A motion filed on May 5 sought the consolidation of two class-action investor suits against PharmaCielo, which “purports to cultivate, process, produce, and supply medicinal-grade cannabis oil extracts and related products in Colombia and internationally.” The case is being held in the Central District of California, before Judge Phillip S. Gutierrez.
Under the Private Securities Litigation Reform Act of 1995, “the Court is to appoint as Lead Plaintiff the movant who possesses the largest financial interest in the outcome of the action and who satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure,” which governs class actions.
The movants, referred to as PharmaCielo Investor Group, noted that consolidation is appropriate since the cases concern common questions of law and fact. The cases both alleged that PharmaCielo made numerous false or misleading statements or omissions, including failure to disclose related party transactions and loans involving distributor General Extract, and exaggeration of PharmaCielo’s business operations in South America.
While PharmaCielo’s stock traded at $2.42 in January, by March it had fallen below one dollar. The prices fell on news of PharmaCielo’s failure to submit a qualifying bid for a contract to supply medical cannabis oil in Peru, followed by a report revealing misleading transactions and the poor state of some of PharmaCielo’s facilities.
The underlying complaint recalled a series of positive press releases published by PharmaCielo, which the plaintiffs alleged were false and misleading. The purported class includes “all persons other than defendants who acquired PharmaCielo securities publicly traded on the OTCQX during the Class Period, and who were damaged thereby.” They requested class certification, damages for all class members, and a jury trial.
Daniel Gabbard was initially represented by The Rosen Law Firm, while Howard Anderson was represented by Pomerantz. Pomterantz seeks to represent the combined PharmaCielo Investment Group.