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Cannabis Investor Loses Fraud Lawsuit After Destroying Evidence

Nov. 22, 2021, 8:19 PM

A Bloom Farms investor lost his fraud and retaliation lawsuit against the cannabis company and its executives, when a Delaware judge threw out the case as a penalty, saying he repeatedly lied about electronic evidence, deleted relevant text messages, and violated court orders.

Vice Chancellor Morgan T. Zurn dismissed the case from Delaware’s Chancery Court, nine months after she let Jeff Menashe advance claims that senior leaders of Bloom Farms defrauded him with cooked books and wrongly ousted him from the board for challenging its series E financing round.

Menashe testified he didn’t know what a “litigation hold” was, falsely said certain laptops had been wiped and donated, and insisted he “did not text about business matters” until, caught redhanded, he admitted he had deleted texts, Zurn said in a Nov. 19 ruling.

“This court has been patient with plaintiffs to a fault,” she wrote. “It is clear that no sanction short of dismissal has been or would be meaningful.”

The judge cited a lengthy list of discovery violations, saying Menashe and his affiliates even “refused to comply with this court’s orders to set their own deadlines” after repeatedly missing those she established.

When Menashe finally turned over his cellphone for imaging—weeks after saying during a court hearing that it was being imaged “right now"—he included an unauthorized letter telling the discovery vendor not to include photos, videos, or texts with 34 specific people, Zurn said.

Each time the judge scrambled to accommodate Menashe, he overshot another deadline, she noted, saying the case had been “plagued” by his “dilatoriness.”

Meanwhile, he “bombarded defendants with discovery requests and motion practice,” Zurn wrote. “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.”

By ignoring court orders and discovery obligations “in bad faith, while heaping trouble and expense upon defendants,” Menashe caused “incredible prejudice” to Bloom Farms and its executives, the judge said.

The ruling comes three months after Zurn canceled a Sept. 15 trial and notified the parties in a letter that she planned to dismiss the case.

Menashe, who was represented by Bellew LLC for most of the case, is represented by Dailey LLP as of Nov. 19. Bloom Farms is represented by Berger Harris LLP and Hopkins & Carley LC. Its executives are represented by Benesch, Friedlander, Coplan & Aronoff LLP.

The case is DG BF LLC v. Ray, Del. Ch., No. 2020-0459, 11/19/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com

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