HomeBusinessFormer MedMen Executives Bierman, Modlin File Multiple Lawsuits Against New Cannabis Partners

Former MedMen Executives Bierman, Modlin File Multiple Lawsuits Against New Cannabis Partners


Adam Bierman and Andrew Modlin, once high-flying co-founders of MedMen Enterprises, are back in the spotlight, this time for a new court battle. Or two.

Thirteen months after the owners of a California retail chain gave them a way back into the cannabis industry, Bierman and Modlin have sued their new partners, accusing them of conspiring to dump the company in a “liquidation sale.” .

The duo, who were kicked out of MedMen in early 2020, recently filed three lawsuits in state and federal court against five co-owners of Coastal Holding Co. for plans to sell the Santa Barbara-based company for $ 56.2 million.

Bierman and Modlin state that, as investors and part owners of Coastal, they have the right to approve the sale, but have refused to do so.

The legal fight, first reported by Law360.com, has been characterized by finger pointing both ways.

The other Coastal owners responded in a court docket that Bierman arranged the same sale that he and Modlin now want to torpedo.

“It was the Plaintiff, not the Defendants, who recommended, determined and negotiated” the sale of Coastal for $ 56.2 million, according to a court file from the other owners of the company.

“In fact, (Bierman) has repeatedly expressed concern that Coastal will not survive without an immediate capital injection.”

At the same time, legal experts said that Bierman and Modlin could have created more problems as a result of the legal skirmish.

In particular, they disclosed their partial ownership of Coastal in their $ 3.7 million investment in the company, which owns eight commercial marijuana licenses in southern and central California for retail, delivery, distribution and manufacturing.

In exchange for the investment, Bierman landed a position on the company’s board of directors.

“This would be a fatal blow to non-disclosure violations to owners and holders of financial interests,” said Hilary Bricken, a Los Angeles-based cannabis attorney.

the maximum penalty for Coastal in such a situation it could be the revocation of at least one of its eight permits, and even a minimal fine would result in a 45-day license suspension.

Bierman and Modlin’s first lawsuit was filed Sept. 15 in Orange County Superior Court, moved to federal court four days later, and Orange County’s lawsuit was dismissed.

The five defendants include Coastal CEO Julian Michalowski and Joshua Ginsberg, who co-founded the Denver-based marijuana chain Native Roots.

In their court filing, the five defendants claimed that Coastal’s proposed sale and a disputed $ 1 million bridge loan were necessary to keep the business afloat and pay an IRS debt of $ 640,000.

A week after filing their first lawsuit, Bierman and Modlin filed a similar lawsuit in Santa Barbara County Superior Court, apparently in support of the federal case, adding Coastal Holding Co. as a defendant.

Both cases are pending. The state court has set a hearing for January 21, 2022.

A message seeking comment from the attorney representing Bierman and Modlin was not returned, and attorneys for the five Coastal co-owners could not be reached for comment.

Lawsuit claims, disclosures

Bierman and Modlin have kept a low profile since their removal from leadership positions at MedMen in January 2020.

At the time, the Los Angeles-based company laid off hundreds of employees, sold non-core assets and faced questions about its financial health.

But the pending lawsuits reveal new details about the couple’s business activities since they left MedMen more than a year and a half ago.

Bierman and Modlin became involved with Coastal in August 2020 through a $ 3.7 million investment from LMAJ, a Delaware corporation that they registered that month. LMAJ is the plaintiff in the pending lawsuits.

That arrangement seemed fine until August, when Michalowski began “unilaterally negotiating” a “direct sale” of the company “designed to benefit himself” and the other defendants, Bierman and Modlin say in their federal and state lawsuits.

“The defendants have abused their power and treat Coastal as their possession to do as they please without regard to Coastal’s operating agreement or their fiduciary duties to the other Coastal shareholders,” the two business partners allege, adding that any sale of the company “Requires LMAJ approval”.

In response, the other five Coastal homeowners said it was Bierman who started shopping Coastal and began looking for a buyer in April, not August.

“Mr. Bierman, at Coastal’s urging, worked with an outside consultant, MarVista Partners … to purchase Coastal from potential buyers. At least three offers were obtained,” according to a court file of the accused co-owners.

I try said to unravel

The first opportunity for a real sale was undone after one of the potential buyers performed due diligence, according to the defendants’ filing.

Bierman, they added, then urged the entire board to go back to the other potential buyers and lower Coastal’s price.

“Bierman vehemently expressed his view that Coastal was days away from being a constant concern,” the document states.

“He indicated that it was necessary to go back with all the potential buyers from the first round and be willing to reduce the sale price of Coastal.”

At a June 22 board meeting, Bierman proposed that the entity accept a new offer to buy Coastal for $ 56.2 million, which he called a “great offer,” and the rest of the board unanimously agreed, according to the presentation of the accused. .

But apparently that’s when the problem started, because the offer approved by the board included an “exclusivity clause” to ensure that Coastal owners did not continue to buy the company with other buyers before the sale was closed.

Meanwhile, Bierman found a “backup offer” that he apparently preferred over the $ 56.2 million deal the board had agreed to, according to the defendants’ filing.

It is unclear why Bierman and Modlin preferred the other offer, as the presentation refers to it only as “far inferior to the current Offer and not in the interest of the Company.”

But the “offer of endorsement” was apparently enough to tarnish the trade deal.

“Since Defendants (and therefore Coastal) rejected Mr. Bierman’s ‘offer of support’, Plaintiff has taken every practice and maneuver he can think of to prevent the Current Offer from reaching a successful conclusion.” affirms the defendant’s presentation.

In particular, the Bierman and Modlin lawsuits request a temporary restraining order and preliminary injunction to stop both the Coastal sale and a proposed $ 1 million bridge loan.

In their court papers, the five co-owners of Coastal contend that if Bierman and Modlin prevail, it could spell the demise of the company.

“Failure to obtain the bridge loan could mean bankruptcy for the Company,” the filing states. “The Company urgently needs the bridge loan to pay off large debts that are past due or past due.”

Questionable movements

Industry lawyers shook their heads at the legal uproar.

“This is a ‘fuck it’ lawsuit,” said Katy Young, a San Francisco-based attorney and chair of the board of the International Cannabis Lawyers Association.

“These guys know how to get around lawsuits and they know how to act. More or less, ‘Sue first and ask questions later.’ It’s not surprising at all, given their past business history, ”Young said of Bierman and Modlin and the litigation that arose during their tenure at MedMen.

Bricken said the dual lawsuits, in both federal and state court, could simply be backup copies of each other in case the federal court refuses to hear the dispute, as it involves a marijuana business. .

Both Young and Bricken also said legal skirmishes could come back to bite Bierman and Modlin.

Bierman and Modlin claim they have a seat on the board of directors through the LMAJ investment, which in the opinion of state regulators means they are proprietary, a point that should have been publicly disclosed, the two attorneys said.

According to online records from the California Department of Cannabis Control, Bierman is identified only as the owner of one of Coastal’s multiple retail licenses, for a store in Vallejo that operates as Releaf Alternative.

Modlin is not identified as the owner of any of the eight licenses Coastal owns.

Young said he has not seen the state impose a strict punishment, such as license revocation, for failing to disclose the property and believes such a penalty is highly unlikely.

Still, Bricken noted, it “puts the company at risk” to air the company’s laundry the way the demand is.

“Most sophisticated entrepreneurs don’t go that far,” Bricken said.

“It’s total speculation about what (Bierman and Modlin) want out of this.”

You can reach John Schroyer at [email protected] PRIMER.



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