Trio of Metrc-related lawsuits could force systemic changes for track-and-trace, enforcement tactics

A trio of active lawsuits spread across three U.S. states aim to upend the cannabis track-and-trace system provided by Florida-based Metrc. The cases allege that flaws in the system have empowered bad actors while undercutting licensed businesses – and industry insiders claim the regulators are well aware of the issues.

One of the cases – first brought against California regulators in 2021 – is scheduled to go to trial in October, according to court records. But it’s not yet clear what effect – if any – the three suits will have on the industry more broadly, and Metrc itself is actively fighting one of the plaintiffs in court in two other state legal battles.

The first court case targeting Metrc was filed four years ago by a division of Catalyst Cannabis Co., a retail marijuana chain based in Southern California. The suit sought to shed light on the phenomenon of so-called “burner distros,” which are legal cannabis distribution licenses obtained by criminals who then use them to purchase and ship legally produced marijuana products out of state to underground markets across the country.

The industry trickery has long been an open secret amid those in the cannabis trade. Catalyst alleged in that case that the state Department of Cannabis Control turned a “blind eye” to the illegal diversion, which the company claimed had been sending “millions of pounds” of cannabis out of state.

That case has been pushed back and delayed a number of times. It was even scheduled at one point to go to trial this month, but now, the case is slated for trial starting Oct. 3 in Orange County Superior Court.

That case appears to have been given extra fuel by another recent lawsuit filed on the same topic, a whistleblower retaliation case. That case was filed in Oregon earlier this month by former Metrc Vice President Marcus Estes, who met with Catalyst CEO Elliot Lewis and others on Lewis’ team in 2023. During that meeting, Lewis informed Estes of the previous lawsuit and allegations on how flaws within Metrc had allowed “burner distros” to exploit the system at the expense of legal marijuana companies such as his.

The Estes lawsuit backs up many of the claims made by Catalyst in its case, and Lewis celebrated the news of Estes’ lawsuit in a video posted to social media. Lewis promised that his company would continue fighting to “fix” both Metrc and the state regulatory system with Estes’ help.

“(Metrc) doesn’t work. Everyone knows it doesn’t work. (Estes) goes on to quote, to say, that it’s set up for burner distribution so illicit operators can engage in business in the legal market. That’s it, point blank, end of story,” Lewis said in the video.

The third lawsuit, filed in March in Colorado against state cannabis regulators by Mammoth Farms, makes eerily similar claims to those from Catalyst and asserts that the state Marijuana Enforcement Division neglected its legal mandate to establish a workable track-and-trace system.

Mammoth claims that the MED ignored discrepancies in inventory levels, allowing bad actors to freely ship illicit products in and out of the state.

“Either the people in the government are really stupid, or they’re really corrupt, and both are equally terrifying,” Mammoth Farms CEO Justin Trouard said when asked about thematic connections between the three lawsuits.

The Colorado case is scheduled for a hearing on a requested preliminary injunction on April 30, Trouard said, meaning there could also be some movement in the near future on reforming how Metrc functions in Colorado. If the court grants the injunction, it would force the MED to “establish basic tracking and testing measures,” according to court filings.

“This would transform Metrc from a system that records truths and lies without distinction to a system that uses reasonable proxies to track regulated marijuana,” Mammoth argued in its injunction request.

If the injunction request is successful, it could lend legal momentum to the other two lawsuits.

In an emailed statement to Green Market Report, Metrc noted that it is not a defendant in either the California or Colorado lawsuits and blasted Estes for the allegations in his lawsuit.

“While normally we would not comment on ongoing litigation, these claims are so baseless that they warrant a response,” Metrc said. “This former employee was let go due to performance issues and, in response, he engaged in a retaliatory campaign against the company that required Metrc to take active steps to protect its systems and customers. This lawsuit is just a continuation of this former employee’s campaign of retaliation, and the falseness of these claims will be proven in court.”

The California DCC also denied any wrongdoing and said in a statement, “In October DCC will have the opportunity to demonstrate, once again, that it has met its obligation under state law to build a track and trace system that does exactly what it’s supposed to: flag irregularities for investigation. And for those still wondering, yes, the Department actively uses California Cannabis Track and Trace data to launch and pursue investigations.”

The Colorado MED referred to a bulletin it released in response to the Mammoth Farms lawsuit, which said in part that the agency “does not tolerate licensees engaged in the deliberate disregard of requirements and will continue to take enforcement action when licensees put youth or consumers at risk.” It also said that it “considers complaints and allegations regarding diversion and inversion of marijuana in earnest.”

