Los Angeles court denies $20M Cannabis fraud retrial bid
In reality, the facilities were owned by third parties.
A Los Angeles judge has denied a motion for a new trial by CADM Inc. and its affiliates, who were ordered to pay $20 million in damages to Leafire Inc. and Llulllu LLC for defrauding them in a real estate scheme involving several cannabis cultivation and dispensary sites across California, according to court documents obtained by Law360.
Judge Joel L. Lofton ruled that CADM failed to serve the motion to the proper attorneys representing the plaintiffs by the deadline. Even if the motion had been filed on time, the judge found that CADM’s arguments for a new trial lacked merit.
The lawsuit centered around allegations that CADM and owner, Jianqian Gu, misrepresented their ownership of eight cannabis facilities, including five cultivation sites and two dispensaries in Los Angeles, two facilities in Santa Barbara, and two in Northern California.
Gu solicited a $12 million loan from Leafire and Llulllu to pay off a previous loan, promising to make them the new management companies of the facilities. However, it was later revealed that Gu and CADM did not actually own them, and the money was used to pay Gu’s personal debts and invest in other projects.
The sites included a 300,000 square-foot greenhouse in Santa Barbara and several warehouses ranging from 20,000 to 67,000 square feet. The original complaint also mentions that Leafire conducted site inspections of certain facilities as part of their due diligence before entering into agreements with CADM and Gu.
Several of CADM’s affiliates, which were allegedly owned or controlled by Gu, were implicated in the lawsuit due to their alleged involvement in fraudulent transfers of properties. The plaintiffs argued in their complaint that these transfers were designed to prevent them from collecting on their claim against Gu and CADM, which exceeded $14.3 million.
The court has now upheld the original verdict, which awarded Leafire and Llulllu $17.2 million in compensatory damages and $2.1 million in punitive damages from Gu, as well as $150,000 in punitive damages from the six companies involved in the scheme.
“Responding Parties maintain that the compensatory damages…were substantiated by extensive evidence presented at trial, including additional consequential damages related to specific upgrades and installations at the facilities covered by the agreement, which were both foreseeable and communicated to the Defendants,” the order said.
The judge also found that CADM had waived its right to challenge the verdict form or the court’s responses to juror questions.
