Preview
FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024
NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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SIDDARTH GUPTA and LINSAY VILLAREAL,
Petitioners,
VERIFIED PETITION
-against-
JEFFREY SCHULTZ, GREGORY TANNOR, SAM
PHELPS, FLOWERHOUSE NY LLC, MICHAEL
SILVERMAN, and NY FARM HOLDCO LLC,
Respondents.
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Petitioners, SIDDARTH GUPTA (“GUPTA”), and LINSAY VILLAREAL
(“VILLAREAL”) (collectively, “Petitioners”), by their attorneys, Bronster LLP, as and for their
Verified Petition against Respondents, JEFFREY SCHULTZ (“SCHULTZ”), GREGORY
TANNOR (“TANNOR”), SAM PHELPS (“PHELPS”), FLOWERHOUSE NY LLC (“FH” or
“Company”) MICHAEL SILVERMAN (“SILVERMAN”), and NY FARM HOLDCO LLC
(“NY FARM”) (collectively, “Respondents”), allege, upon information and belief, as follows:
NATURE OF THE ACTION
1. This petition is for a provisional order in aid of arbitration pursuant to CPLR ¶
7502 (c) enjoining and restraining Respondents from transferring, removing, using or otherwise
dispensing with any assets of FH, including any cannabis, cash, inventory, equipment or
intellectual property in a manner that is not consistent with the ordinary course of the Company’s
business, and precluding Respondents from interfering with GUPTA’S authority as Manager
under the Company’s Amended and Restated Operating Agreement (“OA”), and removing
SILVERMAN from the Company Board because he was illegally placed on the Board without
any authority under the OA.
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THE PARTIES AND VENUE
2. GUPTA is a resident of New York County, New York and is a managing member
of the Company.
3. VILLAREAL is a resident of New York County, New York and is a member of
the Company.
4. TANNOR is a resident of Nassau County, New York.
5. SCHULTZ is a resident of Nassau County, New York and a member of the
Company.
6. SILVERMAN is a resident of Nassau County, New York and an investor in the
Company who is only supposed to be a Board observer at the Company.
7. PHELPS is a resident of Orange County, New York and a member of the
Company.
8. FH is a domestic limited liability company.
9. NY FARM is a Delaware limited liability company with a principal place of
business in New York, New York.
10. Venue lies in this Court pursuant to CPLR §503.
THE FACTS
11. Petitioners seek immediate injunctive relief in aid of arbitration because, as set
forth below, Respondents have illegally usurped GUPTA’S role as Manager of the Company in
violation of the clear language of the OA and are illegally siphoning off Company inventory for
their own personal benefit, all to Petitioners’ detriment.
12. Petitioners are also concerned that the Company will be run in an illegal manner
by a major investor, SILVERMAN, who orchestrated GUPTA’S ouster as a Manager in an
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illegal fashion so he can use the Company assets for his own personal benefit. SILVERMAN
needed GUPTA to be ousted as a Manager of the Company so he could effectuate his plan to
engage in self-dealing and use Company assets for his own benefit without GUPTA being able to
conduct any oversight over his illegal actions. This illegal action by SILVERMAN includes
SILVERMAN pursuing an ownership interest in a dozen retail cannabis locations in violation of
state regulations prohibiting the investment in both production of cannabis and retail licenses.
13. GUPTA’S ouster not only prevents him from having oversight over the
Company’s management, but it also allows SILVERMAN to prevent GUPTA from being able to
recover his substantial financial investment in the Company by improperly depleting the
Company’s assets and inventory for his own personal business projects, such as the Tyson brand
and a Vape brand known as Holiday. It is also evident from the facts of GUPTA’S illegal ouster
that SILVERMAN, a man of considerable financial means, has colluded with and paid off other
members of the Company to go along with his illegal self-dealing actions. In effect,
SILVERMAN’S plan is to starve the Company of cash from his self-dealing and then cause the
Company to potentially shut its operations and cause GUPTA an irreparable loss that he will not
be able to undo even if he prevails in an arbitration. Without Petitioners obtaining provisional
relief from the Court pending arbitration, any subsequent action or award from an arbitration
panel would be rendered ineffectual.
Background
14. From 2015 on, GUPTA was considered a pioneer in the New York cannabis space
and a figurehead for legal cannabis. In 2021, he had the idea to create FH. He thought his
longstanding relationships in the cannabis industry would enable him to bring together growers
with decades of commercial agriculture and cannabis experience who were tailoring their
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knowledge to cultivate cannabis. This included his relationship with VILLAREAL, a Latin
American woman, with more than fifteen years of experience in the cannabis industry, who was
previously responsible for the legal production of more than one million joints per month.
15. GUPTA’S important role in the Company’s development and success has been
quoted in the media in prominent publications. For instance, in Spring 2023, Berkshire
Hathaway’s Businesswire quoted GUPTA as follows:
I am humbled by and proud of what our team has already
accomplished and the work we’ve done and will continue to do to
support the budding legal New York cannabis market,” said co-
founder Sid Gupta. FlowerHouse is setting the standard for quality
cannabis products. Our new strains will give consumers access to
even more variety and further equip the industry, especially New
York’s dispensaries and CAURD licensees, for success.
16. Because VILLAREAL and GUPTA were both persons of color, FH would be the
first Black Indigenous and People of Color (“BIPOC”) owned grower of cannabis, and they
intended to use that classification to create value. Specifically, the New York State’s cannabis
program has made clear that it will be more likely to issue retail licenses to minorities and those
disproportionately affected by the previous “war on drugs.” Further, the distinction of being a
BIPOC producer put FH in a unique position which was used in all press efforts, releases, and
media coverage including a launch as the first product sold at USTA (a dispensary in Union
Square owned by the Doe Fund) which was widely covered by the press.
17. Given GUPTA’S unique knowledge in the cannabis industry, he founded FH with
a well-known cannabis attorney, SCHULTZ, and SCHULTZ’S “best friend” TANNOR, who
could contribute to the Company with his real estate contacts in the cannabis industry.
18. VILLAREAL is also an invaluable person at the Company because she has
unique knowledge and unparallelled experience with cannabis post processing, including
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harvesting, trimming, packaging, sales, and distribution. She was a cannabis expert – from seed
to sale - which is why she was made a co-founder, partner, and head of operations.
19. On February 1, 2022, SCHULTZ, as the Company’s in-house counsel, drafted the
Company’s first Operating Agreement dated February 1, 2022. This Agreement delineated
ownership in the Company among TANNOR, Scott Anchin, 1 SCHULTZ, PHELPS and GUPTA.
20. Because GUPTA’S influx of personal funds to FH continued to increase, and
TANNOR and SCHULTZ were unable to contribute sufficient capital, FH needed to borrow
significant funds to survive. SCHULTZ and SILVERMAN had a pre-existing relationship, and
it was SCHULTZ who arranged for SILVERMAN to loan money to the Company.