In another twist, when Estes filed his claim, Metrc had already filed a pair of lawsuits against the whistleblower in Florida and Delaware, alleging breach of contract and seeking financial damages.

Estes didn’t file his claim for whistleblower retaliation until April 4, 2025, while Metrc sued him in Florida on May 23 last year and filed a parallel suit in Florida eight days later.

The Delaware breach of contract suit claims that Estes, who joined Metrc as an executive vice president after the company bought his smaller tech firm Chroma Signet, violated a trio of legal agreements he signed, including a “restrictive covenant agreement” that barred Estes from doing anything to “disrupt the relationship” between Metrc and any of its business partners.

Metrc argued in the lawsuit that Estes tried to “sabotage the rollout” of Retail ID, a new software offering for cannabis companies that Chroma Signet had begun working on, by spreading “disparaging and false information” about Metrc, specifically with two of its largest cannabis clients in the U.S. and Canada. The suit accuses Estes of altering online domain names related to the Retail ID project, rendering them useless for at least 10 days last year, which affected inventory tracking for at least 200,000 cannabis product units.

The suits also accuse Estes of refusing to return a $100,000 signing bonus he received upon joining Metrc. The bonus was contingent upon his remaining at the company for at least two years, but he was terminated after one year of employment.

Both cases are still pending.

How exactly the three cases will play out is still a gigantic question mark for both the plaintiffs and industry observers who likely have a stake in quashing illicit market competition. There was very little consensus among insiders consulted by Green Market Report on whether the three will have the desired impact, but several agreed that they will make each other’s cases stronger.

“It makes the plaintiff’s case, I think, just more credible when you can point to this being a documented problem in many different places,” said Alex Freedman, the president of the newly formed California Cannabis Operators Association, of which Catalyst Cannabis is a member.

But Freedman – an attorney who served as a Los Angeles cannabis regulator prior to joining the industry – was hesitant to suggest that the trio of cases would have the direct outcome that Lewis, Estes, Trouard and others are seeking.

“The litigation will probably have more of an impact on just a political and public relations level where it’s pointing – not the strongest spotlight – but still a spotlight on an issue that affects all regulated markets across the country,” Freedman said.

“Courts are often hesitant to second-guess regulatory agencies’ decisions on how to apply its powers. But you never know,” Freedman said. “This doesn’t have anything to do with cannabis. It’s just when courts give a lot of deference to administrative agencies’ use of their powers. Courts don’t want to act as policymakers and regulators.”

Another attorney, California cannabis consultant Hirsh Jain at Ananda Strategy, echoed Freedman’s take and said he’s skeptical that lawsuits alone will be able to force regulators to address loopholes in Metrc that have allowed bad actors to flourish.

“These lawsuits are important, but unfortunately, I think the only thing that will precipitate a speedy change to this is a public health crisis whereby, because of diversion or something else, people get sick,” Jain said.

Jain pointed to the fact that Catalyst has been waging its legal war with the DCC and Metrc for four years now, a reminder that government agencies have plenty of resources with which to either fight back or simply wait out a long legal fight such as this. And the Catalyst case was dismissed once already by one judge, before Catalyst got it reinstated on appeal.

“As we’ve seen with the Catalyst lawsuit, these lawsuits can be delayed for years. Even when resolved, they can be appealed, and the defense, the regulatory agencies, can often use a wide variety of legal technicalities to shield themselves from or delay these lawsuits,” Jain said. “I hope I’m wrong, but for those reasons, I’m pessimistic about an immediate change.”

Jain added that the legal actions are thus far very specific to both California and Colorado, and all of the U.S. state cannabis markets remain cut off from each other due to federal illegality. That in turn means that even if the lawsuits are successful, Metrc won’t necessarily be forced to fix systemic problems in other markets.

The more effective strategy, Freedman and Jain agreed, would be a multipronged approach to leveraging political pressure on government officials to fix the broader situation and get a track-and-trace system in place that does what it’s intended to.

“Anytime you’re making a credible claim about a failing of a government agency in public – even if you don’t achieve all of your ends through litigation – it’s that public airing of the issue that it gets into the political realm, where the agencies feel some pressure to change course,” Freedman said.

Trouard said a multipronged strategy is exactly why he filed the lawsuit, given that he spent months trying to bring attention to the systemic issues in Colorado.

“Without the lawsuit, these things don’t come out of the woodwork,” Trouard said. “That lawsuit is, it is the fuse that you’ve got to light, in my opinion.”