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Ken Teegardin

High Supply, a Denver-based cannabis packaging company, has filed for Chapter 11 bankruptcy as the result of “severe financial stress” caused by “theft and corporate espionage by former employees,” according to its CEO Paul Lufkin, as reported by the Business Den.

Lufkin is currently embroiled in a lawsuit against a former co-owner of the company and other employees, claiming the cohort tried to start another packaging firm in violation of a non-compete agreement.   

Through their lawyer, Tobin Kern, the former co-owners and employees contend that the bankruptcy is the result of the High Supply’s new owners’ “own poor customer service and decision-making since the sale was completed.”

In the bankruptcy filing, the company outlined debts of $245,000.

Lufkin, along with investors from Green Leaf Acquisitions purchased High Supply from founders Justin Walker and Aaron Israel last year for $400,000 including stock. Walker remained president of the company while continuing to run his printing business, Pressroom 2.0. As part of the sale, Walker signed the non-compete clause.

About a year later, Walker and Israel claimed that they had not been paid for their ownership stake in full, and in February 2016 Pressroom 2.0 sued High Supply alleging that the owners locked them out of the shared space used for the printing business operations.

Green Leaf countered, claiming that Walker and several employees conspired “to establish new competing operations” in Denver — in violation of the non-compete clause.

In that case, a Denver County District Court barred Walker from owning or working at any packaging firm that supplies cannabis companies. Walker was allowed to continue running Pressroom 2.0 under the condition that High Supply be its only cannabis packaging client. Additionally, the judge ordered Green Leaf to pay the former co-owners $150,000 in stock under the original sale agreement.

In a court filing, Kern argued that Green Leaf could not “stretch” Walker’s non-compete order to include other individuals and marijuana packaging business’ names in the suit. He says that Walker is complying with the terms of the agreement and the former employees are not subject to non-compete agreements.

This is at least the second time Lufkin has filed bankruptcy for a company. In 2012 Lufkin purchased e-payment company eFusion, which filed for bankruptcy a year later due to claims that the former owners plundered the company’s profits for themselves.  

This is also not the first time he has been locked in litigation with former associates. In 2005, he purchased a majority stake in eCashFlow Systems, a Denver-based e-checking business. Lufkin was subsequently sued by its founder, who claimed he was never paid his full equity shares by Lufkin. Investors also sued, claiming Lufkin had mismanaged company funds.            

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