21. Accordingly, on or about December 12, 2022, SCHULTZ drafted a Convertible
Promissory Grid Note where the Company borrowed money from SILVERMAN through
SILVERMAN’S wholly owned company, NY FARM HOLDCO LLC, and under that agreed-to
arrangement, SILVERMAN was only named as a “Board Observer.”
22. SILVERMAN was never meant to be part of the Company’s management. In
conjunction with the Convertible Note, SCHULTZ also drafted an Amended and Restated
Operating Agreement that took effect on or about December 12, 2022, which currently governs
the ownership and operating of the Company, and which entirely replaced the original February
1, 2022 Operating Agreement (the “OA”). The current governing OA delineates ownership of
the Company as follows:
Sid Gupta 48.515%
Jeffrey Schultz 24.257%
Greg Tannor 24.257%
1
Anchin subsequently redeemed his interest.
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Sam Phelps 1.98%
Linsay Villareal .99%
Under the OA, Schedule C thereto states that the three Managers that are the only three Members
of the Board as of December 2022 are (1) SCHULTZ, (2) TANNOR, and (3) GUPTA.
SILVERMAN was never intended to be a Manager of the Company. Section 14.8 of the OA
also states that disputes arising out of the OA shall be finally settled by arbitration.
23. In addition to being an integral part of the Company’s management, GUPTA
personally loaned the Company $1,819,400, and deferred more than $500,000 in annual salary,
accepting virtually no compensation for his work and value. Between the loans and his deferred
salary, the Company now owes GUPTA approximately $2.8 million.
24. It was agreed and understood by all the Board members prior to SILVERMAN
being illegally placed on the FH Board as detailed below, that the money GUPTA loaned to the
Company would be fully returned to him once SILVERMAN’S loan funds were received by the
Company. That agreement and understanding was never kept, and GUPTA is still owed
approximately $2.8 million. SILVERMAN, through his orchestrated illegal actions, is attempting
to prevent GUPTA from recouping his money.
25. Similarly, all the Board members agreed to compensate VILLAREAL five
percent of the equity value of the Company and increase her salary, but they failed to do so and
terminated her on January 17, 2024 because they had illegally ousted GUPTA as a Manager of
the Company and likely did not want VILLAREAL to be able to see what SILVERMAN was
doing after GUPTA’S ouster.
26. While VILLAREAL and GUPTA were working 12-15 days, 6 or 7 days a week,
to build the Company’s value, TANNOR, SCHULTZ, and SILVERMAN were illegally
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conspiring to oust them from the Company, usurp GUPTA’S role as Manager in violation of the
OA, and illegally use Company funds and credit cards for their own benefit and otherwise
engaging in self-dealing in violation of their fiduciary duties to GUPTA and the Company.
27. There are many instances where SILVERMAN has engaged in self-dealing to
starve the Company of cash and, through his illegal placement on the Board, is now seeking to
complete his plan by colluding with SCHULTZ and TANNOR. One prime example, which was
happening just as GUPTA was illegally ousted, involved SILVERMAN manipulating GUPTA to
provide millions of dollars in Company inventory to a company called Hudson Cannabis, a
competing company that SILVERMAN invested in for his own personal benefit.
28. SILVERMAN told GUPTA he had a license to convert FH inventory into
cannabis oil and sell through Hudson Cannabis. It came to GUPTA’S attention, just prior to his
illegal ouster, that the Company has not received any of the money it was due from the use and
transfer of the Company inventory to Hudson Cannabis, and GUPTA suspects that
SILVERMAN is continuing to siphon inventory from FH to Hudson Cannabis for his own
personal benefit, with a likely payoff to SCHULTZ and TANNOR.
29. Indeed, within 15 minutes of GUPTA’S illegal ouster on January 17, 2024,
representatives from Hudson Cannabis were onsite at FH claiming to be checking on the
inventory -- this was no coincidence. All this is not only a breach of fiduciary duty to GUPTA
and the Company, but it also puts GUPTA at a great disadvantage and in danger of losing his
equity interest in the Company and recouping his substantial investment of about $2.8 million in
the Company.
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Respondents’ Conspiracy to Remove Gupta as Manager
was Illegal and Violated the Company Operating Agreement
30. Without warning, at 2:30 pm on January 17, 2024, Respondents caused lawyers,
armed security, and police to storm the Company office and escort GUPTA off the Company
premises. That same day, Respondents stole his laptop and phone, and downloaded his hard
drive. Respondents also cut off GUPTA’S email account and email access to the Company.
Respondents delivered a purported corporate resolution replacing him as Manager dated January
15, 2024.
31. GUPTA’S purported removal as a Manager from the Company is illegal and void
because it is squarely contradicted by the OA, and because it is signed by SILVERMAN who is
not a legitimate member of the Company’s Board.
32. Section 5.5 (b) of the OA provides that a Manager may only be removed for
Cause.
33. Cause under the OA is defined as:
(A) gross negligence, (B) willful misconduct, (C) breach of …
duty of loyalty required under this Agreement, or (D) if a
Manager is convicted of (1) any crime involving theft or
willful destruction of a material amount of money or other
property of the Company or (2) any felony (excluding a
cannabis related offense under federal law that would
otherwise be permitted by state law). See Id., Schedule B.
34. GUPTA never engaged in any conduct that even comes close to satisfying this
definition. Indeed, the Company sent GUPTA a purported “formal” written notice letter dated
January 17, 2024, which stated that he was being removed as Manager in accordance with
Section 5.5(b) of the OA, but it fails to mention any grounds for “Cause” that would permit the
“other Board members” to actually oust him as a Manager by a unanimous vote. When GUPTA
asked SILVERMAN the reason he was being removed as a Manager, he explicitly said that there
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were a number of employee complaints about him and that GUPTA had created a “hostile work
environment” at the Company. GUPTA, of course, denies that claim, but more importantly,
even if it were true, it does not meet any of the defined grounds of a “for Cause” removal of
GUPTA as a Manager.
35. Furthermore, the purported resolution used to remove GUPTA as a Manager
dated January 15, 2024 cites the original and replaced February 1, 2022 Operating Agreement,
not the proper Amended and Restated OA that took effect in December 2022, and is only signed
by TANNOR and SILVERMAN. SILVERMAN, as an investor and Board Observer, was not a
Board Member who had a right to remove GUPTA as Manager. SILVERMAN is not a
legitimate Board Member that had any authority to sign the purported resolution and the
purported Notice Letter to remove GUPTA as a Manager.
36. SILVERMAN’S illegal attempt to place himself on the Board can easily be
demonstrated by simply reviewing the governing OA of the Company juxtaposed to the actions
taken by SILVERMAN and TANNOR to illegally remove GUPTA.
