In a significant legal battle unfolding in Michigan, entrepreneur Dan Reinhold has initiated a $5 million lawsuit against his former business partner, Marc Steimer. The lawsuit accuses Steimer of derailing a promising cannabis cultivation venture in Chelsea, near Ann Arbor, by diverting critical investment to a competing operation in Denver, Colorado.
Filed in a Michigan federal court, the legal dispute centers around Reinhold's plans to acquire and develop a 10-acre cannabis grow facility. Reinhold, new to the cannabis industry, had enlisted the expertise of Steimer and his consultancy firm, The High Consultants LLC (THC), to navigate the burgeoning market. In the early stages, their partnership sought to capitalize on the legalization of recreational cannabis use in Michigan, which began in January 2019. Despite exploring several potential grow sites throughout the year, it wasn't until 2022 that the pair decided to jointly pursue a cultivation operation in Chelsea.
The Chelsea property in question featured a 4,100-square-foot building designed for cannabis cultivation, equipped with three licenses allowing the growth of up to 1,000 plants for both medical and recreational use. Additionally, the facility had the capacity for a 6,000-square-foot expansion. Reinhold managed to secure interest from investors Brian and Steven Doyle, who were prepared to invest $1 million in the project, even negotiating the purchase price of the property down from $900,000 to $700,000.
However, complications arose when Steimer expressed a desire to introduce the Doyles to an investment opportunity in Colorado, involving a $1.5 million stake in a Denver dispensary, OG Medicinals. Despite Reinhold's requests to delay any discussion of the Colorado project until after the completion of the Chelsea deal, Steimer went behind Reinhold's back, convincing the Doyles to withdraw their investment from the Chelsea project and redirect it towards the Denver operation.
The lawsuit alleges that Steimer's actions were not only fraudulent but also oppressively detrimental to Reinhold's business interests. As a direct result of Steimer's interference, Reinhold claims his venture has incurred substantial financial damages, estimated between $2.5 million and $5 million in lost profits. These figures are supported by an expert in the Michigan cannabis industry, who will testify regarding the financial impact on Reinhold's venture.
This case underscores the volatile nature of the cannabis industry, where partnerships can quickly turn into rivalries, and investment opportunities are fiercely contested. As the legal proceedings unfold, the outcome will likely resonate through the Michigan cannabis business community, highlighting the importance of trust and transparency in collaborative ventures.
Better Made Snack Foods Inc., a staple in the metro Detroit snack food market since 1930, known for its potato chips and related products, has initiated legal action against multiple Michigan-based cannabis companies. The lawsuit, filed in the U.S. District Court for the Eastern District of Michigan, accuses these entities of unauthorized use of the Better Made trademark on their cannabis flower and edible product packaging.
The legal complaint highlights that Better Made did not grant permission to these companies to leverage its trademark, thereby alleging violations of both federal and state copyright laws. The defendants include a wide array of cannabis businesses, ranging from growers and retailers to distributors. In total, more than thirty companies are implicated in the lawsuit for infringing upon Better Made's intellectual property rights.
Companies named in the lawsuit are: IVP Holding, LLC, House Brands Distro, High Society 2, Zen Republic, LLC, Olswell Cannabis Company, Olswell-Adrian, The Earle of Smoke II, LLC, House of Dank Grand Rapids, Detroit Herbal Center, The High Club, Royal Highness, LLC, Herbology Cannabis Co., MJC Development, LLC, Cannabis King, Cafiero Family Ventures, LLC, King of Budz Ferndale, Carmen Selena Investments, LLC, Royal Highness PC3 LLC, Flower Bowl River Rouge, Greencare Provisioning LLC, Mid Ventures, LLC, Greencare Provisioning Center, Inkster Microbusiness LLC, Nar Inkster, Indica LLC, Sticky Muskegon, Lucky Pablo, Inc., Lucky's Cannabis Company, Pure Buds, LLC, Quest Cannabis, NBT Group LLC, URB Cannabis, Parom Holdings, LLC, and URB Cannabis Company.
