to cause LAHC to remove the DTLA store’s Dr. Greenthumb signage and branding. Reply at 5.

Dr. Greenthumb is correct. Derohanian is not a party to the License Agreement. Nonetheless, if LAHC can be enjoined, Derohanian also can be enjoined as an agent of LAHC.

Defendants asserts that Derohanian’s June 10, 2022 letter and the July 15, 2022 phone conversation between the parties are inadmissible settlement negotiations under Evidence Code section 1152. Opp. at 11-12.

Defendants are wrong. Evidence Code section 1152(a) provides that evidence that a person has offered in compromise money or any act or service to another who claims damage is inadmissible to prove his or her liability. Derohanian’s June 10 letter and the subsequent July 15 telephone call are not settlement negotiations. The June 10 letter is Derohanian’s demand for a cure or LAHC would terminate the License, not a settlement offer. Fowler Decl., ¶7, Ex. 2. The July 15 telephone call was a discussion of problems in the parties’ License performance and no offer of compromise was made. Dr. Greenthumb relies on this evidence not to show LAHC’s admission to liability, but rather that the statements themselves are an anticipatory breach. The evidence is admissible.

Dr. Greenthumb asserts that it has performed its duties under the License despite LAHC’s to the contrary. App. at 7; Fowler Decl., ¶7, Ex. 2. Dr. Greenthumb offered training on multiple days in each of the last few months, which LAHC declined. Rothschild Decl., ¶3, Ex. 1. Dr. Greenthumb also provided menus, promotions, and budtender incentives and samples that LAHC failed to respond to without fail. Rothschild Decl., ¶3, Ex. 1. Freese had made promotional appearances at the DTLA store, and the store’s large customer base proved that the promotion and quality of products were not subpar. Rothschild Decl., ¶3, Ex. 1. While the Sylmar store had no bearing on the contractual obligations of either party, LAHC’s accusation coincided with LAHC personnel causing the temporary closure of the Sylmar store, which spoke to the real motive for LAHC’s complaints. Rothschild Decl., ¶3, Ex. 1. Dr. Greenthumb blames LAHC for breaching the License, including failures to purchase sufficient Dr. Greenthumb products, inform Dr. Greenthumb of applicable events, maintain a website, collaborate on sale plans, account for and pay monthly license fees, and provide financial reports. Rothschild Decl., ¶3, Ex. 1.

Despite this, during the July 15, 2022 phone call, LAHC informed Dr. Greenthumb that it (LAHC) would terminate the License if Dr. Greenthumb did not terminate its license with the Sylmar store within 10 days. Fowler Decl., ¶10. Dr. Greenthumb asserts that this is an anticipatory breach. App. at 7.

LAHC disagrees that Dr. Greenthumb has performed under the License Agreement and, in fact, Dr. Greenthumb has materially breached the License. In the June 10, 2022 letter, LAHC asserted that Dr. Greenthumb (1) did not provide a commercially reasonable list of licensed and affiliate products available for LAHC’s purchase and resale; (2) provided no brand support; and (3) failed to use commercial best efforts to maintain the high quality and standards of its brand and licensed property, including by severing ties with Sylmar. Fowler Decl., ¶7, Ex. 2. Despite LAHC’s June 10, 2022 letter, Dr. Greenthumb failed to allege its performance in the Complaint and failed to prove it in the application. In short, there is no evidence that Dr. Greenthumb performed under the License Agreement. Opp. at 13.

Dr. Greenthumb’s counsel’s July 5, 2022 letter and the allegations in the declarations supporting Dr. Greenthumb’s application are sufficient to meet its initial burden to show performance and to require LAHC to present evidence of Dr. Greenthumb’s non-performance. In reply, Dr. Greenthumb fleshes out its position with considerable evidence of performance. Fowler Reply Decl., ¶¶ 3, 7-14, Exs. 1-6; Cohen Decl., ¶¶ 4-5, 7-12, Exs. 1-6. This is sufficient to meet Dr. Greenthumb’s burden to show its performance under the License Agreement.

