Default judgment against CBD company affirmed

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An Indiana CBD company that refused to pay for a shipment of more than $200,000 of hemp could not convince an Indiana appellate court that it had excusable neglect for failing to respond to both a lawsuit filed against it as well as related court orders.

Issues began for Biodynamics Extract LLC, or BDX, in December 2019 after it received hemp from Kickapoo Creek Botanicals. Kickapoo, a company that grows and sells hemp, had entered into a hemp buyback agreement with BDX.

The agreement stated that Kickapoo would purchase hemp seeds and cultivate them into plants, while BDX retained the right of first refusal to purchase the plants according to an agreed-upon price schedule. The price schedule was based on the percentage of cannabidiol the matured plants produced.

After performing its CBD analysis on the December 2019 shipment of hemp, BDX determined the value of the product was $216,163.44. But BDX never paid Kickapoo for the hemp.

Thus, Kickapoo sued BDX and Biodynamic Ventures LLC in November 2020, seeking payment and asserting breach of contract, unjust enrichment and conversion. It also served the summons and complaint on BDX’s registered agent, Registered Agents Inc., and on Ventures registered agent, John Bales.

In December 2020, Kickapoo filed a certificate of issuance of summons. Still receiving radio silence from BDX three months later, Kickapoo moved for summary judgment on the full value of the hemp delivered and accepted by BDX.

The Marion Superior Court granted judgment to Kickapoo after BDX continued to fail to respond.

Then in April 2021, Kickapoo filed a verified motion for proceedings supplemental and served it on Registered Agents and Bales. The trial court also issued an order to appear, requiring BDX and Ventures to attend the hearing, but both failed to show.

After the trial court issued an order to show cause requiring the parties to appear, BDX moved to set aside the default judgment on grounds of excusable neglect pursuant to Indiana Trial Rule 60(B)(1). It claimed it never received notice of the lawsuit and argued that it never signed the hemp buyback agreement.

To support its motion, BDX submitted two affidavits from BDX’s members, Bales and Ken Thieneman, who both affirmed they had never been served any documents and were never notified of the existence of any documents regarding the lawsuit.

The trial court found otherwise, denying the motion to set aside the judgment, and the Court of Appeals of Indiana affirmed in Biodynamic Extraction, LLC d/b/a Biodynamics Extract, LLC v. Kickapoo Creek Botanicals, LLC, 21A-CT-2446.

The appellate panel noted that one characterizing constant in Indiana precedent is the explanation provided for the breakdown in communication, which guides the result as to whether courts find excusable neglect and overturn a default judgment.

“As noted by the trial court, the affidavits did not state that Bales and Thieneman are the only persons authorized to receive the Complaint and summons for BDX, nor did it explain why none of the other legal documents sent by Kickapoo and the trial court to Registered Agents appeared to have never been received by BDX either,” Judge Patricia Riley wrote. “BDX bears the burden of demonstrating it did everything that needed to be done and that it was Registered Agents who was responsible for the breakdown.

“… Here, BDX’s evidentiary designations are simply insufficient for this court to conclude that BDX has done everything that apparently needed to be done to prevent a breakdown in communication between the company and Registered Agents,” Riley concluded.

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