Three Triangle startups, three lawsuits. From a cannabis firm having to defend itself against irate investors to a Duke University spin-out going after its former chief operating officer.
A look at recent court filings show all three could be in for a legal fight in 2022, should their cases make it to trial:
LivingLab versus Gallagher:
LivingLab, founded in 2018, does business as Alcove Rooms and last raised capital in 2019, a $2.7 million round. The startup, founded by a group of Duke University students, developed an online platform to match owners of properties with professionals seeking roommates.
But behind the scenes, a conflict has been brewing with former Chief Operating Officer Gerald Gallagher, who claims the company owes it thousands.
To offset those claims, LivingLab filed a lawsuit in Durham County which is now circulating North Carolina Business Court. In the lawsuit, it claims that, when it hired Gallagher in 2018, it sweetened the deal with a 500,000-share stock offering. The terms of the deal, according to LivingLab, were that if Gallagher were to be terminated “for any reason,” non-vested shares could be bought back for 1 cent each.
But when LivingLab terminated Gallagher, it claims to have discovered that Gallagher altered the document he signed. Instead of allowing LivingLab to repurchase shares for 1 cent each, it said shares would be sold for “fair market value.” LivingLab accuses Gallagher of deceit, of having changed the document without its knowledge when he was supposed to be reviewing the terms.
Gallagher, through his attorney Brandon Neuman, isn’t commenting on the case. But according to the complaint, he’s sticking with his characterization of the agreement, and saying LivingLab owes him money. LivingLab, which paid Gallagher $4,000 for 400,000 shares, wants a court to rule that it’s correct, and that it doesn’t owe Gallagher anything.
LivingLab is being represented by Jeffrey Roether of Morning Star Law Group.
Robbins versus Altopa
Altopa, now called Oblend, was founded in 2016. And expectations were high, as the co-founder was an executive well-known to the Triangle startup scene, former TearScience CFO Nicole Wicker.
Altopa last raised capital in 2019, a round totaling nearly $3.8 million in equity. Securities filings show it closed on a $175,000 debt round in 2017 and $1.4 million in equity and debt back in 2017.
The company began by developing a device Wicker boasted about in 2016, saying “we’re bringing a compounding pharmacy to everybody’s home, making it affordable.” The countertop device could mix ingredients, helping customers develop their own shampoos, vitamins, perfumes and, yes, cannabis oil. At the time, she compared the device (called the Oblend) to an ink jet printer, with replaceable fluid cartridges.
Wicker said the company changed its business model over time. Instead of selling devices, it sells cannabis oil blends today.
But a group of investors are crying foul in a federal lawsuit, claiming the device never worked and their investment should be refunded.
Wicker has denied wrongdoing in the case.
Plaintiffs Lance Robbins, MII Realty and Brick Investment are suing Altopa and founders Wicker and Wilson, asking for a full refund of the nearly $587,000 combined they claim to have funneled into the firm in 2018 and 2019. They claim through attorney Brooke Howard that the devices were never functional, and that Altopa’s founders lied when saying they were “ready to order.” They claim that, had they known the devices were not fully developed, they never would have invested.
“We are surprised and disappointed by this lawsuit. Altopa denies all allegations raised and intends to vigorously defend itself in this frivolous matter,” Wicker said in an email.
Digital Realty Trust versus Sprygada
Digital Realty Trust (NYSE: DLR) is the Texas company that quietly bought out Raleigh cloud connectivity startup Pureport in February. The company, which owns data centers across North America, is suing former Pureport CTO Peter Sprygada, claiming he took trade secrets and brought them to a competitor.
Sprygada is being represented by Jonathan Sasser of Ellis & Winters, who said his client denies all wrongdoing.
“It doesn’t say what he’s supposed to have done,” Sasser said of the complaint. “I think it’s telling that they haven’t sued him under the North Carolina Trade Secrets Act. … They cite no evidence at all that he took any confidential information.”
Following the buyout, Sprygada stayed on, hired as Digital Realty Trust’s chief architect. In the lawsuit, Digital Realty Trust claims his regular access to confidential material such as business strategies and product processes “materially motivated” its decision to keep Sprygada.
Digital Realty filed suit after Sprygada resigned to work as the vice president of product management for a competitor, Itential Inc., claiming he is violating the confidentiality and covenant agreement he signed as part of his hire.
“Prior to filing this suit, the company contacted Sprygada and demanded that he immediately cease and desist all violations of the Confidentiality and Covenant Agreement,” the lawsuit, currently in North Carolina Business Court, reads. “In response, Sprygada indicated that he intends to continue his unlawful activities.” The lawsuit was filed by J. Allen Thomas of Ogletree, Deakins, Nash, Smoak and Stewart, who didn't return a request to comment on the case.