Dr. Greenthumb argues that LAHC has a non-exclusive license to use the Dr. Greenthumb name and brand for the DTLA store and exploited this right for more than a year to its financial benefit. Dr. Greenthumb has performed under the License. On July 15, 2022, LAHC breached the License through an anticipatory breach by stating that it no longer intends to comply with the License and will remove Dr. Greenthumb’s signage and branding from the DTLA store on July 29, 2022. App. at 7.

Under the doctrine of anticipatory breach, if a party to an obligation gives notice to another that he will not perform the same upon his part, and the party does not retract such notice before the time at which performance upon his part is due, such other party is entitled to enforce the obligation without previously performing or offering to perform any conditions upon his part in favor of the former party. Civil Code §1440. An anticipatory breach may be made through express repudiation by an unequivocal refusal to perform. See Jeppi v. Brockman Holding Co., (1949) 34 Cal.2d 11, 18 (seller repudiated real property sales contract by express repudiation and notice that it would sell to another buyer). It may also be made by an implied repudiation in which the promisor takes an action that puts it out of his or her power to perform. Zogarts v. Smith, (1948) 86 Cal..App.2d 165, 172 (liquidation of partnership made it impossible to pay plaintiff’s notes). Finally, repudiation may occur when reasonable grounds exist to believe that the obligor will commit a breach by non-performance, the obligee demands reassurance of performance, and the obligor fails to do so in a reasonable time. Rest. 2d, Contracts, §251; 1 Witkin, Summary of California Law (Contracts), (2017 11^th ed.) §890, p. 936.

LAHC has not committed an anticipatory breach of the License Agreement. It has not repudiated the License, either expressly or by implication. Although LAHC threatened (or gave an ultimatum) to terminate the License in the July 15, 2022 meeting, it expressly disavowed termination at the July 26, 2022 hearing on Dr. Greenthumb’s ex parte application. The parties further discussed whether they could resolve their differences on August 1, 2022. Fowler Decl., ¶10; Derohanian Decl., ¶15. Finally, LAHC’s opposition carefully preserves its option to terminate. Opp. at 6, n. 1. LAHC has never definitively asserted that it would repudiate the License.

Nor does Dr. Greenthumb show repudiation under the Restatement of Contracts. Assuming that LAHC’s conduct in the July 15 meeting gave rise to a reasonable belief that it would not perform, Dr. Greenthumb never demanded reassurance of performance. Even if it did make such a demand, LAHC has provided that reassurance.

Dr. Greenthumb has not shown LAHC’s anticipatory breach of the License Agreement.

In general, an injunction is not available for a breach of contract because damages will often be an adequate remedy for contract breach, and the mere difficulty of determining damages is not sufficient to warrant injunctive relief. Voorhies v. Greene, (1983) 139 Cal.App.3d 989, 996 (where law partnership broke up, portion of injunction providing for former partner’s access to corporate books was appropriate, but injunction directing continued access to office and continued employment by firm was not). However, an injunction may be issued to restrain the breach where specific performance of the contract would be available for the protection of the legal right and the prevention of irreparable mischief. Id., 139 Cal.App.3d at 996. See also Bharat Developers, Inc. v. Minidis, (“Bharat”) (2008) 167 Cal.App.4th 437, 444 (injunction prohibiting franchisee from using trademark).

Dr. Greenthumb contends that damages will be an inadequate remedy because LAHC’s removal of the Dr. Greenthumb signage will cause irreparable damage to its brand, reputation, and goodwill, and loss of goodwill is inherently difficult to measure. App. at 7-8.

LAHC argues that specific performance is not available because damage to goodwill is expressly barred under section 7.2(e) of the License Agreement where it expires or is terminated per section 7.1. Opp. at 14. This argument presumes that the License has been terminated. LAHC expressly disavowed termination at the ex parte hearing and continues that disavowal in the opposition. See Opp. at 6., n. 1.

