A New York appellate court recently ruled on a significant case involving a cannabis lease agreement. In the case of Three Buds, LLC v. NCTBP Calabrese, LLC, the court decided to grant partial summary judgment in favor of the plaintiff, Three Buds, LLC, regarding a breach of contract claim against NCTBP Calabrese, LLC. This ruling affects businesses operating in the cannabis industry and highlights the importance of lease agreements and the obligations of landlords.
The case began when Three Buds, LLC entered into a lease with NCTBP Calabrese, LLC to operate a cannabis dispensary. According to the lease, NCTBP was responsible for providing a certificate of occupancy for the premises. However, after a construction accident led to a partial collapse of the building, the premises were condemned, preventing Three Buds from occupying the space. When NCTBP failed to resolve the structural issues, Three Buds initiated legal action against them.
The dispute escalated as Three Buds claimed multiple causes of action, including breach of contract, breach of implied warranty of good faith and fair dealing, and unjust enrichment. Additionally, they sought to pierce the corporate veil to hold Doug Calabrese personally liable for the company's actions. The case was filed in the Supreme Court of Monroe County, where the initial ruling was made.
On June 13, 2025, the lower court denied Three Buds' motion for partial summary judgment on their breach of contract claim and dismissed the defendants' affirmative defenses and counterclaims. This prompted Three Buds to appeal the decision, leading to the recent ruling from the Appellate Division of the Supreme Court of New York.
The appellate court, which included Judges Lindley, Curran, Ogden, Delconte, and Hannah, reviewed the case and modified the lower court's ruling. The court granted partial summary judgment for Three Buds on the breach of contract claim against NCTBP. The court stated, "The determination to pierce the corporate veil is fact-laden and thus is not well suited for resolution by summary judgment." It also noted that Three Buds had met its burden of proof regarding the breach of contract claim.
The court found that Three Buds had established the existence of a contract, their performance under that contract, and NCTBP's failure to repair the premises as required. The judges determined that the lower court erred in concluding that there were triable issues of fact concerning the obligations of NCTBP under the lease agreement.
However, the court upheld the lower court's decision regarding Three Buds' claims for breach of implied warranty of good faith and fair dealing and unjust enrichment. The court explained that the claim for breach of implied warranty must be based on a duty independent of the agreement and cannot simply duplicate a breach of contract claim. Additionally, the unjust enrichment claim was deemed precluded by the existence of a valid contract governing the subject matter.
This ruling has significant implications for businesses in the cannabis industry and other sectors that rely on lease agreements. It underscores the importance of clearly defined responsibilities in contracts and the potential consequences when those responsibilities are not met. The court's decision may encourage landlords and tenants to be more diligent in their lease agreements, ensuring that all parties understand their obligations.
Looking forward, the ruling sets a precedent for how similar cases may be handled in the future. It clarifies the standards for proving breach of contract in the context of commercial leases, particularly in industries that are still navigating legal complexities, such as cannabis. This ruling could influence how landlords and tenants approach their agreements and the legal recourse available in case of disputes.
As for the next steps, it remains to be seen whether NCTBP Calabrese, LLC will seek to appeal the ruling. The court filing did not provide details on any related cases pending. However, the outcome of this case could have lasting effects on the cannabis industry and lease agreements moving forward.