UPDATE: Judge Livingston has ruled to extend the terms of the Temporary Restraining Order (TRO) in the form of a Temporary Injunction (TI). This is based on the Judge’s ruling, pending the signed TI order. Once signed, the TI will be in place until the final trial occurs, which is currently scheduled for February 2021.
Four Texas companies are suing to overturn Texas’ ban on the manufacture and sale of smokable hemp products, which they warn will shut Texas companies out of a multi-billion-dollar industry and lead to inaccurately labeled products on store shelves. Today these companies (the plaintiffs) and their attorneys (Matt Zorn, Chelsie Spencer, and Susan Hays), participated in a temporary injunction hearing against the state (represented by Charles Eldred) in Judge Livingston’s Travis County 261st District Court.
Out of the several complaints brought by the plaintiffs, Eldred only objected to the probable right to recovery. He did not object to the points on harm or cause of action, therefore waiving the right to appeal based on those issues. Eldred contended that the state’s rules: 1. do not add to the statutes, 2. do not counter the statute, 3. do not create additional restrictions. Eldred further argued that the ban on manufacture of smokable hemp products in the statute equates to a ban on sale since they assert that was the intent of the bill. Therefore, the rules make what is implicit, explicit.
Due to time restrictions, there was substantive back and forth on if witnesses would offer verbal testimony. The plaintiffs must put evidence in the record for an injunction to hold. The nexus between the law and government interest must be weighed to deem if it is oppressive. Eldred makes a standing objection to any verbal testimony, which Livingston overrules. Ultimately, Livingston says the plaintiffs have the burden of proof and may offer testimony only in regards to the probable right of recovery.
First Witness: Zain Meghani, owner Crown Distributing, LLC – Crown has been producing hemp products for 3 years in Texas. Their main revenue generator are their Hempettes. They worked with local government and Dallas Police Department (DPD). At one point, they were investigated by DPD who tested their products and were found to be compliant. Crown learned about the manufacture ban in late 2019 and reached out to lawyers to create a contingency plan. In case they were forced to leave Texas, Crown secured a lease in Oklahoma at the cost of $8,000/month. Once rules came out, Crown pulled the smokable hemp products. They also had to continue to build out their Oklahoma location, spending $70,000 on electrical work alone and an additional estimated $40,000 on other repairs. There is still outstanding work to be done on the facility. The move to the new facility could cost several million. Previously, Crown estimated that they made up 12-15% of the national market ($10mil revenue). If they are forced to move, Crown could lose $56 million and devastate the company since their Hempettes are their main product. Additionally, 30 jobs have been lost in Dallas and will be going to Oklahomans instead.
Second Witness: Jason Roberts, Decorated Army Veteran, employed by Purely CBD and owner of store in Abilene – Roberts has worked in the hemp industry for 2 years and is familiar with Texas and US markets. He co-owns an Abilene store that was founded in 2018. They worked with local officials and were often visited by law enforcement to ensure their compliance.
Over the past 6 months the Abilene store’s sales are approximately 40% [smokable hemp products]. With the ban, that will immediately cut out that 40% and possibly affect the rest of our products as generally our customers purchase a few CBD products in a bundle. With the ban, these customers could just purchase online rather than come into the store where they were forced to purchase smokable hemp products. We have seen a 70% drop in sales over the past two months since we announced the ban to our customers in overall sales. With the ban, we will still be forced to pay our lease and other contracted liabilities which will put a significant burden on our family due to the loss of that revenue. We cannot get out of our lease even though the state’s rules have basically forced our business to close.Jason Roberts, Decorated Army Veteran (9/14/2020)
The State offered no evidence or witnesses. Judge Livingston had a few questions:
The plaintiffs assert in their closing that the ban is a deprivation of property rights and liberty rights. It is a travesty that businesses are being shut down during an economic crisis due to this oppressive economic regulation. The state reasserts the points they made in their opening statement. The Judge left the item pending and plans to rule by 9/17/20.
Link to Case: Crown Distributing, LLC v. Texas DSHS (D-1-GN-20-004053)
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