LAHC further argues that specific performance is not available to prevent it from terminating the License. LAHC has a right to terminate under section 7.1 if Dr. Greenthumb has breached the License Agreement, and the specific performance provision cannot be used to strip that right. Opp. at 15. This is true, but LAHC does not purport to terminate the License at this time.

LAHC also relies on equitable principles that will not permit specific performance of contracts that stipulate for a succession of acts whose performance cannot be consummated by one transaction inasmuch as such continuing performance requires protracted supervision and direction. Thayer Plymouth Center, Inc. v. Chrysler Motors Corp., (“Thayer”) (1967) 255 Cal. App. 2d 300, 304. LAHC argues that the License would require the court’s constant supervision on the DGLA store’s allocation of 15% of prime space for Dr. Greenthumb products, Dr. Greenthumb’s obligation to provide a wide variety of products, and LAHC’s calculation of its profits. Opp. at 16.

Dr. Greenthumb argues without citation to authority that Thayer is an archaic doctrine that has been universally disapproved. Reply at 3. Nonetheless, the court agrees that specific performance is not barred by equity.

In sum, Dr. Greenthumb has not demonstrated a likelihood of success on the merits because it has not shown anticipatory breach through LAHC’s repudiation of the License Agreement.

In determining whether to issue a preliminary injunction, the second factor which a trial court examines is the interim harm that plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach, (2014) 232 Cal.App.4th 1171, 1177. This factor involves consideration of the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo. Id.

Dr. Greenthumb asserts that termination of the License Agreement would cause it to lose customers, goodwill, promotional value, and the substantial investment in time and resources that it has devoted to the DTLA store. Fowler Decl., ¶14.

LAHC argues that Dr. Greenthumb’s goodwill may be measured by the fee that LAHC pays for the use of Dr. Greenthumb’s brand, trademark, and goodwill. Opp. at 17. To some extent this is true. The licensing fee paid by LAHC for Dr. Greenthumb’s its products, brand, and tradename may be used to measure the damage to Dr. Greenthumb’s goodwill if the products, brand, and tradename are not used. There may be additional damage to Dr. Greenthumb’s goodwill, but the licensing fee is a rough approximation. However, the fact that the harm can be measured does not make it any less of a harm.

Dr. Greenthumb is wrong in asserting that LAHC suffers no harm from an injunction. App. at 10. LAHC says it is losing money and if it is forced to carry Dr. Greenthumb’s allegedly stale and unsupported products prevents LAHC from finding a business partner who would honor those commitments and therefore increase sales. Fowler Decl., ¶7, Ex. 2.

[1] The courts look to the substance of an injunction to determine whether it is prohibitory or mandatory. Agricultural Labor Relations Bd. v. Superior Court, (1983) 149 Cal.App.3d 709, 713. A mandatory injunction — one that mandates a party to affirmatively act, carries a heavy burden: “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” Teachers Ins. & Annuity Assoc. v. Furlotti, (1999) 70 Cal.App.4th 187, 1493.

[2] However, a court may issue an injunction to maintain the status quo without a cause of action in the complaint. CCP §526(a)(3).

[3] The court has ruled on Dr. Greenthumb’s written objections to Defendants’ evidence. The clerk is directed to scan and electronically file the court’s rulings.

The court need not address Defendants’ recitation of the License Agreement (Fowler Decl., ¶6, Ex. 1; Derohanian Decl., ¶3, Ex. 1), the June 10, 2022 letter (Fowler Decl., ¶7, Ex. 2; Derohanian Decl., ¶¶ 8-9, Ex. 2), and the July 8, 2022 letter (Rothschild Decl., ¶3, Ex. 1; Derohanian Decl., ¶13, Ex. 5) already part of Dr. Greenthumb’s evidence.