Posted: Mar 01, 2019
Alcohol delivery service Drizly Inc. is looking to enter a new market, delivering medical and recreational cannabis, and hit its former CEO with a suit unsealed Wednesday in Boston's Business Litigation Session, claiming he is violating an agreement by seeking to start his own marijuana delivery business.
Drizly sought to have the suit, filed last Friday in Boston's Suffolk Superior Court, impounded since it has not publicly announced its new venture. But details unsealed this week show the company claims co-founder and former CEO Nick Rellas, who left the company in August, is violating a noncompetition agreement as well as a nondisclosure pact by trying to start his own online cannabis delivery company. Drizly is planning to enter the cannabis e-commerce market this year, the suit says.
"Beginning in late 2017 and continuing through his tenure as CEO, Drizly decided to enter an adjacent market for another highly controlled product: legalized medical and recreational cannabis," the complaint states. "Drizly has approached potential commercial retail partners, explored the best path to market, consulted with state regulatory officials, and crafted a market entry plan."
Rellas took part in all of this planning while he was in charge of Drizly, the suit alleges.
"The non-competition agreement prohibited Rellas, for a period of one year after leaving Drizly, from directly or indirectly competing with any business Drizly had entered - or planned to enter - while Rellas was at the company," the complaint reads.
The nondisclosure agreement forever bars Rellas from using any Drizly proprietary information without the company's consent, the company claims. According to the complaint, Rellas has founded and attempted to raise money for his own cannabis e-commerce venture and even asked Drizly to invest, "an offer which the company refused."
"Rellas would not have been able to create a competing company without the knowledge and experience he gained at Drizly," the suit alleges. "For this very reason, Drizly asked Rellas to sign agreements at the outset of his employment, as the company's proprietary information and goodwill were and continue to be valid business interests. Rellas' flagrant and repeated breaches of his contracts are the basis of Drizly's instant lawsuit."
The name of Rellas' new venture is not disclosed in the complaint, significant portions of which are redacted, but Rellas - who could not be reached for comment Thursday - did recently start a new LLC providing "consulting services," according to a Jan. 29 filing with the Secretary of the Commonwealth. The suit seeks a preliminary injunction preventing Rellas from competing against his old company, as well as unspecified monetary damages. The two sides are already in settlement discussions, but are due to appear in a Boston state court March 4, according to the case docket.
Rellas signed the nondisclosure and noncompetition agreements in 2012, according to the lawsuit, just after the company was founded. He stepped away from Drizly last summer and his cousin, Corey Rellas, took over as CEO.
At the time of Nick Rellas' departure, Drizly, which touts itself as "the world's largest alcohol marketplace and the best way to shop beer, wine and spirits," had agreements with 1,000 liquor stores nationwide and had raised more than $30 million to date, according to media reports announcing the change.
Counsel for Drizly did not immediately respond to comment requests Thursday.
Drizly is represented by William J. Trach and Timothy McLaughlin of Latham and Watkins LLP.
Counsel information for Rellas was not immediately available.
The case is Drizly Inc. v. Nicholas Rellas, case number 19-0602, in Suffolk County Superior Court.
February 28, 2019
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