Francine Shulman, et al. vs. Todd Kaplan, et al.

Case Background

On November 30, 2020, Plaintiffs Francine Shulman, individually and as Trustee of the Shulman Family Trust, Iron Angel, LLC, 3F, Inc., and Emerald Sky filed a fraud lawsuit against Defendants Todd Kaplan, Medical Investor Holdings LLC dba Vertical Companies (“Vertical”), Vertical Wellness, Inc., Charles Houghton, Matt Kaplan, Drew Milburn, Courtney Dorne, Smoke Wallin, Robert Scott Kaplan, Elyse Kaplan, Jeff Silver, Iron Angel II, LLC, and NCAMBA9, Inc.

The case was filed in the California Superior Court, Los Angeles County. Judges Huey P. Cotton, Paul A. Bacigalupo, and Virginia Keeny presided over this case. [Case number: 20VECV01406]

Cause

Defendant Todd Kaplan and his co-conspirators defrauded Plaintiff Francine Shulman and her companies, stealing her interest in a cannabis cultivation operation that Defendants admitted could have become one of the world’s largest by 2019.

Ms. Shulman, an experienced farmer in Santa Barbara County, invested in the Iron Angel Ranch in 2014, with plans to cultivate organic produce and medical cannabis. By 2017, she expanded her operation and positioned herself to take advantage of California’s evolving cannabis laws, which presented an opportunity to scale her business significantly.

In June 2017, Ms. Shulman met Todd Kaplan, the founder and CEO of Vertical Brands, who immediately recognized the value of her business. Kaplan, a convicted felon with a history of fraud, had been indicted on multiple charges, including healthcare fraud and conspiracy to commit money laundering. He pleaded guilty to tax evasion in 2007 but avoided prosecution on over 130 other charges. Kaplan’s criminal history, however, did not deter him from continuing his fraudulent schemes.

Kaplan saw an opportunity to exploit Ms. Shulman’s vulnerability. He promised her partnership and support, claiming he could help grow her business and navigate the changing cannabis industry. However, Kaplan and his co-defendants quickly set about manipulating Ms. Shulman, misrepresenting their cannabis expertise and financial capabilities. They persuaded her to enter into contracts that, unbeknownst to her, were designed to steal her business and assets.

Once the deal was struck, Kaplan’s true intentions became clear. He took control of Iron Angel Ranch, used it to cultivate crops, and failed to pay Ms. Shulman any profits. Kaplan and his associates resorted to harassment, intimidation, and threats to maintain control over her property and force her out of the business. His fraudulent conduct was part of a broader scheme targeting multiple victims, where he would create sham partnerships, exploit vulnerable individuals, and wrongfully seize valuable assets for his personal gain.

Damages

The Plaintiffs sought a judgment in their favor, requesting various forms of relief against the Defendants. They sought various forms of relief, including actual damages, statutory damages, exemplary damages, punitive damages, and treble damages, along with any other remedies provided by the applicable statutes. Additionally, they asked for an accounting of the money owed to Ms. Shulman. The plaintiffs also sought both pre-judgment and post-judgment interest on the awarded monetary relief. Furthermore, they requested to recover the costs of bringing the lawsuit, which included reasonable attorneys’ fees. Finally, they sought any other relief to which they were entitled under law or equity.

Key Arguments and Proceedings

Legal Representation

  • Plaintiff(s): Francine Shulman, individually and as Trustee of the Shulman Family Trust, Iron Angel, LLC, 3F, Inc., and Emerald Sky
    • Counsel for Plaintiff(s): Cauley Cheryl Ann | Dhadialla Karan | Sanders Natalie | Wu Julia
  • Defendant(s): Todd Kaplan | Medical Investor Holdings LLC dba Vertical Companies | Vertical Wellness, Inc. | Charles Houghton | Matt Kaplan | Drew Milburn | Courtney Dorne | Smoke Wallin | Robert Scott Kaplan | Elyse Kaplan | Jeff Silver | Iron Angel II, LLC
    NCAMBA9, Inc.

    • Counsel for Defendant(s): Rachel F. Kashani | Spanos Theodore G. | Watson Houston

Claims

The Complaint outlined several claims, including intentional misrepresentation, fraud, and negligent misrepresentation. It also alleged breach of contract and violation of the implied covenant of good faith and fair dealing. The Plaintiff accused the defendant of violating California Business and Professions Code §§ 17200 and 17500. Additionally, the Complaint included charges of common law unfair competition, intentional interference with contractual relations, and intentional interference with prospective economic advantage.

Further, the Plaintiff claimed intentional infliction of emotional distress and elder financial abuse. The Complaint also alleged breach of fiduciary duty by an attorney, malicious prosecution, rescission, and the establishment of a constructive trust.

Defense

The Defendants denied all allegations in the Complaint and rejected the Plaintiffs’ claims of damages. The Defendants raised several affirmative defenses, including:

  1. The Complaint lacked sufficient facts to support any cause of action.
  2. The Plaintiffs’ claims were unclear and ambiguous.
  3. Even if damages occurred, the Plaintiffs failed to mitigate them.
  4. The damages were speculative and caused by the Plaintiffs’ own conduct or third parties.
  5. The Plaintiffs’ claims were barred by prior legal rulings, including res judicata (the legal doctrine that prevents re-litigation of claims already decided) from a related federal case.
  6. The Defendants acted in good faith and made decisions based on sound business judgment.

The defense also argued that the Plaintiffs failed to allege fraud with specificity and that any claims for damages were unjustified. They reserved the right to assert additional defenses if necessary. Kaplan and Vertical brought counterclaims against Shulman and her sons, alleging breach of contract, intentional interference, and conversion.

Jury Verdict

After a two-week trial in Los Angeles Superior Court, a 12-person jury ruled in favor of Shulman. On October 28, 2024, the jury found Kaplan and Vertical liable on all claims. It awarded Shulman over $20 million in damages, along with pre-judgment interest. Additionally, the jury granted $15 million in punitive damages due to Kaplan’s and Vertical’s actions.

In total, the jury’s verdict amounted to over $43 million for Shulman.

Court Documents:

Available upon request

Press Release:

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