37. On June 30, 2023, SCHULTZ resigned from the Board as is conceded in a
purported Written Consent of the majority of the membership interest of the Company dated
June 30, 2023 and signed by TANNOR, PHELPS, and SCHULTZ. The purported written
consent seeks to fill a vacancy on the Board created by SCHULTZ’S resignation and appoint
SILVERMAN to the Board on June 30, 2023. However, as before, this Written Consent again
cites the wrong originally replaced February 1, 2022 Operating Agreement as opposed to the
current governing OA, and it illegally attempts to appoint SILVERMAN to the Board of the
Company without having the requisite votes and consents to do so under the OA.
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38. GUPTA was never made aware of this illegal appointment of SILVERMAN to
the Board on June 30, 2023, and never consented to appoint SILVERMAN to the Board. At this
point in time, June 30, 2023, once SCHULTZ resigned, that left only two other Managers on the
Board, GUPTA and TANNOR. Accordingly, under the OA, TANNOR, on his own, had no
authority to appoint SILVERMAN to the Board on June 30, 2023, and indeed TANNOR had no
authority to even remove GUPTA as a Manager on January 15, 2024.
39. Under the governing OA, Section 5.5 states:
(a) Resignation. The Managers may resign at any time by giving written
notice to the Company. The resignation of a Manager shall take effect upon
receipt of such notice or at such later time as shall be specified in the notice;
and, unless otherwise specified in the notice, the acceptance of the
resignation by the Company shall not be necessary to make it effective.
Upon the effectiveness of any such resignation, such Manager shall cease to
be a “manager” within the meaning of the Act. Following a Manager’s
resignation, death or permanent incapacitation, a replacement for the
resigned Manager shall be elected or appointed by the remaining
Managers.
40. Thus, the appointment of SILVERMAN as a replacement Manager on June 30,
2023 was invalid for several reasons. Under the correct governing OA, GUPTA would have
been required to be informed of this consent resolution and be given a vote because he was one
of the remaining Managers on June 30, 2023. Also, under Section 4.8 of the OA, GUPTA would
have had to vote to change any process of procedure under the OA in a Supermajority vote,
given that he had and still has a 48.515% ownership interest in the Company. Absent his vote,
the appointment of SILVERMAN to the Board on June 30, 2023 was illegal and any actions
taken by the only legitimate Board Manager after June 30, 2023 was TANNOR. So all
resolutions signed by TANNOR and SILVERMAN attempting to remove GUPTA as a Manager
should be deemed illegal, void, and a legal nullity.
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41. Furthermore, Section 5.1 (b) of the OA states “Any vacancies created by the
increase in the size of the Board shall be filled by the Members, acting by consent or vote of a
Supermajority of the Percentage Interests.” Additionally, Section 5.2 of the OA states that all
Major Decisions as defined under Section 5.2 of the OA also require a Supermajority approval of
the Board. The term “Major Decision” defined by Section 5.2 includes “the appointment or
removal of any officers of the Company or its subsidiaries.”
42. Accordingly, based on these provisions of the OA, SILVERMAN was illegally
appointed to the Board on June 30, 2023 because it was done without GUPTA’S consent, and his
removal as a Manger and as an Officer of the Company (GUPTA is the Company’s CEO)
required a Supermajority vote, which could not occur without GUPTA actually voting. The
same is true for the termination of VILLAREAL, as she was an Officer of the Company as a
Partner and Head of Operations. A Supermajority vote would have been required for her
removal as well.
43. Again, GUPTA was not even aware that the June 30, 2023 vote to appoint
SILVERMAN to the Board occurred, which is an outrageous act that abundantly demonstrates
the collusion and illegality SILVERMAN orchestrated.
44. Also, with only TANNOR and GUPTA as the only two remaining Board
members and Managers on June 30, 2023, after SCHULTZ’S resignation, neither TANNOR nor
GUPTA had any individual authority to remove each other as Manager of the Company, nor as
an officer of the Company as per the provisions of the OA.
45. The ultra vires acts and collusive fraudulent scheme by SILVERMAN is further
evidenced by a text message that GUPTA sent to TANNOR, SCHULTZ, and PHELPS on July
23, 2023, wherein GUPTA suggested that PHELPS be appointed to replace SCHULTZ on the
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Board. In an act of clear deception, SCHULTZ and TANNOR, as well as PHELPS, all
responded to this text message and agreed with his suggestion, without ever telling GUPTA that
on June 30, 2023, they already attempted to illegally place SILVERMAN on the Board without
GUPTA’S consent or vote.
46. If Respondents are not immediately ordered to act in accordance with the OA,
GUPTA, as well as VILLAREAL, will suffer irreparable harm and Respondents will steal all the
Company’s inventory, intellectual property, and cash, putting the Company in a position where
GUPTA loses his investment and the ability to recover the substantial funds the Company owes
him. Being starved of cash under SILVERMAN’S illegal scheme to take over the Company’s
management and self-dealing will also negatively impact the Company’s goodwill with its
clients that will by itself create irreparable harm to GUPTA as an owner with substantial sums
invested in the Company.
47. Without GUPTA obtaining provisional relief from the Court pending arbitration,
any subsequent action or award GUPTA, or VILLAREAL, obtain from an arbitration panel
would be rendered ineffectual. While the specific issues of SILVERMAN’S improper acts and
self-dealing schemes will have to be decided in an arbitration under the OA, in the interim
SILVERMAN’S illegal appointment to the Board should be nullified by this Court, and GUPTA
should be fully reinstated to the Board as a Manager and Officer of the Company with complete
oversight rights to ensure that the status quo before his ouster continues so that he and
VILLAREAL are not irreparably harmed pending the arbitration.
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AS AND FOR A FIRST CAUSE OF ACTION
(Interim Relief in Aid of Arbitration)
48. Petitioners repeat and reallege the allegations contained in paragraphs “1” through
“47” above as if set forth at length herein.
49. CPLR § 7502 (c) provides a mechanism for a litigant in an arbitration to
commence an action in aid of arbitration, which includes the seeking of a court order to provide
provisional remedies to ensure that that status quo pending a decision by an arbitration panel
remains in place, and without which a decision or arbitration award could be made ineffectual
due to the passage of time.
50. The Court is empowered to grant a TRO “pending a hearing for a preliminary
injunction where it appears that immediate and irreparable injury, loss or damage will result
unless the defendant is restrained before the hearing can be had.” CPLR § 6301.
51. The Company is in danger of losing its relationships and shutting down if
Silverman is permitted to continue his self-dealing scheme with Schultz and Tannor, especially
with no oversight by Gupta who was clearly illegally removed as a Manger and where Silverman
was illegally appointed to the Board.
52. Allowing Silverman’s illegal scheme will cause irreparable harm to Gupta in that
he will permanently lose his entire substantial investment in the Company and his entire equity
interest in the Company.
53. Providing Gupta the interim relief to maintain the status quo before he was
illegally ousted so that Gupta can commence an arbitration under Section 14.8 of the OA and
prevent any arbitral award obtained by Gupta relating to the causes of action set forth below
from becoming ineffectual.
