Philadelphia cannabis investor wins nearly $25M in fraud case against former partners

A Philadelphia judge upheld a nearly $24.5 million award to a cannabis entrepreneur who claimed her business partners fraudulently induced her to reduce her ownership stake in a marijuana company without disclosing it was about to be sold for millions, Law360 first reported.

In an opinion issued Wednesday, Philadelphia County Court of Common Pleas Judge Paula Patrick rejected arguments from Ilera Holdings LLC and its executives asking the court to strike or modify the judgment awarded to Shannon Hexter and her company, Big Bite Real Estate LLC.

The case stemmed from a 2020 lawsuit in which Hexter alleged that Ilera Holdings CEO Greg Rochlin and other company principals convinced her to reduce Big Bite’s ownership stake in Ilera I from 12% to 4% without mentioning the company was in talks to sell one of its subsidiaries for at least $125 million.

Hexter claimed she was told that reducing her stake would allow her to acquire an interest in Ilera II, a “shadow company” that Rochlin represented as more valuable, according to court filings. Shortly after she agreed to the reduction, Ilera I announced the sale of its subsidiary, Healthcare, to TerrAscend for between $125 million and $225 million.

“Had Big Bite been aware of the discussions between Ilera I and TerrAscend, it never would have agreed to Rochlin’s proposal, which cost Big Bite at least $10 million (i.e., 8% of $125 million) and as much as $18 million (i.e., 8% of $225 million),” the complaint stated.

Patrick, who presided over a four-day bench trial in July 2024, found in favor of Hexter on claims including fraud, breach of fiduciary duty and unjust enrichment.

In challenging the award, the defendants argued the court lacked authority to include prejudgment interest and attorney fees. Patrick dismissed such arguments, noting that her Sept. 6, 2024, order properly granted prejudgment interest at a 6% rate starting from the beginning of the litigation in 2020.

“Appellants have consistently failed to allege any specific error in how the prejudgment interest was calculated, besides that the trial court did not specifically calculate it itself, which is unrequired,” Patrick wrote.

The defendants also contended that attorney fees should not have been awarded because a breach of contract claim had been dismissed earlier in the proceedings. However, Patrick found that the fee-shifting provision in the parties’ operating agreement broadly applied to actions brought to protect a party’s rights.

“The plaintiffs brought and prevailed on an action to protect their rights and against defendants’ breach of fiduciary duty and unjust enrichment, both of which arose from the ownership rights originated in the agreement,” the judge wrote.

Court records indicate the defendants have appealed the decision to the Superior Court of Pennsylvania.