Caro Capital, LLC v. Koch

• Decision Date: 30 January 2023
• Docket Number: 20-cv-6153 (LJL)
• Parties: CARO CAPITAL, LLC, CARO PARTNERS, LLC, JUPITER WELLNESS, INC., BRIAN JOHN, and RICHARD MILLER, Plaintiffs, v. ROBERT KOCH, BEDFORD INVESTMENT PARTNERS, LLC, KAIZEN ADVISORS LLC, and JOHN DOES 1-10, Defendants.
• Court: U.S. District Court — Southern District of New York

CARO CAPITAL, LLC, CARO PARTNERS, LLC, JUPITER WELLNESS, INC., BRIAN JOHN, and RICHARD MILLER, Plaintiffs,
v.
ROBERT KOCH, BEDFORD INVESTMENT PARTNERS, LLC, KAIZEN ADVISORS LLC, and JOHN DOES 1-10, Defendants.

No. 20-cv-6153 (LJL)

United States District Court, S.D. New York

January 30, 2023

OPINION AND ORDER

LEWIS J. LIMAN, United States District Judge:

Plaintiffs-Counterclaim Defendants Caro Capital, LLC, Caro Partners, LLC, Jupiter Wellness, Inc., Brian John, and Richard Miller (collectively the “Caro Parties” or “Plaintiffs”) move, pursuant to Federal Rule of Civil Procedure 56, for partial summary judgment on the counterclaims brought by Defendants-Counterclaim Plaintiffs Robert Koch and Bedford Investment Partners (together, “Koch Parties” or “Defendants”). Dkt. No. 130. For the following reasons, the motion for partial summary judgment is granted in part and denied in part.

BACKGROUND

This case revolves around Defendants' alleged attempt to extort Plaintiffs for millions of dollars by delaying the initial public offering (“IPO”) of Jupiter Wellness, Inc. (“Jupiter”). The extortion is not at issue in this motion. Rather, Plaintiffs challenge Defendants' counterclaims for unjust enrichment related to the Koch Parties' contributions to Jupiter.

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Jupiter started as purveyor of cannabidiol- or “CBD”-infused products. See Dkt. No. 137 (“Koch Parties' 56.1 Response”)^[1] ¶ 54 (quoting Dkt. No. 136, Ex. 7 (Jupiter's Prospectus)).

Reflecting the nature of its business, Jupiter was initially named CBD Brands, Inc. (“CBD Brands”) and its website was www.cbdbrands.net. Dkt. No. 133 (“Caro Parties' 56.1”) ¶¶ 26, 30; Koch Parties' 56.1 Response ¶¶ 26, 30.^[2] However, in connection with its IPO in November 2020, Jupiter changed its name because of negative connotations with CBD and because other CBD companies were underperforming. See Caro Parties' 56.1 ¶¶ 26-28, 42; Koch Parties' 56.1 Response ¶¶ 26-28, 42. Today, Jupiter has deviated only slightly from its CBD origins; it has two primary product lines: CaniSun, a CBD-infused sunscreen, and toys that it makes for Disney Universal. See Caro Parties' 56.1 ¶ 29; Koch Parties' 56.1 Response ¶ 29.

The parties agree on the nature of Jupiter's business, but have very different accounts of the role that Robert Koch (“Koch”) played in Jupiter's founding and the value of the services he contributed to Jupiter. Koch testified that he co-founded Jupiter and “created CBD Brands”

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alongside Brian John (“John”). Koch Parties' 56.1 Response, Additional Facts ¶ 1. He testified that he “raised money for [Jupiter], helped build the PowerPoint, owned the domain names, came up with the name CaniSun,” recruited Dr. Glynn Wilson (“Wilson”) to serve on Jupiter's board of directors, and developed logos for the company. Caro Parties' 56.1 ¶¶ 19, 23, 56; Koch Parties' 56.1 Response ¶¶ 19, 23, 56. The Koch Parties also present evidence which they claim shows that Koch gave Jupiter an indirect loan when the company ran short on cash. See Koch Parties' 56.1 Response, Additional Facts ¶¶ 44-51. The Caro Parties do not dispute the general nature of Koch's involvement with Jupiter; rather, they dispute the degree to which Koch assisted the company and the value of Koch's contributions.