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AS AND FOR A SECOND CAUSE OF ACTION
(Breach of Contract)
54. Petitioners repeat and reallege the allegations contained in paragraphs “1” through
“47” above as if set forth at length herein.
55. Petitioners and Respondents are parties to the OA.
56. At all times, Petitioners have duly performed their obligations under the OA.
57. Respondents knowingly, willfully, and intentionally breached and continue to
breach the OA by attempting to remove GUPTA as Manager of the Company unilaterally and
without authorization or cause in contravention of the OA.
58. As a direct and proximate result of Respondents’ breach of the OA, GUPTA has
suffered and will continue to suffer damages, and will be in danger of losing his investment in
the Company unless SILVERMAN’S illegal appointment to the Board is nullified by this Court,
and GUPTA should be fully reinstated to the Board as a Manager and Officer of the Company
with complete oversight rights to ensure that the status quo before his ouster continues so that he
and VILLAREAL are not irreparably harmed pending the arbitration.
59. Respondents’ violation of the OA will result in a substantial loss of business and
working capital, causing GUPTA to lose his investment in the Company unless SILVERMAN’S
illegal appointment to the Board is nullified by this Court, and GUPTA is fully reinstated to the
Board as a Manager and Officer of the Company with complete oversight rights to ensure that
the status quo before his ouster continues so that he and VILLAREAL are not irreparably
harmed pending the arbitration.
60. As a direct and proximate result of Respondents’ breach of the OA, GUPTA has
suffered and will continue to suffer damages, including, but not limited to, an inability to carry
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out his duties and responsibilities as Manager of the Company and recover his investment in the
Company.
61. Petitioners have no adequate remedy at law for Respondents’ violations of the
OA.
62. Accordingly, by reason of Respondents’ knowing, willful, and intentional breach
of the OA, and illegal attempt to oust GUPTA, Petitioners are entitled to an order in aid of
arbitration enjoining and restraining Respondents from transferring, removing, using or
otherwise dispensing with any assets of FH, including any cannabis, cash, inventory, equipment
or intellectual property in a manner that is not consistent with the ordinary course of the
Company’s business, and precluding Respondents from interfering with GUPTA’S authority as
Manager under the Company’s OA, and removing SILVERMAN from the Company Board
because he was illegally placed on the Board without any authority under the Company’s
governing OA.
AS AND FOR A THIRD CAUSE OF ACTION
(For Breach of Fiduciary Duty)
63. Petitioners repeat and reallege the allegations contained in paragraphs “1” through
“47” above as if set forth at length herein.
64. Respondents owed a fiduciary duty to Petitioners to perform their duties for the
benefit of the Petitioners and not for the benefit of themselves.
65. Through their unauthorized and unilateral attempted removal of GUPTA as a
Manager, and the attempt to unilaterally operate the Company, Respondents knowingly,
willfully, and intentionally breached their fiduciary duties to Petitioners.
66. The Respondents’ knowing, willful, and intentional breach of fiduciary duty
proximately damaged the Petitioners, who have suffered and will continue to suffer damages,
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including, but not limited to, an inability to carry out GUPTA’S duties and responsibilities as
Manager of the Company and recover his investment in the Company.
67. As a direct and proximate result of Respondents’ knowing, willful, and intentional
breach of fiduciary duty, Respondents have caused monetary damages to the Company with a
significant potential to cause irreparable harm to the Petitioners if Respondents are permitted to
continue with their illegal and wrongful actions including lost business, and the inability for
GUPTA to recover his investment in the Company.
68. Petitioners have no adequate remedy at law.
69. Accordingly, by reason of Respondents’ knowing, willful, and intentional
breaches of their fiduciary duty to the Petitioners, Petitioners are entitled to an order in aid of
arbitration, enjoining and restraining Respondents from transferring, removing, using or
otherwise dispensing with any assets of FH, including any cannabis, cash, inventory, equipment
or intellectual property in a manner that is not consistent with the ordinary course of the
Company’s business, and precluding Respondents from interfering with GUPTA’S authority as
Manager under the Company’s OA, and removing SILVERMAN from the Company Board
because he was illegally placed on the Board without any authority under the Company’s
governing OA.
AS AND FOR A FOURTH CAUSE OF ACTION
(Equitable Accounting)
70. Petitioners repeat and reallege the allegations contained in paragraphs “1” through
“47” above as if set forth at length herein.
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71. As described herein, as members of the Company, Respondents owed a fiduciary
duty to Petitioners to perform their duties for the benefit of the Petitioners and not for the benefit
of themselves.
72. Respondents have precluded Petitioners from accessing the Company’s funds and
cannabis inventory and equipment.
73. Petitioners demand that Respondents account for all funds, inventory and
equipment held by Respondents.
74. Petitioners have no adequate remedy at law.
75. Accordingly, Petitioners are entitled to an accounting of all funds, inventory and
equipment.
WHEREFORE, Petitioners demand judgment against Respondents as follows:
76. On their First Cause of Action for Interim Relief, Petitioners seek interim relief to
maintain the status quo before Guipta was illegally ousted so that Gupta can commence an
arbitration under Section 14.8 of the OA and prevent any arbitral award obtained by Gupta
relating to the causes of action set forth below from becoming ineffectual.
(a) On their Second Cause of Action for Breach of Contract for: (i) compensatory
damages in an amount to be determined at arbitration; (ii) punitive damages; and (iii) injunctive
relief enjoining Respondents from taking further steps to interfere with Petitioners’ rights under
the OA;
(b) On their Third Cause of Action for Breach of Fiduciary Duty for: (i)
compensatory damages in an amount to be determined at arbitration; (ii) punitive damages; and
(iii) injunctive relief enjoining Respondents from taking further steps to interfere with
Petitioners’ rights under the OA;
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(c) On their Fourth Cause of Action for an accounting, Petitioners seek an accounting
for the money, inventory and equipment over which Respondents have wrongful control;
(d) Awarding Petitioners the costs and disbursements of this action, including their
reasonable attorneys’ fees; and
(e) Such other and further relief as this Court deems just and proper.
Dated: New York, New York
February 14, 2024
Yours, etc.,
BRONSTER, LLP
Attorneys for Petitioners
FLOWERHOUSE NY LLC, SIDDARTH
GUPTA and LINSAY VILLAREAL
By: /s/ Don Abraham
Don Abraham
156 West 56th Street, Suite 703
New York, NY 10019
Tel: (212) 558-9300
Fax: (347) 246-4704
Email: dabraham@brosnterllp.com
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ATTORNEY VERIFICATION
Don Abraham, an attorney duly admitted to practice before the Courts of the State of
New York, affirms the following to be true under the penalties of perjury:
I am a member of the law firm of BRONSTER LLP, attorneys of record for Petitioners, I
have read the annexed PETITION and know the contents thereof, and the same are true to my
knowledge, except those matters therein which are stated to be alleged upon information and
belief, and as to those matters I believe them to be true. My belief, as to those matters therein not
stated upon knowledge, is based upon facts, records, and other pertinent information contained in
my files. The reason this verification is made by me and not Petitioners is that Petitioners do not
reside in the county wherein the attorney for the Petitioners maintains its offices.
