Take the following ingredients, stir the pot and you have a recipe for a big-time lawsuit:
- $12,000,000 allegedly invested in or on behalf of Ultra Health, LLC, an Arizona LLC owned by Duke Rodriguez (51% membership interest + 40% of profits) and CA2 Capital, LLC (49% membership interest + 60% of profits). CA2 Capital, LLC, is owned by Alan Abrams and Christopher Carra.
- A fight for control of two Arizona medical marijuana dispensaries called Broken Arrow Herbal Center, Inc. and CJK, Inc. These non-profit corporations have dispensary registration certificates for Sahuarita (Ultra Health Green Valley) and Kingman (Ultra Health Kingman), respectively.
- Disagreements among three major shareholders of Zoned Properties, Inc., a publicly traded company. Zoned Properties, Inc., claims in its March 31, 2015, disclosure statement that it “focuses on properties within the medical marijuana industry.” Zoned Properties’ major shareholders as of March 31, 2015, include Duke Rodriguez’ company Cumbre Investment, LLC, (2,251,552 shares – 12.18%), Alan Abrams (3,526,669 shares – 19.08%) and Christopher Carra (2,043,335 shares – 11.06%).
The lawsuit filed in Maricopa County Superior Court on March 26, 2015, is CA2 Capital, LLC; Alan B. Abrams; Broken Arrow Herbal Center, Inc.; & CJK, Inc.; vs. Duke Rodriguez, a/k/a Rueben Duke Montenegro Rodriguez; Stormwind Group, LLC; Cumbre Investment, LLC; CVUH, LLC; & Sold By Group, LLC. The litigation is a fight over money and control of two Arizona medical marijuana dispensaries and Ultra Health, LLC. Alan Abrams seeks court approval of his attempt to remove Duke Rodriguez as a manager of Ultra Health and a director and officer of Broken Arrow and CJK.
This is the
sixth seventh (Duke was sued again after this case was filed) time since 2011 that Duke Rodriguez, Arizona’s would-be medical marijuana czar, has been a party in a Maricopa County Superior Court lawsuit. The lawsuits are CV2011-095146, CV2013-055265, CV2014-003047, CV2014-005642, CV2014-007302, CV2015-003778 and CV2015-004225. To learn about the seventh Duke Rodriguez lawsuit read “Zoned Properties, Inc., Sues Duke Rodriguez for Fraud.”
Summary of the Complaint
For those of you who don’t have the time to read the juicy allegations in the Complaint that are quoted below, here’s a short summary of the plaintiffs’ allegations:
- CA2 Capital, LLC, invested $12 million in Ultra Health, LLC or on its behalf.
- On information and belief, Rodriquez did not have substantial personal assets in the Summer of 2013.
- Ultra Health, LLC, distributed a Prospectus that falsely claimed Ultra Health possessed three Arizona medical marijuana dispensary certificates.
- Rodriguez made reassuring but false representations to Abrams at that time that Ultra Health could still obtain those three dispensary registration certificates through litigation with the non-profit companies which had actually been awarded the three certificates.
- Abrams’ funds were indeed used to pay for litigation with the control persons of the non-profits which held the three dispensary registration certificates which Rodriguez had represented had been “awarded” to Ultra Health, funded the acquisition of control and management rights for two additional non-profit companies awarded dispensary registration certificates, and funded the acquisition of a large medical marijuana cultivation facility in Chino Valley, Arizona. See “Ultra Health, LLC Sued Again: Now in 4 Lawsuits.”
Here are the court documents filed in the case as of April 1, 2015:
- Exhibit 1 – the Ultra Health, LLC, Prospectus
- Exhibit 2 – Removal of Duke Rodriguez as Manager of Ultra Health, LLC
- Exhibit 3 – Ultra Health, LLC, Operating Agreement
- Exhibit 4 – Financial Records
- Exhibit 5 – Broken Arrow Herbal Center Bylaws.
- Opposition to Application for Temporary Restraining Order – Defendants’ response to the Complaint
- Exhibit 1 – Declaration of Duke Rodriguez
- Exhibit 2 – Christopher Carra’s FINRA Letter of Consent
- Exhibit B – Joint Venture Agreement between Ultra Health, LLC & MACCAM, LLC
Public Company Zoned Properties, Inc.
