The company Southern University selected to run one of Louisiana’s two medical marijuana growing operations is embroiled in a dispute over company ownership and the contract negotiated with the school, potentially jeopardizing the deal as a contract-signing deadline approaches.
A lawsuit, filed in Lafayette in April, offers an explanation for delays in Southern's medical marijuana program. It has remained in its infancy for months without a final agreement between the school and the company it partnered with. LSU AgCenter, the other state-authorized grower, has partnered with a company that already is building a production facility to have medical marijuana available this year.
Court filings made Thursday in the Lafayette lawsuit throw the very ownership of Advanced Biomedics LLC — Southern University's chosen company — into question, with founder Chad Bodin alleging that majority owner Carrol Castille never put up funds he promised, negating his claim to ownership.
With the company ownership and Southern contract in turmoil, Castille was threatening legal action Thursday to prevent Southern from potentially scrapping the deal with Advanced Biomedics and picking someone else to run the medical marijuana program. Negotiations between Southern and Castille's team were ongoing Thursday.
Southern, in an afternoon statement, said it is aware of the dispute between the owners of Advanced Biomedics, which "had nothing to do with the university or its stakeholders."
"These internal issues were brought to our attention after we selected the firm and had negotiated a contract with their counsel," the statement said. "It is our hope that Advanced Biomedics can resolve their conflict and sign the contract, which is based upon the terms of their proposal to the university. However, the university cannot indefinitely delay its program. Therefore, on April 27, the university's counsel informed Advanced Biomedics that they would be provided until May 4 to execute the contract tendered or the university would negotiate with an alternate vendor."
In the lawsuit filed in Lafayette, Castille claims that a contract negotiated with Southern by Bodin was done without permission from the company. On that basis, Castille now says he should not be held to a deadline set by Southern that requires the firm to sign a contract by Friday, according to a copy of a petition Castille threatened to file in Baton Rouge.
Advanced Biomedics was selected by Southern in September to run the growing operation after a competitive bid process in which it jumped ahead of an earlier front-runner.
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Castille, a Lafayette-area businessman with ties to the horse racing industry, claims in the Lafayette district court lawsuit that Bodin, a pharmacy owner in Lafayette who is Advanced Biomedics' largest minority owner and founder, “fraudulently” negotiated the contract between the company and Southern for the medical marijuana partnership and that it was a bad deal.
In court filings responding to the lawsuit, Bodin disputes that Castille holds any ownership in the company. Castille promised $12 million in funding for Advanced Biomedics, but never came through with the funds, according to Bodin. Castille's attorney also participated in the Southern University negotiations alongside Bodin, according to the filings, and Bodin was given authority to negotiate the contract in a February meeting of the firm's owners.
"We're ready to move forward," said Robin Sylvester, Bodin's attorney. "Chad Bodin has done everything he is supposed to do."
Sylvester said Bodin signed the contract with Southern, and because Castille never put up the money he promised, no other signatures are needed.
According to Castille's lawsuit, he put up $8 million in capital for the firm, through Advanced Biomedics Holdings, giving him a 63 percent stake in the company. Bodin put up $2 million and owned a 25.5 percent share. Nine other people own 4 percent or less of the firm, the court documents say.
Bodin “surreptitiously engaged in meetings and negotiations” with Southern and made substantial changes to the contract proposed by Castille’s holding company, Castille's Lafayette suit said. Castille said the contract that Bodin negotiated with the school included “materially worse terms” than Castille’s proposal.
“As a direct and proximate result of Bodin’s conduct … there have been substantial delays in the formation of an agreement between Southern University and AB LLC, which has correspondingly delayed the ability of the state of Louisiana to provide medical treatment to those citizens suffering from a ‘debilitating medical condition,’” the lawsuit said.
Chuck Huebner, a spokesman for Castille, said Bodin created Advanced Biomedics and had the initial idea to run one of the state's two medical marijuana growing operations, but that Castille provided most of the financing through his holding company.
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Castille has owned and operated a number of business ventures, mostly in the Carencro area, including several horse racing and breeding enterprises.
Castille says he learned that his proposed contract with Southern had been revised in March. After emailing proposed revisions to the contract on April 9, Southern University responded that the university’s board had already approved the agreement negotiated with Bodin’s counsel, the suit said.
Castille contends the operating agreement signed by all owners of the firm prevents anyone but him from negotiating on the company’s behalf. He said in the lawsuit he never gave Bodin permission to negotiate with Southern.
The lawsuit against Bodin is for breach of contract, breach of fiduciary duty, violations of the Louisiana Unfair Trade Practices Act and injunctive relief.
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Southern University also faced a lawsuit last fall, when the firm that initially finished first place in the school's selection process sued for copies of the other finalists' applications, as well as correspondence among members of Southern's board. Southern picked Advanced Biomedics over the first-place company, Med Louisiana. Advanced Biomedics promised the school $6 million over the five-year contract, about three times the amount Med Louisiana promised.
When asked for an update of Southern’s medical marijuana program last week, Lakeeshia Giddens Lusk, an AgCenter research associate, said the school is waiting on Mike Strain’s office to complete the firm’s background checks. Strain is the head of the Louisiana Department of Agriculture and Forestry, one of the regulators for medical marijuana in the state.
“After that process is complete, we plan to begin construction either in or near East Baton Rouge Parish and have products available in the dispensaries in early February,” Lusk said.