Dated: New York, New York
February 14, 2024
/s/ Don Abraham
Don Abraham
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Preview
FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK -------------------------------------------------------------------X Index No. _______________ SIDDARTH GUPTA and LINSAY VILLAREAL, Petitioners, VERIFIED PETITION -against- JEFFREY SCHULTZ, GREGORY TANNOR, SAM PHELPS, FLOWERHOUSE NY LLC, MICHAEL SILVERMAN, and NY FARM HOLDCO LLC, Respondents. -----------------------------------------------------------------X Petitioners, SIDDARTH GUPTA (“GUPTA”), and LINSAY VILLAREAL (“VILLAREAL”) (collectively, “Petitioners”), by their attorneys, Bronster LLP, as and for their Verified Petition against Respondents, JEFFREY SCHULTZ (“SCHULTZ”), GREGORY TANNOR (“TANNOR”), SAM PHELPS (“PHELPS”), FLOWERHOUSE NY LLC (“FH” or “Company”) MICHAEL SILVERMAN (“SILVERMAN”), and NY FARM HOLDCO LLC (“NY FARM”) (collectively, “Respondents”), allege, upon information and belief, as follows: NATURE OF THE ACTION 1. This petition is for a provisional order in aid of arbitration pursuant to CPLR ¶ 7502 (c) enjoining and restraining Respondents from transferring, removing, using or otherwise dispensing with any assets of FH, including any cannabis, cash, inventory, equipment or intellectual property in a manner that is not consistent with the ordinary course of the Company’s business, and precluding Respondents from interfering with GUPTA’S authority as Manager under the Company’s Amended and Restated Operating Agreement (“OA”), and removing SILVERMAN from the Company Board because he was illegally placed on the Board without any authority under the OA. 1 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 THE PARTIES AND VENUE 2. GUPTA is a resident of New York County, New York and is a managing member of the Company. 3. VILLAREAL is a resident of New York County, New York and is a member of the Company. 4. TANNOR is a resident of Nassau County, New York. 5. SCHULTZ is a resident of Nassau County, New York and a member of the Company. 6. SILVERMAN is a resident of Nassau County, New York and an investor in the Company who is only supposed to be a Board observer at the Company. 7. PHELPS is a resident of Orange County, New York and a member of the Company. 8. FH is a domestic limited liability company. 9. NY FARM is a Delaware limited liability company with a principal place of business in New York, New York. 10. Venue lies in this Court pursuant to CPLR §503. THE FACTS 11. Petitioners seek immediate injunctive relief in aid of arbitration because, as set forth below, Respondents have illegally usurped GUPTA’S role as Manager of the Company in violation of the clear language of the OA and are illegally siphoning off Company inventory for their own personal benefit, all to Petitioners’ detriment. 12. Petitioners are also concerned that the Company will be run in an illegal manner by a major investor, SILVERMAN, who orchestrated GUPTA’S ouster as a Manager in an 2 2 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 illegal fashion so he can use the Company assets for his own personal benefit. SILVERMAN needed GUPTA to be ousted as a Manager of the Company so he could effectuate his plan to engage in self-dealing and use Company assets for his own benefit without GUPTA being able to conduct any oversight over his illegal actions. This illegal action by SILVERMAN includes SILVERMAN pursuing an ownership interest in a dozen retail cannabis locations in violation of state regulations prohibiting the investment in both production of cannabis and retail licenses. 13. GUPTA’S ouster not only prevents him from having oversight over the Company’s management, but it also allows SILVERMAN to prevent GUPTA from being able to recover his substantial financial investment in the Company by improperly depleting the Company’s assets and inventory for his own personal business projects, such as the Tyson brand and a Vape brand known as Holiday. It is also evident from the facts of GUPTA’S illegal ouster that SILVERMAN, a man of considerable financial means, has colluded with and paid off other members of the Company to go along with his illegal self-dealing actions. In effect, SILVERMAN’S plan is to starve the Company of cash from his self-dealing and then cause the Company to potentially shut its operations and cause GUPTA an irreparable loss that he will not be able to undo even if he prevails in an arbitration. Without Petitioners obtaining provisional relief from the Court pending arbitration, any subsequent action or award from an arbitration panel would be rendered ineffectual. Background 14. From 2015 on, GUPTA was considered a pioneer in the New York cannabis space and a figurehead for legal cannabis. In 2021, he had the idea to create FH. He thought his longstanding relationships in the cannabis industry would enable him to bring together growers with decades of commercial agriculture and cannabis experience who were tailoring their 3 3 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 knowledge to cultivate cannabis. This included his relationship with VILLAREAL, a Latin American woman, with more than fifteen years of experience in the cannabis industry, who was previously responsible for the legal production of more than one million joints per month. 15. GUPTA’S important role in the Company’s development and success has been quoted in the media in prominent publications. For instance, in Spring 2023, Berkshire Hathaway’s Businesswire quoted GUPTA as follows: I am humbled by and proud of what our team has already accomplished and the work we’ve done and will continue to do to support the budding legal New York cannabis market,” said co- founder Sid Gupta. FlowerHouse is setting the standard for quality cannabis products. Our new strains will give consumers access to even more variety and further equip the industry, especially New York’s dispensaries and CAURD licensees, for success. 16. Because VILLAREAL and GUPTA were both persons of color, FH would be the first Black Indigenous and People of Color (“BIPOC”) owned grower of cannabis, and they intended to use that classification to create value. Specifically, the New York State’s cannabis program has made clear that it will be more likely to issue retail licenses to minorities and those disproportionately affected by the previous “war on drugs.” Further, the distinction of being a BIPOC producer put FH in a unique position which was used in all press efforts, releases, and media coverage including a launch as the first product sold at USTA (a dispensary in Union Square owned by the Doe Fund) which was widely covered by the press. 17. Given GUPTA’S unique knowledge in the cannabis industry, he founded FH with a well-known cannabis attorney, SCHULTZ, and SCHULTZ’S “best friend” TANNOR, who could contribute to the Company with his real estate contacts in the cannabis industry. 18. VILLAREAL is also an invaluable person at the Company because she has unique knowledge and unparallelled experience with cannabis post processing, including 4 4 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 harvesting, trimming, packaging, sales, and distribution. She was a cannabis expert – from seed to sale - which is why she was made a co-founder, partner, and head of operations. 19. On February 1, 2022, SCHULTZ, as the Company’s in-house counsel, drafted the Company’s first Operating Agreement dated February 1, 2022. This Agreement delineated ownership in the Company among TANNOR, Scott Anchin, 1 SCHULTZ, PHELPS and GUPTA. 20. Because GUPTA’S influx of personal funds to FH continued to increase, and TANNOR and SCHULTZ were unable to contribute sufficient capital, FH needed to borrow significant funds to survive. SCHULTZ and SILVERMAN had a pre-existing relationship, and it was SCHULTZ who arranged for SILVERMAN to loan money to the Company. 