Eaze fires back at Green Dragon founders in ongoing litigation

The executives of California-based cannabis delivery company Eaze have shot back at the marijuana investment company headed by Andrew Levine, of Green Dragon fame, arguing in a new court filing that the family is nonsensically trying to “harm” Eaze with “frivolous litigation” that requests records to which the family already has access.

Meanwhile, tech billionaire James Henry Clark, one of the founders of Netscape, has taken ownership of Eaze with a $54 million auction purchase last month through his company FoundersJT LLC. But plans for Eaze have not been made clear.

Legal wrangling

The latest lawsuit, filed by Levine on the same day Eaze went up for auction, claimed that Levine, his wife and his son – all three of whom had ownership stakes in Eaze – were improperly denied access to company records. The suit follows a separate court action filed by Levine last year, in which he accused the company of fraud and other misdeeds; that lawsuit was dismissed without prejudice.

In its response filed on Sept. 5 in the Delaware Court of Chancery, Eaze asserted that the Levines had not been denied any access to records, but rather were trying to force the company to go through a lengthy discovery process that could aid another potential fraud lawsuit.

The company also accused Levine of stealing company records and improperly accessing the company database in order to search for incriminating emails that could provide ammunition for his earlier fraud lawsuit.

The response labels Levine a “serial litigator” and notes that he and his family controlled 42% of Eaze shares before FoundersJT won the auction on Aug. 6, with a winning bid of $54 million, Eaze CEO Cory Azzalino said in an email. He also noted that no other bids were offered and no other companies showed up for the auction, and that the Levines will not have any ownership stakes in the new entity moving forward.

Eaze said in its court filing that it offered to produce whatever records Levine wanted earlier this year as long as he’d sign a confidentiality agreement. but instead of agreeing to such terms, Levine filed suit on Aug. 6.

The company also noted that Levine’s wife, Lisa Leder, received almost $16 million from the business in connection with a $37 million loan from FoundersJT, which was repayment for a loan by Leder. Leder also resigned from the Eaze board of directors earlier this year.

“This dispute is one between competing sets of sophisticated owners of the company, where Eaze and its management have been unfairly caught in the middle. Rather than engage with FoundersJT, Mr. Clark, and Mr. (Thomas) Jermoluk, Plaintiff and his family have bizarrely and repeatedly attempted to harm the company,” Eaze asserted in its response.

As part of the dispute between the Levines and FoundersJT, Levine in mid-2022 “repeatedly and improperly accessed the company’s server and engaged in a series of unauthorized, secret searches of multiple Eaze email accounts of others, seeking to find salacious and embarrassing information,” the suit claims.

“Beginning in August 2022, Plaintiff ran thousands of searches across the company’s server for records hitting on terms such as, but not limited to, ‘jew,’ ‘racist,’ ‘Levines,’ ‘leder,’ ‘andy,’ ‘lisa,’ tj@411tj.com, ‘green dragon folks,’ jim@groupclark.com, ‘cory,’ ‘wsgr,’ and ‘sexist,'” the suit claims, adding that Levine improperly accessed “thousands of documents and emails” from Eaze employee accounts.

“This behavior continued for approximately six months until his conduct was discovered, his access revoked, and, ultimately, his employment was terminated,” the suit charges.

The move was clearly to gain an advantage over FoundersJT as the two sides jockeyed for control of Eaze, the legal filing asserts.

The latest court filing by Eaze asks that the Delaware court throw out the latest lawsuit and rule in favor of Eaze. According to court records, the case is ongoing but the parties will be filing joint status reports with the court each month beginning in November.

New ownership

Despite the new owners’ willingness to pony up $54 million for Eaze, the company’s future is still unclear, Azzalino said. Both Clark and Jermoluk resigned from the Eaze board of directors in February last year, according to the court filing.

“The new ownership group is evaluating the status of each state’s operations and expects to make a decision prior to year end about what will continue to operate or be closed down,” Azzalino wrote in an email to Green Market Report.