Abat­tis files suit against com­peti­tor, for­mer em­ploy­ees

Abat­tis Bio­ceu­ti­cals Corp. has filed suit for da­m­ages and in­junc­tive re­lief against Affi­nor Grow­ers Inc. and for­mer em­ploy­ees of Phy­taLab. Abat­tis al­leges the de­fen­dants con­spired to steal con­fi­den­tial Phy­taLab in­for­ma­tion to set up a com­pet­ing business.

Stockwatch Daily - - FRONT PAGE - Mr. Michael Withrow re­ports

ABAT­TIS BIO­CEU­TI­CALS Corp. has to­day, in U.S. Fed­eral Court in Wash­ing­ton state, filed suit for da­m­ages and in­junc­tive re­lief against prior em­ploy­ees of Phy­taLab (Dr. Kaleb Lund and Lau­ren Hilty), a for­mer business as­so­ciate (James Baxter), a com­peti­tor (Affi­nor Grow­ers Inc.), its di­rec­tor and for­mer Abat­tis di­rec­tor (Nick Brusatore), and an em­ployee of Herbal An­a­lyt­ics LLC (Erin Leary).

Phy­taLab is owned 51 per cent by Abat­tis through its sub­sidiary, Abat­tis Bio­ceu­ti­cals In­ter­na­tional Inc. Phy­taLab was the first lab­o­ra­tory to pro­vide test­ing ser­vices in Wash­ing­ton state for med­i­cal cannabis un­der state law.

In early Septem­ber, 2014, Dr. Lund and Ms. Hilty, part own­ers of Phy­taLab and con­sul­tants to Abat­tis, pro­vided Phy­taLab with 30 days no­tice of their res­ig­na­tions as man­agers of Phy­taLab. After pro­vid­ing no­tice, but prior to the ef­fec­tive date of their res­ig­na­tions, they joined with Mr. Baxter and Affi­nor Grow­ers to in­cor­po­rate a new Wash­ing- ton state limited li­a­bil­ity company, Herbal An­a­lyt­ics LLC, for the pur­pose of com­pet­ing with Phy­taLab in pro­vid­ing test­ing ser­vices in Wash­ing­ton state for med­i­cal cannabis.

Last week Abat­tis ob­tained in­for­ma­tion that in­di­cates that cer­tain of the de­fen­dants, in con­spir­acy with the other de­fen­dants, stole con­fi­den­tial and pro­pri­etary in­for­ma­tion be­long­ing to Phy­taLab for the pur­pose of us­ing Phy­taLab’s pro­pri­etary in­for­ma­tion to pre­pare an I-502 ap­pli­ca­tion with the State of Wash­ing­ton to recre­ate Phy­taLab’s lab­o­ra­tory fa­cil­i­ties and business model, and to take business from Phy­taLab. Dr. Lund and Ms. Hilty’s ac­tions are will­ful breaches of their fidu­ciary du­ties as man­agers of Phy­taLab, detri­men­tal to the value of their fel­low share­hold­ers’ in­vest­ment in Phy­taLab, and in di­rect con­tra­ven­tion of their con­tin­u­ing con­sult­ing con­tracts with and obli­ga­tions to Abat­tis.

In con­junc­tion with the company’s part­ner, Dr. Michelle Sex­ton, an owner and the chief ex­ec­u­tive man­ager of Phy­taLab, Abat­tis and Phy­taLab have acted quickly to pre­pare a com­plaint for da­m­ages and in­junc­tive re­lief, as well as an emer­gency mo­tion for a tem­po­rary re­strain­ing or­der. The com­plaint and TRO were filed with the U.S. Dis­trict Court for the Western Dis­trict of Wash­ing­ton, and was served on the de­fen­dants ear­lier this morn­ing. As an emer­gency mo­tion, a hear­ing on the mat­ter is an­tic­i­pated to take place within two to three business days, with the TRO be­ing put in place at that time. A full hear­ing for a pre­lim­i­nary in­junc­tion to run un­til the con­clu­sion of le­gal pro­ceed­ings is ex­pected to oc­cur some time within 30 to 45 days of the en­try of the TRO.

Mike Withrow, chair­man and chief ex­ec­u­tive of­fi­cer of Abat­tis, com­mented: “Our share­hold­ers have been fi­nan­cially at­tacked by in­di­vid­u­als who owed an ab­so­lute duty of loy­alty and good­will to the company. We will use all le­gal av­enues avail­able to us to stop their anti-com­pet­i­tive ac­tiv­ity, and re­cap­ture any and all losses suf­fered and any gains they made from their ac­tions. Abat­tis wel­comes spir­ited com­pe­ti­tion, but we will not stand idly by and al­low ne­far­i­ous schemes to de­rail the ex­e­cu­tion of our best-in-class business model.” He went on to say: “Affi­nor proudly pro­claimed on Sept. 9 that ‘Herbal An­a­lyt­ics has the staff, in­stru­men­ta­tion and pro­ce­dures nec­es­sary to com­ply with the scope of tests that Wash­ing­ton State re­quires for I-502 qual­ity con­trol of cannabis and as­so­ci­ated de­riv­a­tives.’ Ini­tially we wished them well in their en­deav­ours, but were stunned to sub­se­quently learn that for- mer own­ers of Phy­taLab and con­sul­tants to Abat­tis had con­spired with Mr. Brusatore, the chair­man of Affi­nor and for­mer di­rec­tor of Abat­tis, to steal valu­able con­fi­den­tial and pro­pri­etary in­for­ma­tion from Phy­taLab with the in­tent to harm Abat­tis. This scheme was de­vised and im­ple­mented while th­ese in­di­vid­u­als were un­der con­tract to Abat­tis, and share­hold­ers and man­agers of Phy­taLab. Upon re­view of the ev­i­dence, we were sim­ply amazed by the brazen­ness of their con­duct and the will­ful man­ner in which they dis­re­garded their con­trac­tual obli­ga­tions and prom­ises. We have re­placed the staff at Phy­taLab with tal­ented peo­ple who come with strong cre­den­tials and pas­sion for sci­ence. I am pleased to have Kather­ine Maloney, MSc (pharmacy), and Kyle Shel­ton join our team.”

We seek Safe Har­bor.

Erika Flores con­densed this news re­lease ([email protected]­watch.com).

Guy P Dan­cosse, Ter­ence Fealey, Wil­liam James Flem­ing, Robert Hedley, Emanuel Mon­tene­grino, Dou­glas J Sorocco, Michael Withrow

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