21. Accordingly, on or about December 12, 2022, SCHULTZ drafted a Convertible Promissory Grid Note where the Company borrowed money from SILVERMAN through SILVERMAN’S wholly owned company, NY FARM HOLDCO LLC, and under that agreed-to arrangement, SILVERMAN was only named as a “Board Observer.” 22. SILVERMAN was never meant to be part of the Company’s management. In conjunction with the Convertible Note, SCHULTZ also drafted an Amended and Restated Operating Agreement that took effect on or about December 12, 2022, which currently governs the ownership and operating of the Company, and which entirely replaced the original February 1, 2022 Operating Agreement (the “OA”). The current governing OA delineates ownership of the Company as follows: Sid Gupta 48.515% Jeffrey Schultz 24.257% Greg Tannor 24.257% 1 Anchin subsequently redeemed his interest. 5 5 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 Sam Phelps 1.98% Linsay Villareal .99% Under the OA, Schedule C thereto states that the three Managers that are the only three Members of the Board as of December 2022 are (1) SCHULTZ, (2) TANNOR, and (3) GUPTA. SILVERMAN was never intended to be a Manager of the Company. Section 14.8 of the OA also states that disputes arising out of the OA shall be finally settled by arbitration. 23. In addition to being an integral part of the Company’s management, GUPTA personally loaned the Company $1,819,400, and deferred more than $500,000 in annual salary, accepting virtually no compensation for his work and value. Between the loans and his deferred salary, the Company now owes GUPTA approximately $2.8 million. 24. It was agreed and understood by all the Board members prior to SILVERMAN being illegally placed on the FH Board as detailed below, that the money GUPTA loaned to the Company would be fully returned to him once SILVERMAN’S loan funds were received by the Company. That agreement and understanding was never kept, and GUPTA is still owed approximately $2.8 million. SILVERMAN, through his orchestrated illegal actions, is attempting to prevent GUPTA from recouping his money. 25. Similarly, all the Board members agreed to compensate VILLAREAL five percent of the equity value of the Company and increase her salary, but they failed to do so and terminated her on January 17, 2024 because they had illegally ousted GUPTA as a Manager of the Company and likely did not want VILLAREAL to be able to see what SILVERMAN was doing after GUPTA’S ouster. 26. While VILLAREAL and GUPTA were working 12-15 days, 6 or 7 days a week, to build the Company’s value, TANNOR, SCHULTZ, and SILVERMAN were illegally 6 6 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 conspiring to oust them from the Company, usurp GUPTA’S role as Manager in violation of the OA, and illegally use Company funds and credit cards for their own benefit and otherwise engaging in self-dealing in violation of their fiduciary duties to GUPTA and the Company. 27. There are many instances where SILVERMAN has engaged in self-dealing to starve the Company of cash and, through his illegal placement on the Board, is now seeking to complete his plan by colluding with SCHULTZ and TANNOR. One prime example, which was happening just as GUPTA was illegally ousted, involved SILVERMAN manipulating GUPTA to provide millions of dollars in Company inventory to a company called Hudson Cannabis, a competing company that SILVERMAN invested in for his own personal benefit. 28. SILVERMAN told GUPTA he had a license to convert FH inventory into cannabis oil and sell through Hudson Cannabis. It came to GUPTA’S attention, just prior to his illegal ouster, that the Company has not received any of the money it was due from the use and transfer of the Company inventory to Hudson Cannabis, and GUPTA suspects that SILVERMAN is continuing to siphon inventory from FH to Hudson Cannabis for his own personal benefit, with a likely payoff to SCHULTZ and TANNOR. 29. Indeed, within 15 minutes of GUPTA’S illegal ouster on January 17, 2024, representatives from Hudson Cannabis were onsite at FH claiming to be checking on the inventory -- this was no coincidence. All this is not only a breach of fiduciary duty to GUPTA and the Company, but it also puts GUPTA at a great disadvantage and in danger of losing his equity interest in the Company and recouping his substantial investment of about $2.8 million in the Company. 7 7 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 Respondents’ Conspiracy to Remove Gupta as Manager was Illegal and Violated the Company Operating Agreement 30. Without warning, at 2:30 pm on January 17, 2024, Respondents caused lawyers, armed security, and police to storm the Company office and escort GUPTA off the Company premises. That same day, Respondents stole his laptop and phone, and downloaded his hard drive. Respondents also cut off GUPTA’S email account and email access to the Company. Respondents delivered a purported corporate resolution replacing him as Manager dated January 15, 2024. 31. GUPTA’S purported removal as a Manager from the Company is illegal and void because it is squarely contradicted by the OA, and because it is signed by SILVERMAN who is not a legitimate member of the Company’s Board. 32. Section 5.5 (b) of the OA provides that a Manager may only be removed for Cause. 33. Cause under the OA is defined as: (A) gross negligence, (B) willful misconduct, (C) breach of … duty of loyalty required under this Agreement, or (D) if a Manager is convicted of (1) any crime involving theft or willful destruction of a material amount of money or other property of the Company or (2) any felony (excluding a cannabis related offense under federal law that would otherwise be permitted by state law). See Id., Schedule B. 34. GUPTA never engaged in any conduct that even comes close to satisfying this definition. Indeed, the Company sent GUPTA a purported “formal” written notice letter dated January 17, 2024, which stated that he was being removed as Manager in accordance with Section 5.5(b) of the OA, but it fails to mention any grounds for “Cause” that would permit the “other Board members” to actually oust him as a Manager by a unanimous vote. When GUPTA asked SILVERMAN the reason he was being removed as a Manager, he explicitly said that there 8 8 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 were a number of employee complaints about him and that GUPTA had created a “hostile work environment” at the Company. GUPTA, of course, denies that claim, but more importantly, even if it were true, it does not meet any of the defined grounds of a “for Cause” removal of GUPTA as a Manager. 35. Furthermore, the purported resolution used to remove GUPTA as a Manager dated January 15, 2024 cites the original and replaced February 1, 2022 Operating Agreement, not the proper Amended and Restated OA that took effect in December 2022, and is only signed by TANNOR and SILVERMAN. SILVERMAN, as an investor and Board Observer, was not a Board Member who had a right to remove GUPTA as Manager. SILVERMAN is not a legitimate Board Member that had any authority to sign the purported resolution and the purported Notice Letter to remove GUPTA as a Manager. 36. SILVERMAN’S illegal attempt to place himself on the Board can easily be demonstrated by simply reviewing the governing OA of the Company juxtaposed to the actions taken by SILVERMAN and TANNOR to illegally remove GUPTA. 