Koch purchased several domain names, including www.kannablals.com, www.kannables.com, www.kannisun.com, and www.cbdbrands.net. See Caro Parties' 56.1 ¶¶ 39-40; Koch Parties' 56.1 Response ¶¶ 39-40. Two of these domain names, www.kannablals.com and www.kannables.com, were purchased for $12.17 each; there is no evidence in the record of how much Koch paid for www.kannisun.com and www.cbdbrands.net. Caro Parties' 56.1 ¶¶ 39, 41; Koch Parties' 56.1 Response ¶¶ 39, 41. At least one of these domain names, www.cbdbrands.net, was transferred to Jupiter. See Caro Parties' 56.1 ¶ 30; Koch Parties' 56.1 Response ¶ 30. The transfer of www.cbdbrands.net led to one of the many arguments between Koch and John contained in the record. Caro Parties' 56.1 ¶ 11; Koch Parties' 56.1 Response ¶ 11. After a delay in transferring the domain name in March 2020, John wrote Koch: “Bobby I don't know what kind of f[***]ing bulls[**]t or shake down you're trying to do here but I'm gonna tell you now if it doesn't get transferred in the next 24 hours you can lose my f[***]ing number for good.” Koch Parties' 56.1 Response, Additional Facts ¶ 40 (quoting Dkt. No. 139, Ex. 28 at KOCH 106034). Koch eventually transferred the domain name

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to John, who texted, “Love you Bobbby. Thanks for getting that done today.” Koch Parties' 56.1 Response ¶ 11; Koch Parties' 56.1 Response, Additional Facts ¶ 41 (quoting Dkt. No. 139, Ex. 29 at KOCH 116881).

John testified that Jupiter used www.cbdbrands.net “when we were originally setting up the company....It was our email address basically.” Caro Parties' 56.1 ¶ 30 (quoting John Dep. 66:13-15); Koch Parties' 56.1 Response ¶ 30. However, the website “never did any business.” Id. In fact, discovery only produced evidence of a single online sale of a Jupiter product, for $112.32 on June 19, 2019. Caro Parties' 56.1 ¶¶ 35-36; Koch Parties' 56.1 Response ¶¶ 35-36. The order was for CBD gummy bears and sunscreen and was placed by Koch himself. Caro Parties' 56.1 ¶ 37; Koch Parties' 56.1 Response ¶ 37. Jupiter has filed two Form 10-Ks since its November 2020 IPO. Caro Parties' 56.1 ¶ 42; Koch Parties' 56.1 Response ¶ 42. Both list www.JupiterWellness.com as Jupiter's “primary corporate website.” Id. Neither mentions www.cbdbrands.net. Caro Parties' 56.1 ¶ 44; Koch Parties' 56.1 Response ¶ 44. Earlier SEC filings, however, do include www.cbdbrands.net and Jupiter's prospectus lists the website as its “primary corporate website.” See Koch Parties' 56.1 Response ¶ 42; Koch Parties' 56.1 Response, Additional Facts ¶ 43. Koch testified that he has no plans for the website and that the Koch Parties' attorney questioning him could “have it.” Caro Parties' 56.1 ¶ 31 (quoting John Depo. 81:7-19); Koch Parties' 56.1 Response ¶ 31.

