Settlement Agreement — Sidesolve v. Docklight Brands (W.D. Wash.)

Summary

Exhibit A in United States ex rel. Sidesolve LLC v. Docklight Brands, Inc., No. 2:22-cv-01371-JNW, in the U.S. District Court for the Western District of Washington, filed February 22, 2024 as Document 20-2: a settlement agreement among the United States, Docklight and the relator. The United States contends that Docklight certified eligibility for a PPP loan from Cross River Bank on April 12, 2020, of which $494,719.00 was forgiven, even though it derived revenues from third parties engaged in cannabis-related activities; Docklight does not admit liability. Docklight agrees to pay $989,438.00, of which $494,719.00 is restitution, and $22,000.00 in relator expenses and fees, and, conditioned upon receiving the Settlement Amount, the United States shall pay the relator $148,416.70. It provides for a consent judgment and releases of False Claims Act claims for the covered conduct.

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“Settlement Agreement — Sidesolve v. Docklight Brands (W.D. Wash.).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-no-2-22-cv-01371-dkt-20-2-w-d-wash-6f1f969a06/, SHA-256 8225d675095dadd1aa0de13610d89ce60f1fa450a10f003d870a8c6ee0cee03e.

Full text

Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 1 of 13

Exhibit A
Exhibit A
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 2 of 13

SETTLEMENT AGREEMENT

This Settlement Agreement (Agreement) is entered into among the United States

of America, acting through the United States Department of Justice and on behalf of the

United States Small Business Administration (“SBA”) (collectively the "United States"),

Docklight Brands, Inc. (Docklight), and Sidesolve LLC (Sidesolve or Relator) (hereafter

collectively referred to as "the Parties"), through their authorized representatives.

RECITALS
A. Docklight is a Delaware corporation headquartered in Seattle that

developed and sold hemp derived products, and licensed certain marks for use in

connection with state-licensed cannabis products.

B. On September 27, 2022, Sidesolve filed a qui tam action in the United

States District Court for the Western District of Washington captioned United States, ex

rel. Sidesolve LLC v. Docklight Brands, Inc., No. 2:22-cv-01371-JNW, pursuant to the

qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b) (the “Civil Action”).

The United States will intervene in the Civil Action for the purposes of settlement.

C. . The SBA is an independent agency of the United States government that

provides aid, counsel, and assistance to small businesses and entrepreneurs. The

Coronavirus Aid, Relief, and Economy Security Act (CARES Act), Section 1102, vested

the SBA with the responsibility of managing the PPP, under SBA’s 7(a) Loan Program.

The PPP is intended to provide economic relief to small businesses nationwide adversely

impacted by COVID-19.
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 3 of 13

D. To be eligible for a first draw PPP loan, a business or entity must certify

that it “is not engaged in any activity that is illegal under federal, state or local law.”

SBA Form 2483 (4/20).

E, The United States contends that it has certain civil claims against

Docklight arising from its application and receipt of Paycheck Protection Program Loan

#3745097106, on April 12, 2020, from Cross River Bank, of which $494,719.00 was

forgiven. Docklight certified that it was eligible for this PPP loan even though it derived

revenues from third parties engaged in cannabis-related activities. Businesses that

engage in any illegal activity under federal, state or local law are ineligible for SBA

financial assistance. 13 C.F.R. § 120.110(h). That conduct is referred to below as the

Covered Conduct.

F, Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of the

proceeds of this Settlement Agreement and to Relator’s reasonable expenses, attorneys’

fees and costs.

G. Docklight does not admit that it engages or engaged in any illegal

activities under federal, state, or local law, and does not admit liability or wrongdoing in

this matter.

To avoid the delay, uncertainty, inconvenience, and expense of protracted

litigation of the above claims, and in consideration of the mutual promises and

obligations of this Settlement Agreement, the Parties agree and covenant as follows:

TERMS AND CONDITIONS

1. Docklight shall pay to the United States $989,438.00 (Settlement

Amount), of which $494,719.00 is restitution, by electronic funds transfer pursuant to
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 4 of 13

written instructions to be provided by the United States Attorney’s Office for the Western

District of Washington. Docklight’s payment shall be due in full immediately on the

Effective Date of this Agreement.