37. On June 30, 2023, SCHULTZ resigned from the Board as is conceded in a purported Written Consent of the majority of the membership interest of the Company dated June 30, 2023 and signed by TANNOR, PHELPS, and SCHULTZ. The purported written consent seeks to fill a vacancy on the Board created by SCHULTZ’S resignation and appoint SILVERMAN to the Board on June 30, 2023. However, as before, this Written Consent again cites the wrong originally replaced February 1, 2022 Operating Agreement as opposed to the current governing OA, and it illegally attempts to appoint SILVERMAN to the Board of the Company without having the requisite votes and consents to do so under the OA. 9 9 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 38. GUPTA was never made aware of this illegal appointment of SILVERMAN to the Board on June 30, 2023, and never consented to appoint SILVERMAN to the Board. At this point in time, June 30, 2023, once SCHULTZ resigned, that left only two other Managers on the Board, GUPTA and TANNOR. Accordingly, under the OA, TANNOR, on his own, had no authority to appoint SILVERMAN to the Board on June 30, 2023, and indeed TANNOR had no authority to even remove GUPTA as a Manager on January 15, 2024. 39. Under the governing OA, Section 5.5 states: (a) Resignation. The Managers may resign at any time by giving written notice to the Company. The resignation of a Manager shall take effect upon receipt of such notice or at such later time as shall be specified in the notice; and, unless otherwise specified in the notice, the acceptance of the resignation by the Company shall not be necessary to make it effective. Upon the effectiveness of any such resignation, such Manager shall cease to be a “manager” within the meaning of the Act. Following a Manager’s resignation, death or permanent incapacitation, a replacement for the resigned Manager shall be elected or appointed by the remaining Managers. 40. Thus, the appointment of SILVERMAN as a replacement Manager on June 30, 2023 was invalid for several reasons. Under the correct governing OA, GUPTA would have been required to be informed of this consent resolution and be given a vote because he was one of the remaining Managers on June 30, 2023. Also, under Section 4.8 of the OA, GUPTA would have had to vote to change any process of procedure under the OA in a Supermajority vote, given that he had and still has a 48.515% ownership interest in the Company. Absent his vote, the appointment of SILVERMAN to the Board on June 30, 2023 was illegal and any actions taken by the only legitimate Board Manager after June 30, 2023 was TANNOR. So all resolutions signed by TANNOR and SILVERMAN attempting to remove GUPTA as a Manager should be deemed illegal, void, and a legal nullity. 10 10 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 41. Furthermore, Section 5.1 (b) of the OA states “Any vacancies created by the increase in the size of the Board shall be filled by the Members, acting by consent or vote of a Supermajority of the Percentage Interests.” Additionally, Section 5.2 of the OA states that all Major Decisions as defined under Section 5.2 of the OA also require a Supermajority approval of the Board. The term “Major Decision” defined by Section 5.2 includes “the appointment or removal of any officers of the Company or its subsidiaries.” 42. Accordingly, based on these provisions of the OA, SILVERMAN was illegally appointed to the Board on June 30, 2023 because it was done without GUPTA’S consent, and his removal as a Manger and as an Officer of the Company (GUPTA is the Company’s CEO) required a Supermajority vote, which could not occur without GUPTA actually voting. The same is true for the termination of VILLAREAL, as she was an Officer of the Company as a Partner and Head of Operations. A Supermajority vote would have been required for her removal as well. 43. Again, GUPTA was not even aware that the June 30, 2023 vote to appoint SILVERMAN to the Board occurred, which is an outrageous act that abundantly demonstrates the collusion and illegality SILVERMAN orchestrated. 44. Also, with only TANNOR and GUPTA as the only two remaining Board members and Managers on June 30, 2023, after SCHULTZ’S resignation, neither TANNOR nor GUPTA had any individual authority to remove each other as Manager of the Company, nor as an officer of the Company as per the provisions of the OA. 45. The ultra vires acts and collusive fraudulent scheme by SILVERMAN is further evidenced by a text message that GUPTA sent to TANNOR, SCHULTZ, and PHELPS on July 23, 2023, wherein GUPTA suggested that PHELPS be appointed to replace SCHULTZ on the 11 11 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 Board. In an act of clear deception, SCHULTZ and TANNOR, as well as PHELPS, all responded to this text message and agreed with his suggestion, without ever telling GUPTA that on June 30, 2023, they already attempted to illegally place SILVERMAN on the Board without GUPTA’S consent or vote. 46. If Respondents are not immediately ordered to act in accordance with the OA, GUPTA, as well as VILLAREAL, will suffer irreparable harm and Respondents will steal all the Company’s inventory, intellectual property, and cash, putting the Company in a position where GUPTA loses his investment and the ability to recover the substantial funds the Company owes him. Being starved of cash under SILVERMAN’S illegal scheme to take over the Company’s management and self-dealing will also negatively impact the Company’s goodwill with its clients that will by itself create irreparable harm to GUPTA as an owner with substantial sums invested in the Company. 47. Without GUPTA obtaining provisional relief from the Court pending arbitration, any subsequent action or award GUPTA, or VILLAREAL, obtain from an arbitration panel would be rendered ineffectual. While the specific issues of SILVERMAN’S improper acts and self-dealing schemes will have to be decided in an arbitration under the OA, in the interim SILVERMAN’S illegal appointment to the Board should be nullified by this Court, and GUPTA should be fully reinstated to the Board as a Manager and Officer of the Company with complete oversight rights to ensure that the status quo before his ouster continues so that he and VILLAREAL are not irreparably harmed pending the arbitration. 12 12 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 AS AND FOR A FIRST CAUSE OF ACTION (Interim Relief in Aid of Arbitration) 48. Petitioners repeat and reallege the allegations contained in paragraphs “1” through “47” above as if set forth at length herein. 49. CPLR § 7502 (c) provides a mechanism for a litigant in an arbitration to commence an action in aid of arbitration, which includes the seeking of a court order to provide provisional remedies to ensure that that status quo pending a decision by an arbitration panel remains in place, and without which a decision or arbitration award could be made ineffectual due to the passage of time. 50. The Court is empowered to grant a TRO “pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had.” CPLR § 6301. 51. The Company is in danger of losing its relationships and shutting down if Silverman is permitted to continue his self-dealing scheme with Schultz and Tannor, especially with no oversight by Gupta who was clearly illegally removed as a Manger and where Silverman was illegally appointed to the Board. 52. Allowing Silverman’s illegal scheme will cause irreparable harm to Gupta in that he will permanently lose his entire substantial investment in the Company and his entire equity interest in the Company. 53. Providing Gupta the interim relief to maintain the status quo before he was illegally ousted so that Gupta can commence an arbitration under Section 14.8 of the OA and prevent any arbitral award obtained by Gupta relating to the causes of action set forth below from becoming ineffectual. 13 13 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 AS AND FOR A SECOND CAUSE OF ACTION (Breach of Contract) 54. Petitioners repeat and reallege the allegations contained in paragraphs “1” through “47” above as if set forth at length herein. 