Alan Abrams, Christopher Carra and Cumbre Investments, LLC, (owned by Duke Rodriguez) are all shareholders of Zoned Properties, Inc., a publicly traded corporation (symbol ZDPYD) that claims to “focus on properties in the medical marijuana industry.” See page 8 of ZPI’s April 15, 2014, Company Information & Disclosure Statement. In 2014, Zoned Properties, Inc., was involved in three property purchase transactions with Ultra Health, LLC according to Note 3 of its 2014 annual report issued on March 31, 2015. To learn more about Zoned Properties, Inc., read “Zoned Properties, Inc. Public Disclosures.”
Zoned Properties, Inc., had a market value of $926,315,200 on April 1, 2015, despite a 2014, year end financial statement that disclosed:
- $439,887 total revenue
- ($1,483,840) loss from operations
- ($1,744,258) net loss
- $7,240,885 stockholder’s equity
- $10,492,616 total assets
Zoned Properties, Inc.’s Total Cash Flow From Operating Activities for the years 2011 – 2014 was -$1,184,000. Its total revenue for the same four year period was $439,887.
Adversaries Alan Abrams and Duke Rodriguez Acquire Control of Two Arizona Medical Marijuana Dispensaries
Broken Arrow Herbal Center, Inc. and CJK, Inc. are Arizona non-profit corporations that have licenses to operate Arizona medical marijuana dispensaries. Alan Abrams and Duke Rodriguez gained control of these two corporations in 2014. AZDHS regulation R9-17-306.A states: “A dispensary may not transfer or assign the dispensary registration certificate.” Does change of control constitute a transfer of the dispensary license?
Duke Rodriguez claims that Alan Abrams was a founding stockholder of Zoned Properties, Inc. See Exhibit 1 – Declaration of Duke Rodriguez. As of March 31, 2015, Zoned Properties’ major stockholders were Alan Abrams (19.08%), Christopher Carra (11.06%) and Cumbre Investment, LLC (12.18%), which is owned by Duke. What is the relationship, if any, between Zoned Properties, Inc., and the two dispensaries now controlled by major stockholders of Zoned Properties, Inc.?
Here’s a score card to help keep track of the players in this lawsuit:
- CA2 Capital, LLC, is an Arizona limited liability company owned by Alan B. Abrams and Christopher Carra.
- Broken Arrow Herbal Center, Inc., is an Arizona nonprofit corporation whose directors prior to March 26, 2015, were Duke Rodriguez, Alan Abrams and Bryan W. Hill. Duke Rodriguez was the President before March 26, 2015. This corporation owns and operates an Arizona medical marijuana dispensary in Sahuarita, Arizona, that leases its dispensary premises at 1732 W. Commerce Point Place, Sahuarita, AZ, from Green Valley Group, LLC, an LLC that is 100% owned by Zoned Properties, Inc.
- CJK, Inc., is an Arizona nonprofit corporation whose directors prior to March 26, 2015, were Duke Rodriguez and Alan Abrams. Duke Rodriguez was the President before March 26, 2015. This corporation owns and operates an Arizona medical marijuana dispensary in Kingman, Arizona, that leases its dispensary premises at 2095 Northern Ave., Kingman, AZ, from Kingman Property Group, LLC, an LLC that is 100% owned by Zoned Properties, Inc.
- MAC CAM, LLC, an Arizona limited liability company whose members are Alan Abrams, Christopher Carra and Marc Brannigan (former President and former majority stockholder of Zoned Properties, Inc. As of April 15, 2014, MAC CAM, LLC, owned 700,000 shares of preferred stock, but its shares apparently have been redeemed.
- Stormwind Group, LLC, is an Arizona limited liability company owned by Duke Rodriguez.
- Cumbre Investment, LLC is an Arizona limited liability company owned by Duke Rodriguez.
- CVUH, LLC, is an Arizona limited liability company owned by Ultra Health, LLC, and managed by Duke Rodriguez.
- Sold By Group, LLC, is an Arizona limited liability company owned and managed by Duke Rodriguez.
Allegations Stated in the Complaint
Here are some of the more interesting allegations made in the 45 page Complaint (paragraph numbers are the paragraph numbers in the Complaint):
1. Plaintiff CA2 Capital, LLC . . . (“CA2”) . . . has provided and . . . nearly $12,000,000.00 . . . in financing for an entity known as Ultra Health, LLC, . . . (“Ultra Health”).
5. Defendant Duke Rodriguez . . .