2. Conditioned upon the United States receiving the Settlement Amount and

as soon as feasible after receipt, the United States shall pay $148,416.70 to Relator by

electronic funds transfer (Relator’s Share) as soon as feasible after receipt of the

payment.

3. Within thirty (30) days of the Effective Date of this Agreement, Docklight

shall pay to Relator $22,000.00 for expenses and attorneys’ fees and costs pursuant to 31

U.S.C. § 3730(d). Immediately upon execution of this Agreement, Relator shall provide

wire instructions to Docklight in order to effectuate this payment.

4. . Subject to the exceptions in Paragraph 6 (concerning reserved claims)

below, and upon the United States’ receipt of the Settlement Amount, the United States

releases Docklight from any civil or administrative monetary claim the United States has

for the Covered Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733; the

Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; or the common law

theories of breach of contract, payment by mistake, unjust enrichment, and fraud,

5. Subject to the exceptions in Paragraph 6 below, and upon the United

States’ receipt of the Settlement Amount, Relator, for their self and for their heirs,

successors, attorneys, agents, and assigns, releases Docklight from any civil monetary

claim the Relator has on behalf of the United States for the Covered Conduct under the

False Claims Act, 31 U.S.C. §§ 3729-3733.
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 5 of 13

6. Notwithstanding the releases given in Paragraph 4 of this Agreement, or

any other term of this Agreement, the following claims and rights of the United States are

specifically reserved and are not released:

a. Any liability arising under Title 26, U.S. Code (Internal Revenue

Code);

b. Any criminal liability;

c. Except as explicitly stated in the Agreement, any administrative

liability or enforcement right, or any administrative remedy,

including the suspension and debarment rights of any federal

agency;

d. Any liability to the United States (or its agencies) for any conduct

other than the Covered Conduct;

e. Any liability based upon obligations created by this Agreement;

and

f. Any liability of individuals.

7.. .. Relator and its heirs, successors, attorneys, agents, and assigns shall not .

object to this Agreement but agree and confirm that this Agreement is fair, adequate, and

reasonable under all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B).

Conditioned upon Relator’s receipt of the Relator’s Share, Relator and its heirs,

successors, attorneys, agents, and assigns fully and finally release, waive, and forever

discharge the United States, its agencies, officers, agents, employees, and servants, from

any claims arising from the filing of the Civil Action or under 31 U.S.C. § 3730 relating
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 6 of 13

to this Civil Action, and from any claims to a share of the proceeds of this Agreement

and/or the Civil Action.

8. Relator, for itself, and for its heirs, successors, attorneys, agents, and

assigns, releases Docklight, and its officers, agents, and employees, from any liability to

Relator arising from the filing of the Civil Action, or under 31 U.S.C. § 3730(d) for

expenses or attorneys’ fees and costs.

9. Docklight waives and shall not assert any defenses Docklight may have to

any criminal prosecution or administrative action relating to the Covered Conduct that

may be based in whole or in part on a contention that, under the Double Jeopardy Clause

in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the

Eighth Amendment of the Constitution, this Agreement bars a remedy sought in such

criminal prosecution or administrative action.

10. - Docklight fully and finally releases the United States, its agencies,

officers, agents, employees, and servants, from any claims (including attorneys’ fees,

costs, and expenses of every kind and however denominated) that Docklight has asserted,

could have asserted, or may assert in the future against the United States, its agencies,

officers, agents, employees, and servants, related to the Covered Conduct or the United

States’ investigation or prosecution thereof.

11. Docklight fully and finally releases Relator and its officers, directors,

principals, successors, attorneys, agents, and assigns from any claims (including |

attorneys’ fees, costs, and expenses of every kind and however denominated) that

Docklight has asserted, could have asserted, or may assert in the future against Relator,

related to the Civil Action and Relator’s investigation and prosecution thereof.
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 7 of 13

12. a. Unallowable Costs Defined: All costs (as defined in the Federal

Acquisition Regulation, 48 C.F.R. § 31.205-47) incurred by or on behalf of Docklight,

and its present or former officers, directors, employees, shareholders, and agents in

connection with:

(1) _ the matters covered by this Agreement;

(2) the United States’ audit and civil investigation of the

matters covered by this Agreement;

(3) Docklight’s investigation, defense, and corrective actions

undertaken in response to the United States’ audit and civil

investigation in connection with the matters covered by this

Agreement (including attorneys’ fees);

(4) the negotiation and performance of this Agreement;

(5) the payment Docklight makes to the United States pursuant

to this Agreement and any payments that Docklight may

make to Relator, including costs and attorneys fees,

are unallowable costs for government contracting purposes (hereinafter referred to as

Unallowable Costs).

b. Future Treatment of Unallowable Costs: Unallowable Costs will

be separately determined and accounted for by Docklight, and Docklight shall not charge

such Unallowable Costs directly or indirectly to any contract with the United States.

