Delaware court frees former Tilray partners from $13M Marley licensing fee

The Delaware Court of Chancery ruled this week that a trio of cannabis investment firm founders won’t have to pay nearly $13 million related to a Bob Marley licensing deal, finding that an earlier $39.9 million settlement released them from the obligation.

Chancellor Kathaleen St. J. McCormick determined that a court-approved settlement between the three Privateer Holdings founders – Michael Blue, Christian Groh and Brendan Kennedy – and Tilray Brands (Nasdaq: TLRY) (TSX: TLRY) stockholders effectively discharged the founders’ guarantee to cover licensing payments for Marley-branded cannabis products, Law360 first reported.

The dispute stems from licensing arrangements dating to 2016, when Docklight Brands, then a Privateer portfolio company, secured rights from Marley Green LLC to license Bob Marley’s intellectual property. The back-and-forth evolved after Tilray absorbed Privateer in a 2019 merger that was later challenged by shareholders.

“The reorganization restructured the legal relationship between plaintiffs, Privateer, and Tilray,” McCormick wrote in her 20-page opinion. She determined the founders’ guarantee was “a condition to the merger agreement” and “a material inducement” for the transaction.

In July 2023, Marley Green demanded nearly $13 million in payments, which Tilray then sought from the three Privateer founders. The trio refused, arguing that their March 2023 settlement of the merger litigation released them from the guarantee.

McCormick agreed, writing that because the founders’ guarantee was “related to” both the reorganization and merger agreement, it fell within claims released by the settlement. She rejected arguments that the timing between the 2019 reorganization and 2023 guarantee demand made the release overbroad.

“Nothing prohibits a release of contractual obligations, even where efforts to enforce that agreement have not yet occurred,” the chancellor noted in granting judgment to the founders and dismissing Tilray’s counterclaim.