The crux of Better Made's grievance stems from the discovery in August 2023 of the defendants' unlicensed use of its trademark, observed in online platforms and physical product packaging. Despite Better Made's efforts to communicate its concerns through a formal letter and multiple emails sent on August 15th, 2023, urging an immediate halt to these copyright violations, the plea seemingly went unanswered. Although one defendant purportedly ceased the use of the trademark on their website following this communication, reports of continued misuse across other mediums prompted further action.
Notably, customers alerted Better Made to ongoing trademark infringements in December 2023 and January 2024. Subsequent attempts by Better Made's legal counsel to resolve the matter through discussions with a representative lawyer for the defendants yielded promises of rectification that were ultimately unfulfilled, leading to the persistence of the issue.
In seeking redress through the courts, Better Made demands financial compensation and a judicial order to permanently prohibit the defendants from employing the Better Made trademark in any capacity, including within their websites, advertising campaigns, packaging, and manufacturing processes. This legal move underscores the snack food company's determination to protect its brand integrity and copyright ownership against unauthorized exploitation.
In Michigan, the landscape of cannabis sales has undergone a profound transformation following the legalization of the substance for adult use. The approval by voters in November 2018 to legalize cannabis marked a significant shift in the state's approach, bringing about a new era that promised both opportunities and challenges. As dispensaries began to emerge across Michigan, a once thriving underground market found itself grappling with an uncertain future.
Marcus, a 31-year-old Detroit resident, exemplifies the impact of this shift on individual dealers who had previously found a lucrative, albeit illicit, livelihood in the cannabis trade. For years, Marcus had successfully navigated the underground market, catering to a discreet clientele with his high-quality hydroponic flower and cannabis concentrates. The job was not only profitable, bringing in more than $1,000 a week, but it also allowed him to avoid the corporate grind that had disillusioned so many of his peers. However, the legalization and subsequent proliferation of legal dispensaries drastically altered his business landscape.
Initially, Marcus managed to maintain a competitive edge by leveraging lower prices. While dispensaries were charging upwards of $500 for an ounce of flower in early 2020, Marcus could afford to offer the same quantity for $250 to $300. This price advantage, however, was short-lived. As the legal market matured and prices began to fall, Marcus found himself unable to compete. By April 2021, the cost of cannabis at dispensaries had dropped below the price at which Marcus could sustain his operation. Reluctantly, he exited the business, transitioning to a job at a vape shop, where he earns less but appreciates the reduced risk and stress associated with legal employment.
The story of Michigan's legal cannabis market is not just about the financial implications for dealers like Marcus but also about the broader impact on consumer behavior and the illicit market as a whole. With the advent of legal dispensaries, consumers now have access to a diverse array of products, competitive pricing, and the assurance of safety and quality. These factors have significantly diminished the appeal of the underground market, leading many former customers of dealers like Marcus to opt for the legal alternative.
Despite these challenges, some underground operators remain resilient. Nick, another Detroit-based dealer, has managed to sustain his operation by capitalizing on his deep-rooted experience and reputation for quality. With over two decades of growing experience, Nick produces marijuana that is renowned among his clientele for its potency and quality. By adjusting his prices and emphasizing the trust and consistency he offers, Nick continues to serve a loyal customer base that values the personal connection and expertise he brings to the table.
However, the allure of the legal market is not lost on those who have traditionally operated in the shadows. Randy, for instance, saw the legalization of medical marijuana in 2008 and later recreational cannabis as an opportunity to transition to a legal business. The challenges of navigating the legal landscape, however, proved daunting. The financial barriers to entry, including the high cost of licensing and the lack of banking support due to federal restrictions, have made the path to legitimacy prohibitively expensive for many. As a result, individuals like Randy are forced to weigh their aspirations against the harsh realities of the legal cannabis market.
Michigan's journey toward cannabis legalization encapsulates the complex interplay between regulation, market dynamics, and individual livelihoods. As the state continues to refine its approach to cannabis, the stories of Marcus, Nick, Randy, and countless others serve as a testament to the evolving challenges and opportunities that accompany the transition from an illicit to a legal market.
