Preview
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
Exhibit 5
Order denying preliminary injunction and Transcript of July 10, 2018
preliminary injunction hearing
Index No. 652343/2018 Motion Seq. No. 9
FILED:
FILED: NEW
NEW YORK
YORK COUNTY
COUNTY CLERK
CLERK 06/05/2020
08/02/2018 01:13
03:09 PM
PM|
INDEX
INDEX NO.
NO. 652343/2018
652343/2018
NYSCEF
NYSCEF DOC.
DOC. NO.
NO. 193
36 RECEIVED
RECEIVED NYSCEF:
NYSCEF: 06/05/2020
08/02/2018
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. CHARLES E. RAMÓS PART
_
Justice
Index Number : 652343/2018
CRESCO LABS NEW INDEX NO.
YORK, LLC,
vs·
MOTION DATE
FIORELLO PHARMACEUTICALS,
MOTION SEQ. NO.
SEQUENCE NUMBER : 002
PRELIMINARY INJUNCTION/TRO
The fuliuw:ñgpapers, numbered 1 to _ , were read on this motion to/for
Notice of Motien!Order to Show Cause - Affidavits - Exhibits |No(s).
Answering Affidavits - Exhibits No(s).
Replying Affidavits No(s).
Upon the foragoing papers, itis ordered that this motionis
Motion denied as reflected in
w the Court's transcript. Any party to this matter request
Order" may
that this Court "So the transcript a
by submitting copy
of the Court Stenographer's together with
record, an errata
sheet correcting all errors in the record (counsel's as well
as the Court's), to the Clerk of Part 53. If all parties
consent to the proposed corrections or agree that no
corrections are required, a stipulation to that effect shall
accompany said errata sheet or transcript. In the absence of
.. consent, the requesting shall notice
party the record for
>
settlement pursuant to CPLR Rule 5525 (c).
No proposed order will be accepted unless specifically
n y authorized at the oral argument. In the event the ruling
authorizes the entry of a judgment or other action by the
clerks, the submission of a proposed order or judgment shall
be made to the Judgment Clerk or other appropriate clerk.
O O
:E u.
Dated: J.S.C.
CH .
1. CHECK ONE: .....D CASE DISPOSED NON-FINAL DISPOSITION
2. CHECK AS APPROPRIATE: MOTION IS: 0 GRANTED ÓED GRANTED IN PART ¤ OTHER
3. CHECK IF APPROPRIATE: SETTLE ORDER ¤ SUBMIT ORDER
DO NOT POST O FIDUCIARY APPOINTMENT ¤ REFERENCE
1 of 1
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
1
2 SUPREME COURT OF THE STATE OF NEW YORK
3 COUNTY OF NEW YORK- CIVIL BRANCH - PART: 53
--------------------------------------X
4 CRESCO LABS NEW YORK, LLC,
5 Plaintiff,
INDEX No.
6 - against - 652343/18
7 FIORELLO PHARMACEUTICALS , INC. ,
8 Defendant.
--------------------------------------X CONFERENCE
9
60 Centre Street
10 New York, New York
July 10, 2018
11 B E F O R E :
12 HONORABLE CHARLES E. RAMOS, Justice.
13 A P P E A R A N C E S:
14 EDELSON PC
Attorneys for the Plaintiff
15 350 North LaSalle Street
14th Floor
16 Chicago, Illinois 60654
BY: RAFEY S. BALABANIAN, ESQ.
17 BENJAMIN H. RICHMAN, ESQ.
18 IZOWER FELDMAN, LLP
Attorneys for the Defendant
19 85 Broad Street
Floor 18
20 New York, New York 10004
BY: RONALD D. LEFTON, ESQ.
21
22 MICHELLE MAHAFFEY, CSR, RPR
Official Court Reporter
23
24
25
26
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
2
1 Proceedings
2 THE COURT: Good morning.
3 MR. BALABANIAN: Good morning, Your Honor.
4 MR. LEFTON: Good morning, Judge Ramos.
5 THE COURT: How are we doing?
6 MR. LEFTON: Great. How are you?
7 THE COURT: Good. Have we settled this thing
8 yet? No? Then we are not doing so good.
9 All right. This is a situation where, as I
10 recall, defendants had an agreement to sell their stock or
11 made an attempt to sell their stock, but the company had
12 agreed not to sell itself.
13 MR. LEFTON: Correct. The only party to the
14 letter of intent is the corporate entity, not the seller.
15 It's not an asset purchase. It was intended to be a
16 proposed agreement to submit to shareholders and they would
17 be the sellers. are not -- none of the none
They sellers,
18 of the shareholders are party to the letter of intent. The
19 letter of intent also expired on the 30th business day,
20 which was March 29.
