Dutchie Founders Sue the Company for Orchestrating a Coup

Law360 has reported that the founders of e-commerce cannabis company Dutchie are suing the current leaders and accusing them of orchestrating a coup.

Dutchie was founded in 2017 by brothers Ross and Zachary Lipson and was originally called Courier Plus Inc. The two say they were improperly kicked out of the company by the current board and are insisting they are still directors and officers of the company.

The complaint was filed derivatively on behalf of Courier Plus Inc. against Executive Chairman Timothy Barash and board directors Karan Wadhera, Wilder Ramsey, Gaurav Ahuja, and Thomas Linovitz. The case, which was filed under seal, is Ross Lipson et al. v. Timothy Barash, case number 2022-1135.

Law360 wrote that the Lipsons “allege the defendants conspired in late November to remove the brothers from their officer positions, improperly appoint Linovitz as an independent director, and replace Ross Lipson with Barash as CEO.” They claim to have been ambushed at a board meeting held on November 28, “where the board quickly passed pre-drafted resolutions to terminate them ‘for cause,’ stripped them of their status as key stockholders, removed them from the board and amended a common stockholders’ voting agreement so that Barash could take control.”

On Dec. 1, Dutchie announced that Barash was taking over as chairman and CEO and that the Lipsons had departed. Barash is described as instrumental in setting overall business strategy and supporting Dutchie’s fundraising success. Indeed, many of the current board members were involved in the company’s fundraising efforts over the years.

• Ramsey is the managing partner of Gron Ventures LLC, one of the lead investors in the Series A round, and is a “Series A director” of Dutchie, as defined in the voting agreement, according to the complaint.
• Linovitz is also a managing director at Gron Ventures.
• Ahuja is a partner at Thrive Capital, the technology-focused investor that led the Series B round.
• Wadhera is a managing partner at Casa Verde, which also participated in Dutchie’s B round funding.

The founders are no longer even mentioned on the company’s website nor do their names or pictures appear anywhere.

Fast Funds

Dutchie came into the cannabis industry in a fast and furious drive to quickly push aside more established players. One year after being founded, Dutchie nabbed $3 million in a seed round. It was a who’s who of investors that wanted to invest in cannabis but also wanted to avoid plant-touching companies. Dutchie got the attention of Casa Verde Capital, a cannabis-focused venture capital fund whose team includes Snoop Dogg.

Dutchie then raised $15 million in a Series A round a year later, $35 million in a Series B round in August 2020, and $200 million in a Series C round in March 2021. The Series C round was led by Goodwin Procter LLP and featured Dragoneer, DFJ Growth, Casa Verde Capital, Thrive Capital, and former Starbucks CEO Howard Schultz. Dealogic said that deal involved a roughly 11.8% stake in Dutchie.

That was followed by a $350 million in a Series D round in October 2021, bringing its valuation at the time to $3.75 billion.  Dealogic reported that the funding round involved a 9.3% stake in the company.

According to Law360, the complaint seeks a court declaration that Ross Lipson is still a director and CEO of the company and Zachary Lipson is still a director and the company’s chief product officer. “They also seek a court declaration that all the actions taken at the Nov. 28 board meeting, including amendments to the stockholder voting agreement, are invalid.”