In a recent development in a Michigan federal court, Robert Samuel Shumake Jr., also known as Bobby Shumake Japhia following a legal name change, has been directed to secure new legal representation or inform the court of his intention to self-represent. This directive comes in light of Shumake's failure to compensate his previous attorney, sparking allegations from the U.S. Securities and Exchange Commission (SEC) of orchestrating a fraudulent $2 million crowdfunding operation related to cannabis and hemp real estate ventures.
U.S. District Judge Matthew F. Leitman granted the withdrawal request from Jonathan Uretsky of PULLP, Shumake's former lawyer, citing nonpayment as a valid reason for the termination of legal services. Uretsky's request to withdraw highlighted a breakdown in the attorney-client relationship, compounded by unsuccessful attempts to establish a payment plan for the outstanding fees amounting to approximately $36,000 as of April 2022.
During a court hearing, Shumake mentioned his financial struggles and a recent personal bankruptcy filing in California, which he believed would temporarily halt proceedings against him. However, the SEC has contested this, urging the continuation of its lawsuit by arguing that its enforcement action falls under "police power," exempt from bankruptcy's automatic stay provisions.
Judge Leitman has given Shumake a window of 30 days to arrange for new legal representation or declare self-representation, after which he will have 21 days to address the SEC's allegations. These allegations stem from a September 2021 action initiated by the SEC against Shumake and principals of two companies accused of misappropriating funds from investors through deceitful crowdfunding offerings related to cannabis and hemp real estate projects between September 2018 and June 2020.
The SEC's investigations have revealed that Shumake was a pivotal figure in these offerings, concealing his involvement to obscure his prior criminal record related to mortgage fraud. Allegedly, he collaborated with Nicole Birch and Willard Jackson, misleading investors about the companies' management expertise in real estate and diverting substantial funds for personal use.
This case marks Shumake as the final defendant in a series of legal actions that have already seen settlements and judgments against other involved parties, including a significant disgorgement and civil penalties against Birch, a permanent securities law violation ban against Jackson, and a settlement with the crowdfunding platform Fundanna and its CEO.
Furthermore, Shumake's legal troubles extend beyond this case, with a guilty plea in 2017 for violating Michigan's Credit Services Protection Act in a separate mortgage audit services venture.
As the legal proceedings continue, the SEC, represented by John E. Birkenheier, Jerrold H. Kohn, and Dante A. Roldàn, declined further comments. The case, officially recorded as U.S. Securities and Exchange Commission v. Robert Samuel Shumake Jr. et al., remains pending in the U.S. District Court for the Eastern District of Michigan, reflecting ongoing challenges in regulating the intersecting worlds of crowdfunding, cannabis, and real estate investments.
In Menominee, Michigan, the city's legal disputes with several cannabis dispensaries are showing no signs of resolution, complicating efforts to find a mutual agreement. Mayor Casey Hoffman's optimism for a near-term settlement has been dampened following a recent court hearing, highlighting ongoing challenges in negotiations that have spanned several years.
The city has been embroiled in legal battles over the number of dispensaries allowed within its boundaries. These disputes took a new turn at a recent court session presided over by 41st Circuit Court Judge Mary Barglind, where attorneys representing both the city and the dispensaries, including Rize, the Fire Station, Lume, Higher Love, and individual Adam Michaud, discussed various legal motions via Zoom.
The heart of the contention lies in the renewal of local cannabis business licenses introduced by the city, which now include a clause that prohibits dispensaries from suing the city. This was after Judge Barglind mandated mediation earlier in the year, leading to Rize and the Fire Station proposing a partial settlement. However, disagreements persist, particularly around the Michigan Regulation and Taxation of Marihuana Act (MRTMA), specifically concerning the city's limits on cannabis business licenses.
Menominee's City Council rejected an initial settlement offer in February, countering with a proposal that sought a comprehensive dismissal of the lawsuit. This proposal included amendments to zoning laws and allowed the disputing dispensaries to relocate. Despite these efforts, attorney Mike Cox, representing Rize, expressed frustration over the city's rejection of multiple settlement ideas, suggesting the ball is now in the city's court to initiate the next step.
