The cofounder of a compostable packaging company is suing Zume, the troubled, SoftBank-backed food startup, alleging that Zume misrepresented its financial health when it acquired his company and that he never received millions in payments related to the deal.
According to the lawsuit, filed by Pivot Packaging cofounder John Lilley, Zume overstated its financial resources, and was unable to deliver the promised assistance needed to meet the objectives for the business and for Lilley's performance-based payouts. Ultimately, the team was absorbed into Zume on February 25, 2019. Two days later, Garden reprimanded Lilley in an email exchange for not implementing changes fast enough.
Once Lilley became privy to the company's financials, it became clear that the business was in dire straits, the complaint alleges. The Zume's board of directors had not cleared Garden to spend more than $10 million to acquire Pivot Packaging, according to the lawsuit. Lilley alleges that Garden knew of the capital constraints ahead of time and misled the Pivot team of the capital commitments during negotiations.
Garden is now exploring whether he can ramp up production of face masks using the machinery in the Camarillo facility, sources said. The pivot comes amid a nationwide shortage of personal protective equipment for healthcare workers as the coronavirus pandemic rages on.
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