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In the fall of 2016, the owners and operators of Emerald Family Farms, LLC, offered a tour of their operation near Berry Summit to demonstrate just how well prepared they were to succeed in California’s regulated commercial cannabis marketplace.

As we reported at the time, they’d organized an agricultural co-operative with nearly 100 growers, enlisted in the county’s brand new “track and trace” pilot program, signed a distribution deal and hired public accountants, trademark attorneys and marketing experts.

“Humboldt County is the Napa of cannabis,” co-owner and CEO Patrick Murphy told a reporter with PBS NewsHour later that year. “It is by far and away the largest production zone of high-quality cannabis in the world.”

Five and a half years later, with the Emerald Triangle’s legal cannabis market decimated under the weight of rampant over-production statewide, Emerald Family Farms has failed.

On Wednesday morning, the company’s assets — along with those of two related entities, Humboldt Health Care, LLC, and Emerald Family, LLC — are set to be auctioned off in Courtroom Four of the Humboldt County Courthouse.

The assets include:

• 52 acres of land in Willow Creek, including a 42-acre farm on the banks of the Trinity River with a 20,300-square-foot commercial building and an 890-square-foot office building,
• property housing a 15,000-square-foot warehouse on Ericson Court in Arcata,
• commercial cannabis licenses, including ones for cultivation, manufacturing and distribution, and
• personal property including “maintenance materials, supplies, equipment, vehicles, inventory and tools, all intellectual property, and brand names.”

So what the hell happened? The picture’s not totally clear. Murphy could not be reached for comment. A former employee, who left the company a couple of years ago and signed a non-disclosure agreement, told the Outpost that he heard Murphy “skipped town and changed his number.”

But a good deal of information can be gleaned from a lawsuit filed last May against the Emerald Family companies by a Delaware-based cannabis equity firm called Pelorus Fund REIT, LLC.

According to the suit, Pelorus loaned Emerald Family Farms a whopping $18 million in 2021 and has never been repaid. (Messages left for the plaintiff’s attorneys were not returned by publication time.)

Lawyers for Emerald Family Farms actually issued a press release about the loan shortly after it went through. Published by Redheaded Blackbelt, the release said this influx of capital, along with a distribution deal with Cresco Labs, would “elevate EFF into one of California’s largest cultivators of high-end, sustainably grown cannabis products.”

As collateral for the loan, Emerald Family Farms put up virtually all of its assets, including a deed of trust encumbering its real estate along with security interest in everything from cash and property to patents, trademarks, products and proceeds, per the lawsuit.

Emerald Family Farms allowed a “Cultivation-Processor” cannabis license to expire in January 2022, and the following month the company defaulted on the loan by failing to make its full debt service payment. 

“Borrowers did not pay any amounts to Plaintiff following the Notice of Default and in fact have not paid any amounts to Plaintiff since January 2022,” the complaint says. The unpaid balance is listed as “approximately $19,325,454.12.”

Pelorus sued Emerald Family Farms for judicial foreclosure, breach of contract and injunctive relief, seeking reimbursement of the loan plus interest, delinquent property taxes, attorneys’ fees and other costs.

Per the terms of the loan agreement, Pelorus Fund was entitled to appoint a receiver to take control of the assets Emerald Family Farms had put down as collateral. Wednesday’s auction of those assets is the result of that court-ordered receivership.

According to an auction listing online, the opening bid will be $3.5 million, with subsequent bids increasing in increments of $500,000. Making the sales pitch to potential buyers, the listing claims that the Willow Creek property’s weed entitlements make it “the largest cannabis facility in Humboldt County, and one of the largest cannabis facilities in the State of California.”

(For the record, the defaulted operations of Emerald Family Farms are practically mom-and-pop-sized compared to new commercial grows popping up to our south, such as this 134-acre outdoor farm set to open in Santa Barbara County.)

But the auction listing insists that our county’s name still rings out:

“Cannabis that is produced in Humboldt County is considered superior and world famous, is entitled to strong product branding protections, and commands a higher price than cannabis produced in Trinity County.”

Happy bidding, everyone.