The city's legal representative, Matt Cross, pointed to Lume and Higher Love as obstacles in reaching a settlement, citing their resistance to dismissing MRTMA claims. This impasse has led to a situation where plaintiffs are considering taking their claims to trial, a move Cross and Mayor Hoffman view skeptically, especially given the "no lawsuits" clause in the renewed licenses.
Mayor Hoffman stands by the city's position, indicating a potential path to revoking the dispensaries' licenses if deemed in violation of their agreements. However, he also expresses a desire to keep these businesses in Menominee for their economic contributions.
During the recent court hearing, the complexity of the legal dispute was on full display. The plaintiffs sought to narrow their complaint by dropping several counts, leaving only those claims tied to the alleged violation of MRTMA by the city's prior settlement with other dispensaries. Discussions also delved into accusations of tortious interference and the legitimacy of a ballot referendum committee, further complicating the legal landscape.
With a pretrial conference scheduled for April 11th, the legal saga between Menominee and its cannabis dispensaries continues, with each party looking for a path forward that addresses their concerns while navigating the intricacies of state cannabis regulations.
In the small Michigan town of Menominee, with a population of 8,300, situated on the picturesque shores of Lake Michigan's Green Bay and neighboring the state of Wisconsin, a complex legal battle is unfolding. This fight is over the control of the town's lucrative cannabis market, a battle characterized by allegations of unethical conduct and potential illegal activities among competing cannabis businesses. This conflict highlights the intense competition and legal intricacies faced by the cannabis industry in regions where the market is both lucrative and tightly regulated.
Menominee finds itself at the center of a dispute involving eight cannabis companies, entangled in legal proceedings that implicate the town's officials in alleged violations of the Open Meetings Act and covert operations to skew the local cannabis market in favor of certain businesses. This dispute underscores the town's strategic importance as a cannabis market, drawing significant attention from out-of-state customers, particularly from Wisconsin, where cannabis remains illegal.
At the heart of this controversy are accusations against corporate-backed "shadow" groups, which are said to be orchestrating efforts to limit the expansion of new cannabis shops through sham citizen committees, alongside allegations of political bribery and unethical maneuvers designed to manipulate market dynamics.
A notable moment in this ongoing legal saga occurred during a motion hearing at Menominee's 41st Circuit Court on March 20th, where a staggering 16 attorneys represented the various parties involved, extending what would typically be a brief proceeding into a marathon session lasting over four hours.
Joslin E. Monahan, an attorney from the Grand Rapids-based Miller Johnson law firm, represents Higher Love, a cannabis chain with a store in Menominee. Monahan addressed accusations that her client, among others, had engaged in bribing city officials for favorable market positio ning, a claim for which she asserts there is no evidence. These allegations, Monahan contends, not only lack substantiation but also tarnish the reputations of those implicated, potentially influencing critical decisions within the community.
The roots of the dispute trace back to 2021, when Menominee, after a competitive application process, issued cannabis retailer licenses to Rize and the Fire Station. This decision sparked lawsuits from multiple businesses that were not awarded licenses, alleging flaws in the selection process. Although these initial lawsuits were dismissed, the threat of appeals prompted a settlement agreement in 2023, effectively lifting the cap on the number of cannabis licenses in Menominee and granting priority to the previously contesting companies for new licenses.
Rize and Fire Station subsequently filed lawsuits in state and federal court, challenging the settlement's legitimacy and arguing that the removal of license caps contravenes state laws and undermines their initial business investments predicated on a market with limited competition.
Amid these legal battles, allegations of underhanded tactics have emerged, including the operation of "shadow" groups aiming to curtail the expansion of the cannabis market. It is reported that Rize and Higher Love contributed a combined $200,000 to a ballot initiative campaign, ostensibly led by citizens, to limit the number of cannabis stores in Menominee. Opposing attorneys have criticized this move as a deceptive strategy to influence public opinion and maintain market dominance.
As the legal proceedings unfold, Menominee Circuit Judge Mary Barglind has begun to address some of the disputes, dismissing resolved claims and allowing for the introduction of new allegations. With five cannabis shops currently operational in Menominee and several more planning to open, the outcome of this legal battle will significantly impact the town's cannabis market landscape, setting precedents for how business disputes and regulatory challenges are navigated in the burgeoning cannabis industry.
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