Investor Calls for Sanctions in CV Sciences Suit

By Willis Jacobson
Oct 7, 2020

An investor who sued a CBD company for allegedly misleading stockholders has asked a federal judge to impose sanctions against lawyers representing two of the company’s former executives. The attorneys, according to the plaintiff, have hidden evidence and generally acted in bad faith during the discovery process of the lawsuit.

Richard Ina filed the motion (read it here) calling for sanctions Monday in U.S. District Court in Nevada. The filing is connected to a larger securities class action suit brought by Ina against CV Sciences, a San Diego-based company that researches and sells CBD products.

Ina, a trustee for the Ina Family Trust, accused CV Sciences in his 2018 lawsuit of duping investors – the Ina Family Trust among them – by describing a CBD nicotine gum as “patent pending” even though patents for the product had already been rejected by the U.S. Patent and Trademark Office (USPTO). 

The suit’s discovery process was the focus of Monday’s motion, which alleged that lawyers for father-son duo Michael Mona Jr. and Michael Mona III, both former CV Sciences executives who have since left the company, purposefully stonewalled the process for seven months. Although the Monas and CV Sciences are both named as defendants in the case, they are being represented by separate legal teams.

The filing accuses the Monas’ attorneys – Michael Maupin and Terry Coffing, of the Las Vegas-based Marquis Aurbach Coffing – of routinely ignoring court rules, responding in an untimely manner or not at all, raising frivolous objections, taking inconsistent positions, concealing documents and information, and failing to produce any documents requested in discovery by Ina’s lawyers.

“Plaintiff attempted to work with the Mona Defendants to resolve the disputes arising from these deficiencies — while simultaneously producing nearly 4,000 pages of documents to the Mona Defendants and the other named defendants — yet the Mona Defendants have consistently refused to participate in good faith,” the motion states.

Ina asks the court to waive all of the Monas’ objections to discovery requests, to compel the Monas to provide complete responses, and to order the Monas to pay all fees related to Ina’s motion.

A hard drive from a work laptop that had been used by Mona III is among the materials Ina would like to have turned over. Ina alleges the information on the laptop could potentially prove some of the allegations made in his securities suit.

Ina claimed in the new motion that he wasn’t even aware of the laptop until learning this year that Mona III confirmed its existence in a separate, unrelated lawsuit last year in Nevada.

In March, during the case’s initial disclosures period, Ina requested a copy or description of “all documents, electronically stored information, and tangible things” in the Monas’ possession that may be used to support their case.

The Monas, according to Ina’s motion, claimed to have no such materials and never mentioned the hard drive from the work laptop. Ina claims he independently learned of the existence of the hard drive in April, but the Monas still never responded to attempts to learn about its contents.

In total, Ina alleges the Monas and their attorneys failed to respond to more than 40 requests for documents.

“The fact that the Mona Defendants have repeatedly ignored Plaintiff’s requests to check their personal cell phones and email accounts — both of which they could have used for business purposes while employed at CV Sciences — to look for information responsive to the Plaintiff’s document requests supports Plaintiff’s position that the Mona Defendants are not responding in good faith to his document requests,” the motion read.

Ina’s motion claims that was just part of the Monas’ unwillingness to play by the rules in the case.

The motion claims the Monas gave deficient responses under questioning by Ina’s attorneys, and were evasive.

The Monas, according to the suit, claimed they relied upon third-party advice when deciding, as executives with CV Sciences, to classify the CBD gum in question as “patent pending” or “proprietary.” When asked who those third parties were, the Monas allegedly pointed to “Deloitte and Tanner LLC” and possibly others.

“’Deloitte and Tanner LLC’ does not appear to exist when a web search is run; and if the entity is related to Deloitte Touche Tohmatsu Limited, one of the ‘Big Four’ accounting firms, it is unclear what auditors have to do with patent-related issues,” the motion states.

Beyond the alleged acts of the Monas’ legal team, the overall case focuses on the legality of claiming a patent pending on a product after a final rejection from the PTSO but before all appeals have been exhausted.

CV Sciences has defended itself by claiming that information about its patents, or lack thereof, was publicly available on the PTSO website. Because of this, the company argues, no one could have been tricked or misled.

In 2018, CV Sciences and Mona Jr. settled with the Securities and Exchange Commission on a separate matter after the agency filed enforcement action against the company and Mona Jr. alleging irregularities related to financial reporting. Neither party admitted guilt, as part of the settlement, but the company was fined $150,000 and Mona Jr. was fined $50,000 and prohibited from serving as an officer of a publicly held company for five years.

Ina is represented in the case by Richard Gonnello and Dillon Hagius, of the Faruqi & Faruqi firm, and Martin Muckleroy, of Muckleroy Lunt (firm apparently has no website).

CV Sciences is represented by Jeffery Garofalo, Eric Plourde and S. Todd Neal of Procopio Cory Hargreaves & Savitch.

Attorneys for Ina and the Monas did not respond Wednesday to requests for comment.

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