Following two days of testimony, Michigan cannabis testing laboratory Viridis North was released from a product recall, as a result of a request for temporary injunction by the lab’s owners. A second Viridis lab in Lansing remains under the recall order, following a decision by Michigan Chief Court of Claims Judge Christopher Murray on Friday.
Judge Murray ruled that the Michigan Marijuana Regulatory Agency’s (MRA) recall was overbroad by including products tested by Viridis North, in Bay City, even though all products that allegedly failed retesting were tested at the main Viridis Lansing facility, which legally operates as a separate company.
As a result, Judge Murray made a split decision, releasing the smaller Viridis North from the November 17, 2021 recall, while declining to lift the recall for the Lansing facility.
[Read Judge Murray’s order – Watch day two of hearings]
On Thursday, Viridis co-founder and CEO, Greg Michaud, testified that his company will likely have to close its doors if the recall was not lifted on Viridis’ two laboratories.
“These two beautiful, multi-million dollar laboratories that we’ve built, we have about two months of operating expenses left. So, it’s highly likely that we’d have to close our doors, sir,” said Michaud from the witness stand, during the examination from his attorney, Kevin Blair.
Michaud testified there are, “2,400 samples on hold at Bay City and 1,800 at Lansing.”
Proceedings on the hearing for a temporary injunction on the MRA recall lasted for two days of testimony, finishing up on Thursday afternoon.
The MRA issued a Notification of Marijuana Product Recall on Nov. 17, for all marijuana products tested between Aug. 10 and Nov. 16 by Viridis Laboratories in Lansing and Viridis North in Bay City, Michigan due to unreliable results, leaving more than 400 dispensary owners in Michigan scrambling to replace impacted inventory as growers braced for those returns.
Claire Patterson, scientific and legal section manager with the MRA testified Thursday that she was not entirely sure of the total percentage of what has been retested but the total number of source packages is 829.
“Each of those source packages may relate to a lot of smaller what we call child packages or derived packages,” Patterson said under questioning from the MRA attorney. “As of this morning Dec. 2, we have a total percentage passing at 73 percent and a total percentage failing at 27 percent. Those samples are failing for either total coliforms, total yeast and mold, or aspergillus.”
She went on to say the MRA has received 18 adverse reaction complaints since the issuance of the recall.
“They range from pretty serious side effects and hospitalizations to more mild allergic type reactions.”
Charges that the agency improperly instituted a massive cannabis products recall on Nov. 17 against the testing laboratories went before Judge Murray in Detroit. Viridis’ complaint calls for a revocation of the recall and monetary damages from the MRA for what Viridis says has cost state cannabis businesses more than $230 million
Michaud told the court that he’s received three letters from customers threatening litigation against Viridis.
“If the recall were to end today. If there was a ruling that the recall was never valid in the first place and never should have happened, how would life at Viridis Lansing and Viridis North change immediately?” Viridis’ attorney Kevin Blair asked Michaud.
If the recall were lifted, Michaud replied, Viridis could get back to doing revenue generating work and put aside all the retests that are not generating revenue.
“Currently we’re not seeing any cash collection either,” Michaud said. “The customers have stopped paying us and we have several hundred thousand dollars in accounts receivables. We’ve not seen any of that come in except for a little bit. In fact, we’re having checks cancelled that were sent to us. So, we’re not receiving really any revenue at this point.”
Michaud added that with the recall cancellation they would get back some of their loyal customers, to what extent though, remains to be seen.
Whether it’s cannabis or beef, a recall is to protect the public, Judge Murray said during proceedings.
Judge Murray’s frustrations during the proceedings was evident Thursday just as it was on Wednesday. He even offered an apology to Viridis’ attorneys as they appeared pressed for time in preparing to bring three witnesses including Michaud.
“You don’t have to apologize,” Murray told Blair as he prepared to bring Michaud to testify via Zoom. “I don’t mean to be short with anybody. It’s not the time as in time of day that I have to do this, this is what my job is but…and I’m not talking about the witness that you’re going to call now, it’s the getting into the nitty gritty of an agency decision and seeking the court to enjoin them. That’s something for later but that’s what’s getting me perturbed so, I apologize.”
Under questioning from Blair, Michaud, the main defense witness, elaborated that the recall is not over and that it is just starting.
Their limited capacity, Michaud said, has to do with available personnel, equipment and instrumentation to handle samples on a daily basis. The testing was being done free of charge, he said, as customers reached out to Viridis asking what Viridis can do for them.
“Obviously we’re going to do what we can,” Michaud said. “So, these tests are monopolizing our time all day every day,” he said, adding it’s having probably the worst impact they could imagine on their revenue generating samples.”
Virdis was cleared by the MRA to resume testing, according to testimony provided by both Viridis and MRA witnesses during Wednesday’s proceedings. For those customers asking Viridis how they plan to cover the cost of retesting being done at other laboratories, Michaud said, “The best we can do at this point is provide some level of credit for future testing if they decide to come back with us.”
Members of the business community were also called to testify on Viridis’ behalf, including Jonathan Koweck, director of supply chain for Lume Cannabis, who said he was not there to take sides. Lume has 250,000 feet of indoor growth space and harvests about 600 pounds a week, with 27 dispensaries, said Koweck.
“We have about 125,000 units, which is about $2.5 million in retail value that’s currently tied up in the supply,” Koweck said. “650 retests [are] still pending due to the recall.”