C. Treatment of Unallowable Costs Previously Submitted for

Payment: Within 90 days of the Effective Date of this Agreement, Docklight shall

identify and repay by adjustment to future claims for payment or otherwise any
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 8 of 13

Unallowable Costs included in payments previously sought by Docklight or any of its

subsidiaries or affiliates from the United States. Docklight agrees that the United States,

at a minimum, shall be entitled to recoup from Docklight any overpayment plus

applicable interest and penalties as a result of the inclusion of such Unallowable Costs on

previously-submitted requests for payment. The United States, including the

Department of Justice and/or the affected agencies, reserves its rights to audit, examine,

or re-examine Docklight’s books and records and to disagree with any calculations

submitted by Docklight or any of its subsidiaries or affiliates regarding any Unallowable

Costs included in payments previously sought by Docklight, or the effect of any such

Unallowable Costs on the amount of such payments.

14. Docklight agrees to cooperate fully and truthfully with the United

States’ investigation of individuals and entities not released in this Agreement. Upon

reasonable notice, Docklight shall encourage, and agrees not to impair, the cooperation of

its directors, officers, and employees, and shall use its best efforts to make available, and

encourage, the cooperation of former directors, officers, and employees for interviews

and testimony, consistent with the rights and privileges of such individuals. Docklight

further agrees to furnish to the United States, upon request, complete and unredacted

copies of all non-privileged documents, reports, memoranda of interviews, and records in

its possession, custody, or control concerning any investigation of the Covered Conduct

that it has undertaken, or that has been performed by another on its behalf.

15. In exchange for valuable consideration provided in this

Agreement, Docklight and Relator acknowledge the following:
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 9 of 13

a. In evaluating whether to execute this Agreement, the Parties intend that

the mutual promises, covenants, and obligations set forth herein constitute a

contemporaneous exchange for new value given to Docklight, within the meaning of 11

U.S.C. § 547(c)(1), and the Parties conclude that these mutual promises, covenants, and

obligations do, in fact, constitute such a contemporaneous exchange.

b. The mutual promises, covenants, and obligations set forth herein are

intended by the Parties to, and do in fact, constitute a reasonably equivalent exchange of

value.

c. The Parties do not intend to hinder, delay, or defraud any entity to which

Docklight was or became indebted to on or after the date of any transfer contemplated in

this Agreement, within the meaning of 11 U.S.C. § 548(a)(1).

d. If any of Docklight’s payments or obligations under this Agreement are

avoided for any reason (including but not limited to, through the exercise of a trustee’s

avoidance powers under the Bankruptcy Code) or if, before the Settlement Amount is

paid in full, Docklight or a third party commences a case, proceeding, or other action

-under any law relating to bankruptcy, insolvency, reorganization, or relief of debtors

seeking any order for relief of Docklight’s debts, or to adjudicate Docklight-as bankrupt:

or insolvent; or seeking appointment of a receiver, trustee, custodian, or other similar

official for Docklight or for all or any substantial part of Docklight’s assets:

(i) the United States may rescind the releases in this Agreement and bring

any civil and/or administrative claim, action, or proceeding against Docklight for the

claims that would otherwise be covered by the releases provided in Paragraph 4 above;
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 10 of 13

(ii) the United States has an undisputed, noncontingent, and liquidated

allowed claim against Docklight in the amount of $1,484,157, less any payments

received pursuant to Paragraph | of this Agreement, provided, however, that such |

payments are not otherwise avoided and recovered from the United States by a receiver,

trustee, creditor, custodian, or similar official;

