v3.23.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

 

Litigation – From time to time, we are subject to various litigation and other claims in the normal course of business. Below is a discussion of specific matters. We cannot estimate the ultimate outcome of these matters.

 

Evergreen Sustainable Enterprises, Inc. (formerly Generation Hemp, Inc.) v. Colorado Mill Equipment, LLC

 

The defendant sold to the Company a faulty piece of equipment for $16 thousand and will not refund to the Company the purchase price after repeated attempts to return their equipment. An original lawsuit filed by the Company against Colorado Mill Equipment in January 2022 in Dallas County was subsequently dismissed due to jurisdiction. A second lawsuit was subsequently filed in El Paso County, Colorado and is currently pending.

 

Halcyon Thruput, LLC, Plaintiff v. United National Insurance Company, Defendant, United States District Court for the Northern District of Texas, Dallas Division, Case No. 3:21-CV-3136-K

 

Halcyon Thruput, LLC (Halcyon) obtained an all-risks commercial insurance policy, including an Equipment Breakdown Endorsement (Policy) from United National Insurance Company (UNIC) to provide substantial coverages for Halcyon Thruput LLC’s (Halcyon) $1.2 million hemp processing dryer (Dryer) at its facility in Hopkinsville, Kentucky. During the Policy period, the Dryer caught fire due to the Dryer being defectively designed.

 

While UNIC has paid a number of Halcyon’s claims, Halcyon’s claim for the cost of the replacement Dryer of $1.5 million was denied as described below.

  

Buyer, a wholly owned subsidiary of the Company, pursuant to an Asset Purchase Agreement as twice amended, then acquired all the assets of Halcyon, except for the right to the proceeds of UNIC’s insurance policy since the Policy prohibited assignment. Halcyon and Buyer agreed that Buyer’s principal, Gary C. Evans, had the right to control the litigation, engage counsel for Halcyon and make all decisions relating to any proceeds received in the litigation by settlement or otherwise.

 

Halcyon’s suit against UNIC, which was removed to federal court, seeks over $1 million plus statutory interest on that sum from August 10, 2020 for violating the Texas Insurance Code’s requirement that claims be promptly paid, additional statutory penalties, and attorneys’ fees. Certain documents have been executed between the Company, Halcyon and legal counsel, which provide for a sharing of costs and expenses and awards, if any, against UNIC. Mediation of the case was held in April 2022 where no agreement was reached by the parties. Depositions of the Company’s expert witnesses were completed in July 2022 and of UNIC’s representatives in September 2022.

 

In August 2022, the Company received a second payment from UNIC of $357 thousand as a partial settlement of this claim, which amount was reported as other income in the consolidated financial statements.

 

JDONE, LLC v. Grand Traverse Holdings, LLC and John Gallegos, Denver District Court Case No. 2019CV33723

 

JDONE, LLC (“JDONE”), a wholly owned subsidiary of the Company and landlord of a commercial warehouse building in Denver, brought suit against Grand Traverse Holdings, LLC for default of its commercial lease of the warehouse from JDONE. This case settled in October 2022 and the Company received $122 thousand from the defendant, which amount was reported as other income in the consolidated financial statements.

 

KBSIII Tower at Lake Carolyn, LLC and Prime US-Tower at Lake Carolyn, LLC (collectively – “KBSIII”) v. Energy Hunter Resources, Inc.

 

Plaintiff/Counterdefendant KBSIII was seeking lost rent on office space for periods after EHR vacated office premises located in Las Colinas, Texas. EHR filed a counter suit alleging specific damages due to uninhabitable premises of the office space due to the intolerable conduct of other tenants located on the same floor. On December 23, 2020, the trial court entered a summary judgment against EHR for $231 thousand. The judgment provides for post-judgment interest at a rate of 5% per annum until paid and further provides for additional amounts owed should EHR pursue unsuccessful appeals to higher courts. At December 31, 2022, the Company had accrued $253 thousand for this judgment, which is exclusively an EHR obligation.

 

Ogborn-Mihm, LLP v. Evergreen Sustainable Enterprises, Inc. (formerly Generation Hemp, Inc.), JDONE, LLC and Gary C. Evans

 

The Company was recently made aware of litigation filed against it in the District Court of Denver from a law firm which was previously engaged by the Company. While none of the parties have been officially served, the alleged amount being sought from the Company is less than $50,000.