Bloom Farms Sees Investor Case Dismissed

California-based cannabis company Bloom Farms has won its case with its former investor Jeff Menashe and his investment firm DG BF LLC, according to a report on Law360. Menashe had claimed that he was led to invest $5 million into the company, but that he was given bad information. After Menashe failed to produce documents to support his claim, the judge ultimately dismissed the case. It was originally set to go to trial in September.

Zurn wrote, “Plaintiffs’ failure to answer written discovery substantially weakened that claim, as they declined to identify any omissions or misrepresentations in written discovery and so were precluded from offering any at trial.”

He went on to add, “While Defendants have generously characterized this state of affairs as “a Menashe problem,” I believe his counsel’s approach of prioritizing bluster over substance has compounded the problem. It is clear that no sanction short of dismissal has been or would be meaningful.”

At one point, Bloom Farms was unable to complete any financing for the company as the case was proceeding, but eventually, the Delaware Vice Chancellor Morgan T. Zurn allowed Bloom to resume financing efforts.

American General Resources or AGR is the formal name of the company. It had requested about $2.2 million or at minimum approximately $600,000 based on the fee-shifting orders the court already issued in the case. Zurn said in the court documents that the fees are now shifted to the plaintiffs.

Investor Delays

Menashe and his firm were asked to produce documents supporting the claims by certain dates so that the case could proceed. They were also supposed to provide records from cell phones and laptops. According to the court documents, Menashe’s lawyers said repeatedly that those laptops had been wiped and donated, but eventually, the laptops were found and given to Plaintiffs’ counsel. Menashe also claimed he didn’t send any business texts, but Bloom Farms was able to produce texts that undermined that claim. Various delay tactics were employed by suggested staffing problems at the lawyers office to not having a company in the small Montana town that could search the phone.

The article said that Eric Boustani, general counsel for Bloom Farms, told Law360 that Friday’s order is the kind of decision that restores a lot of his faith in the legal process. “The tactics which were deployed against the company were so wildly out of compliance with appropriate procedure that to do anything other than dismiss this case would have rewarded it,” Boustani said to Law360.

Bloom Farms is a small privately-owned California-based cannabis company. It is mostly known for its vape pens and also its philanthropy. For every product sold, Bloom Farms donates a meal to someone in need. The company has given over 3,000 meals since 2015.

 

 

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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