In April 2017, the Koch Parties also purchased the domain name www.kannisun.com. Caro Parties' 56.1 ¶ 40; Koch Parties' 56.1 Response ¶ 40; Koch Parties' 56.1 Response, Additional Facts ¶ 2. Despite the Koch Parties' purchase, John testified that Koch “ha[d no] input into” the name of one of Jupiter's best-selling products, “CaniSun,” which was developed by Richard Miller (“Miller”). Caro Parties' 56.1 ¶ 33 (quoting John Dep. 67:18-25, 125:17-21);

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Koch Parties' 56.1 Response ¶ 33.^[3] Whatever work Koch did for “K-A-N-N-A-S-U-N,” John testified, was “Bobby[] doing it on his own”-“[w]e have always been C-A-N-I-S-U-N.” Id. The Koch Parties do not dispute that the record lacks evidence that Koch invented the name “CaniSun,” see Caro Parties' 56.1 ¶ 53; Koch Parties' 56.1 Response ¶ 53; rather, in addition to Koch's purchase of the domain www.kannisun.com, the Koch Parties present evidence that (1) in May 2017, Koch developed logos, which incorporated the name “Kannasun,” which he shared with John, Koch Parties' 56.1 Response ¶ 53 (citing Dkt. No. 139, Exs. 4-5), and (2) conflicting testimony from John and Miller concerning which of the two developed the name CaniSun, id.

On June 7, 2019 and May 14, 2021, Jupiter filed for trademarks for CaniSun. Caro Parties' 56.1 ¶ 55; Koch Parties' 56.1 Response ¶ 55; see also Dkt. No. 132, Ex. 2. On August 6, 2020, Jupiter filed a provisional patent for the CaniSun product line. Caro Parties' 56.1 ¶ 51; Koch Parties' 56.1 Response ¶ 51. In its public filings, Jupiter valued its intellectual property at $0 in 2020 and $375,000 in 2021; Jupiter's operating expenses included a $731,629 impairment to intangible assets in 2020 and a $300,000 impairment to intellectual property in 2021. Caro Parties' 56.1 ¶¶ 49-50, 52; Koch Parties' 56.1 Response ¶¶ 49-50, 52. The Form 10-Ks do not identify specific assets or liabilities associated with Jupiter's CaniSun products. Caro Parties' 56.1 ¶ 48; Koch Parties' 56.1 Response ¶ 48. Further, it is undisputed that the Caro Parties never used the logos that Koch developed, though the Koch parties presented evidence that John reviewed the logos and encouraged their development. Caro Parties' 56.1 ¶ 56; Koch Parties' 56.1 Response ¶¶ 33, 56.

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The Koch Parties presented evidence that they provided value to John and Jupiter in other ways, including by soliciting investments and board members. Neither party disputes that the Koch Parties helped to solicit at least one investment, from Wilson. Caro Parties' 56.1 ¶ 23; Koch Parties' 56.1 Response ¶ 23. Wilson, in a declaration that he later testified was accurate, affirms that Koch was “at most[,] a minor facilitator in [his] conversations and relationships with Plaintiffs.” Caro Parties' 56.1 ¶¶ 23, 25. He also affirms that he met Koch through John and Miller, not the other way around. Id. The Koch Parties dispute this characterization. They present evidence that Koch was involved in soliciting investments from several individuals: He developed materials to share with individuals in October 2018, prepared a term sheet in November 2018, and was involved in conversations with Jupiter's attorneys about fundraising, at John's behest. See Koch Parties' 56.1 Response, Additional Facts ¶¶ 6-10. He also sent documents to several investors, including Wilson. Id. ¶¶ 13-14. He testified that he was “the one who introduced Glynn Wilson to the company . . . [and] the one who solicited [Wilson] for the investment of CBD Brands.” Koch Parties' 56.1 Response ¶ 23. Koch's testimony is supported by additional evidence, including text messages between Koch and Wilson setting up meetings with Wilson for John and himself and providing information about a “friends and family” investment round. Id.^[4]

Not only did Koch solicit an investment from Wilson, but he also claims that he “recruited Dr. Wilson . . . to become a member of CBD Brands' board...