(iii) if any payments are avoided and recovered by a receiver, trustee,

creditor, custodian, or similar official, the United States shall not be responsible for the

return of any amounts already paid by the United States to the Relator; and

(iv) if, notwithstanding subparagraph (iii), any amounts already paid by the

United States to the Relator pursuant to Paragraph 2 are recovered from the United States

in an action or proceeding filed by a receiver, trustee, creditor, custodian, or similar

official in or in connection with a bankruptcy case that is filed within two years of the

Effective Date of this Agreement or of any payment made under Paragraph 1 of this

Agreement, Relator shall, within thirty days of written notice from the United States to

the undersigned Relator’s counsel, return to the United States all amounts recovered from

the United States..

e. Docklight agrees that any civil and/or administrative claim, action, or

proceeding brought by the United States under Paragraph 17.¢ is not subject to an

"automatic stay" pursuant to 11 U.S.C. § 362(a) because it would be an exercise of the

United States’ police and regulatory power. Docklight shall not argue or otherwise

contend that the United States' claim, action, or proceeding is subject to an automatic stay

and, to the extent necessary, consents to relief from the automatic stay for cause under 11

U.S.C. § 362(d)(1). Docklight waives and shall not plead, argue, or otherwise raise any
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 11 of 13

defenses under the theories of statute of limitations, laches, estoppel, or similar theories,

to any such civil or administrative claim, action, or proceeding brought by the United

States within 120 days of written notification to Docklight that the releases have been

rescinded pursuant to this paragraph, except to the extent such defenses were available on

September 27, 2022.

16. This Agreement is intended to be for the benefit of the Parties only.

17. Docklight agrees to entry of a Consent Judgment in the Civil Action, in

the form attached hereto as Exhibit A (“Consent Judgment”). The United States may

move ex parte for entry of the Consent Judgment as soon as this Agreement is effective.

18. Docklight waives the 30-day stay of execution on a judgment provided by

Federal Rule of Civil Procedure 62(a) and the 30-day demand for payment requirement

under 28 U.S.C. 3205(b)(1)(B). The United States may immediately enforce payment of

the full amount due under the Agreement and Consent Judgment via writof garnishment

or any other legal process.

19. Each Party shall bear its own legal and other costs incurred in connection

with this matter, including the preparation and performance of this Agreement, except as

provided in Paragraph 3 above.

20. Each Party and signatory to this Agreement represents that it freely and

voluntarily enters into this Agreement without any degree of duress or compulsion.

21. This Agreement is governed by the laws of the United States. The

exclusive jurisdiction and venue for any dispute relating to this Agreement is the United

States District Court for the Western District of Washington. For purposes of construing

this Agreement, this Agreement shall be deemed to have been drafted by all Parties to

10
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 12 of 13

this Agreement and shall not, therefore, be construed against any Party for that reason in

any subsequent dispute.

22. This Agreement constitutes the complete agreement between the Parties.

This Agreement may not be amended except by written consent of the Parties.

23. The undersigned counsel represent and warrant that they are fully

authorized to execute this Agreement on behalf of the persons and entities indicated

below.

24. This Agreement may be executed in counterparts, each of which

constitutes an original and all of which constitute one and the same Agreement.

25. This Agreement is binding on Docklight’s successors, transferees, heirs,

and assigns.

26. This Agreement is binding on Relator’s successors, transferees, heirs, and

assigns.

27. All parties consent to the United States’ disclosure of this Agreement, and

information about this Agreement, to the public.

28... This Agreement is effective on the date of signature of the last signatory to

the Agreement (Effective Date of this Agreement). Facsimiles of signatures shall

constitute acceptable, binding signatures for purposes of this Agreement.

11
Case 2:22-cv-01371-JNW Document 20-2 Filed 02/22/24 Page 13 of 13

eee

Digitally signed by JAMES
JAMES
Date: 2023.12.11 09:55:05
WALDROP -08'00"
DATED: BY:
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Matt Waldrop
Assistant United Statea Attormey a

Westem District of Washington

Docklight Brands, Inc,

DATED; hf [og23py: WLC
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Director Va

DATED: 12/07/2023 BY:

Jeffrey B. Coopersmith
Cor Cronin LLP
Counsel for Docklight Brands, Inc.

Sidesolve - RELATOR

DATED: 12/8/23 By: CYR.
Katy Levinson
CEO, Sidesolve LLC

DATED: j2/sha BY: CL
YJason Marcus :
Bracker & Marcus LLC
Counsel for Sidesolve LLC

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