Growers SIG Sues Grower for $3M Cost of Post-Termination Claims

San Francisco,CA( WorkCompAcademy) - California Agricultural Network, Inc. ("CAN") is a non-profit, mutual benefit California corporation with its principal place of business in Ontario, California. It is a collective of growers who have pooled their resources to successfully form a self-insured group.

A Self-Insured Group (SIG) is an alternative to traditional insurance, granting California members (employers) greater control over their workers’ compensation spend. CAN was formed in 2004 as a SIG for agricultural employers. Under CAN's bylaws, all members must be self-insured employers within the agricultural industry, or provide support or services to the agricultural industry

According to a lawsuit filed in Ventura County Superior Court, because "CAN's members share responsibility for all other members' workers' compensation liabilities, the manner in which each member discharges its duties has a direct pecuniary effect on every other member. The members each repose trust and confidence in every other member to discharge their duties responsibly and in good faith. Thus, by becoming a member of a SIG such as CAN, members take on legal duties to every other member, including fiduciary duties."

The lawsuit alleges that Houweling Nurseries Oxnard, INC. ("HNOI"), became a member of CAN in 2006 and remained a member until September 2021. HNOI operated a tomato farm in Camarillo, California. In 2021, HNOI underwent a name change to its present name, Longvine California , Inc. Another defendant in the lawsuit is Casey Houweling who resides in British Columbia Canada.

CAN alleges that by March 2021, all of Casey Houweling's interest in HNOI and/or its holding companies was transferred to Longvine and/or companies which Longvine owned or controlled, and that these transactions were "concealed" from CAN. And Defendants, "They also failed to report the transactions to the Office of Self-Insurance Plans.

California law, specifically 8 Cal.Code Regs. § 1 5203. 8, requires self-insured employers to report to OSIP any transactions which result in a material change in the form of business structure or ownership from the time the employer first obtained its Consent to Self-Insure.

Plaintiffs say that under CAN's bylaws, membership in the group is non-transferrable. The Defendants were required to report the structural/ownership changes in HNOI to CAN so that CAN and its members could evaluate whether the restructured organization was suitable to remain a self-insured member of CAN.

According to the allegations "HNOI, indeed, no longer had the financial strength or suitable management to remain a CAN member. By September 2021, in fact, it could no longer remain in business, and sold its Camarillo facility to a marijuana grower."

Plaintiffs go on to say that HNOI ended up laying off all of its staff. Further, HNOI and its owners, failed to undertake even minimal steps to prevent or minimize post-termination claims by laid off workers, a foreseeable and often avoidable consequence of any business shutdown. More than 100 laid off employees filed workers' compensation claims against HNOI after being laid off.

Allegedly HNOI had by then ceased its membership in CANSIG, but CAN was left responsible to pay the post-termination claims of its injured workers. CAN remains liable as a matter of law for all of those claims, which are continuing to develop and will increase in cost as time passes.

Plaintiffs say that Casey Houweling in the meantime, having left CAN and its members responsible for millions of dollars in unpaid workers' compensation claims, took advantage of HNOI's closure by starting a new company, Houweling's Camarillo, Inc., hiring back the same employees whom he and his co-defendants laid off, and continuing HNOl's former tomato growing operations on the exact same site that had been farmed by HNOI. In so doing, "Casey Houweling engaged in egregious self-dealing, in contravention to all of his 9 legal and fiduciary duties to CAN and its members."

CAN therefore seeks damages in its lawsuit against several defendants for losses caused by various theories of liability that left the insurance network "holding the bag" for more than $3 million in workers’ compensation claims.

According to a report on this suit by Pacific Coast Business Times, the Houweling’s Tomatoes property in Camarillo was sold in September 2021 to Glass House Group, a publicly traded cannabis company with other greenhouses in Santa Barbara County. Glass House paid around $93 million and has converted part of the space into cannabis greenhouses. There were 486 employees in August 2021, after Glass House agreed to buy the property.

They report that for now, Glass House has split the Camarillo facility into cannabis and tomatoes, and has said that if cannabis becomes legal at the federal level, it will devote all 5.5 million square feet to cannabis.

Forbes reports that Glass House is one of the fastest-growing, vertically integrated cannabis companies in the U.S., with cultivation, processing, distribution and retail operations in California, where voters legalized recreational marijuana in 2016.

Last May, Glass House reported that it has begun marijuana cultivation operations at its new 5.5 million square foot greenhouse in Southern California after receiving approval to open the facility from state and local regulators. The company received licenses from the California Department of Cannabis Control and Ventura County on March 11 and began cultivation operations at the massive facility the same day with the transfer of thousands of young plants from an existing site in Santa Barbara.

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