55. Petitioners and Respondents are parties to the OA. 56. At all times, Petitioners have duly performed their obligations under the OA. 57. Respondents knowingly, willfully, and intentionally breached and continue to breach the OA by attempting to remove GUPTA as Manager of the Company unilaterally and without authorization or cause in contravention of the OA. 58. As a direct and proximate result of Respondents’ breach of the OA, GUPTA has suffered and will continue to suffer damages, and will be in danger of losing his investment in the Company unless SILVERMAN’S illegal appointment to the Board is nullified by this Court, and GUPTA should be fully reinstated to the Board as a Manager and Officer of the Company with complete oversight rights to ensure that the status quo before his ouster continues so that he and VILLAREAL are not irreparably harmed pending the arbitration. 59. Respondents’ violation of the OA will result in a substantial loss of business and working capital, causing GUPTA to lose his investment in the Company unless SILVERMAN’S illegal appointment to the Board is nullified by this Court, and GUPTA is fully reinstated to the Board as a Manager and Officer of the Company with complete oversight rights to ensure that the status quo before his ouster continues so that he and VILLAREAL are not irreparably harmed pending the arbitration. 60. As a direct and proximate result of Respondents’ breach of the OA, GUPTA has suffered and will continue to suffer damages, including, but not limited to, an inability to carry 14 14 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 out his duties and responsibilities as Manager of the Company and recover his investment in the Company. 61. Petitioners have no adequate remedy at law for Respondents’ violations of the OA. 62. Accordingly, by reason of Respondents’ knowing, willful, and intentional breach of the OA, and illegal attempt to oust GUPTA, Petitioners are entitled to an order in aid of arbitration enjoining and restraining Respondents from transferring, removing, using or otherwise dispensing with any assets of FH, including any cannabis, cash, inventory, equipment or intellectual property in a manner that is not consistent with the ordinary course of the Company’s business, and precluding Respondents from interfering with GUPTA’S authority as Manager under the Company’s OA, and removing SILVERMAN from the Company Board because he was illegally placed on the Board without any authority under the Company’s governing OA. AS AND FOR A THIRD CAUSE OF ACTION (For Breach of Fiduciary Duty) 63. Petitioners repeat and reallege the allegations contained in paragraphs “1” through “47” above as if set forth at length herein. 64. Respondents owed a fiduciary duty to Petitioners to perform their duties for the benefit of the Petitioners and not for the benefit of themselves. 65. Through their unauthorized and unilateral attempted removal of GUPTA as a Manager, and the attempt to unilaterally operate the Company, Respondents knowingly, willfully, and intentionally breached their fiduciary duties to Petitioners. 66. The Respondents’ knowing, willful, and intentional breach of fiduciary duty proximately damaged the Petitioners, who have suffered and will continue to suffer damages, 15 15 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 including, but not limited to, an inability to carry out GUPTA’S duties and responsibilities as Manager of the Company and recover his investment in the Company. 67. As a direct and proximate result of Respondents’ knowing, willful, and intentional breach of fiduciary duty, Respondents have caused monetary damages to the Company with a significant potential to cause irreparable harm to the Petitioners if Respondents are permitted to continue with their illegal and wrongful actions including lost business, and the inability for GUPTA to recover his investment in the Company. 68. Petitioners have no adequate remedy at law. 69. Accordingly, by reason of Respondents’ knowing, willful, and intentional breaches of their fiduciary duty to the Petitioners, Petitioners are entitled to an order in aid of arbitration, enjoining and restraining Respondents from transferring, removing, using or otherwise dispensing with any assets of FH, including any cannabis, cash, inventory, equipment or intellectual property in a manner that is not consistent with the ordinary course of the Company’s business, and precluding Respondents from interfering with GUPTA’S authority as Manager under the Company’s OA, and removing SILVERMAN from the Company Board because he was illegally placed on the Board without any authority under the Company’s governing OA. AS AND FOR A FOURTH CAUSE OF ACTION (Equitable Accounting) 70. Petitioners repeat and reallege the allegations contained in paragraphs “1” through “47” above as if set forth at length herein. 16 16 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 71. As described herein, as members of the Company, Respondents owed a fiduciary duty to Petitioners to perform their duties for the benefit of the Petitioners and not for the benefit of themselves. 72. Respondents have precluded Petitioners from accessing the Company’s funds and cannabis inventory and equipment. 73. Petitioners demand that Respondents account for all funds, inventory and equipment held by Respondents. 74. Petitioners have no adequate remedy at law. 75. Accordingly, Petitioners are entitled to an accounting of all funds, inventory and equipment. WHEREFORE, Petitioners demand judgment against Respondents as follows: 76. On their First Cause of Action for Interim Relief, Petitioners seek interim relief to maintain the status quo before Guipta was illegally ousted so that Gupta can commence an arbitration under Section 14.8 of the OA and prevent any arbitral award obtained by Gupta relating to the causes of action set forth below from becoming ineffectual. (a) On their Second Cause of Action for Breach of Contract for: (i) compensatory damages in an amount to be determined at arbitration; (ii) punitive damages; and (iii) injunctive relief enjoining Respondents from taking further steps to interfere with Petitioners’ rights under the OA; (b) On their Third Cause of Action for Breach of Fiduciary Duty for: (i) compensatory damages in an amount to be determined at arbitration; (ii) punitive damages; and (iii) injunctive relief enjoining Respondents from taking further steps to interfere with Petitioners’ rights under the OA; 17 17 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 (c) On their Fourth Cause of Action for an accounting, Petitioners seek an accounting for the money, inventory and equipment over which Respondents have wrongful control; (d) Awarding Petitioners the costs and disbursements of this action, including their reasonable attorneys’ fees; and (e) Such other and further relief as this Court deems just and proper. Dated: New York, New York February 14, 2024 Yours, etc., BRONSTER, LLP Attorneys for Petitioners FLOWERHOUSE NY LLC, SIDDARTH GUPTA and LINSAY VILLAREAL By: /s/ Don Abraham Don Abraham 156 West 56th Street, Suite 703 New York, NY 10019 Tel: (212) 558-9300 Fax: (347) 246-4704 Email: dabraham@brosnterllp.com 18 18 of 19 FILED: NEW YORK COUNTY CLERK 02/14/2024 04:26 PM INDEX NO. 650805/2024 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 02/14/2024 ATTORNEY VERIFICATION Don Abraham, an attorney duly admitted to practice before the Courts of the State of New York, affirms the following to be true under the penalties of perjury: I am a member of the law firm of BRONSTER LLP, attorneys of record for Petitioners, I have read the annexed PETITION and know the contents thereof, and the same are true to my knowledge, except those matters therein which are stated to be alleged upon information and belief, and as to those matters I believe them to be true. My belief, as to those matters therein not stated upon knowledge, is based upon facts, records, and other pertinent information contained in my files. The reason this verification is made by me and not Petitioners is that Petitioners do not reside in the county wherein the attorney for the Petitioners maintains its offices. Dated: New York, New York February 14, 2024 /s/ Don Abraham Don Abraham 19 19 of 19