21 THE COURT: Okay. Plaintiff, you're the one who
22 wants an injunction. There is the lectern.
23 MR. BALABANIAN: Yes, Your Honor.
24 THE COURT: Give me the whole motion.
25 MR. BALABANIAN: Your Honor, I think the
26 opposition papers --
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
3
1 Proceedings
2 THE COURT: This involves a sale of -- this
3 involves a license to sell marijuana in New York State.
4 It's licensed by the Department of Health, I suppose?
5 MR. BALABANIAN: That's correct, Your Honor.
6 THE COURT: And your folks want to buy this
7 company or want to buy the license.
8 MR. BALABANIAN: They want to buy the stock of
9 the company. It was a stock purchase agreement that was
10 contemplated by the LOI, and the motion for preliminary
11 injunction seeks to enjoin the defendants from entering
12 into a transaction would result in the sale of their
13 shareholder stock.
14 THE COURT: Well, defendants are the corporation
15 and the individual shareholders; right?
16 MR . BALABANIAN: Corre c t .
17 THE COURT: At least three defendants.
18 MR. LEFTON: No, Your Honor.
19 MR. BALABANIAN: It may be the individual
20 officers.
21 MR. LEFTON: No. The defendants are only the
22 corporate defendant. They have also added two executive
23 officers, one of whom signed the agreement in his capacity
24 as co-chief executive officer. There are no
25 representations in the letter of instinct, no lockup
26 agreement, no restrictions. He signed only as a corporate
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
4
1 Proceedings
2 officer --
3 THE COURT: Let's get technical.
4 MR. LEFTON: -- not as a shareholder.
5 THE COURT: Let's look at what's being sought
6 here in the order to show cause. They are seeking to
7 enjoin defendants from negotiating sale of the company from
8 its business operations, including its license.
9 MR. LEFTON: So the John Does, Your Honor, are
10 not the shareholders. The John Does are the other
11 potential buyers.
12 THE COURT: So the only question before me is
13 whether or not we have a contract that stops -- that would
14 prohibit the defendants from selling the corporation;
15 right; the corporation's business operations, including its
16 license.
17 Okay. And the basis of this application is a
18 contract, letter of intent, whatever?
19 MR. BALABANIAN: Yes, Your Honor.
20 THE COURT: And that is annexed as exhibit --
21 MR. BALABANIAN: Plaintiffs annexed it as
22 Exhibit 1 to their complaint. That, however, is an
23 meaningless --
unsigned,
24 THE COURT: Where is the complaint?
25 MR. BALABANIAN: -- meaningless draft.
26 THE COURT: Where is the complaint? All I have
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
5
1 Proceedings
2 is the order to show cause with a short affidavit and no
3 exhibit.
4 MR. BALABANIAN: We have a of the
copy complaint,
5 Your Honor. I am not sure why the Court doesn't have it.
6 THE COURT: It would be nice if the Court has a
7 copy of the complaint. I don't have it.
8 MR. BALABANIAN: Yes, Your Honor. I apologize.
9 May I approach, Your Honor?
10 THE COURT: Please.
11 (Handed.)
12 THE COURT: I now have a complaint and it has an
13 Exhibit A, although now it's Exhibit 1.
14 MR. LEFTON: Your Honor, may I inquire? Do you
15 have our opposition papers?
16 THE COURT: I'm sorry?
17 MR. LEFTON: Do you have our opposition papers?
18 THE COURT: I do. This is equity purchase
19 agreement letter of intent, okay, and it's signed by
20 nobody.
21 MR. LEFTON: Correct.
22 THE COURT: Okay. I can enjoin nobody. That's
23 easy.
24 MR. BALABANIAN: I'm sorry?
25 THE COURT: I can enjoin nobody. That's easy,
26 but you want me to enjoin somebody. Nobody signed this.
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
6
1 Proceedings
2 MR. BALABANIAN: Well, the agreement that we
3 appended to our complaint was not the signed version. We
4 do have a signed version that was appended in defendant's
5 papers and they are not materially different, Your Honor.
6 THE COURT: Where do I find defendant's papers?
7 MR. BALABANIAN: I don't think the defendants are
8 disputing that they entered into a letter of intent with my
9 client; is that correct?
10 THE COURT: Let's see. Eric Sirota --
11 MR. BALABANIAN: Yes.
12 THE COURT: -- signs on behalf of Fiorello
13 Pharmaceuticals. Okay. So you've got something signed by
14 Eric Sirota and you don't want them to sell the company or
15 the license.
16 MR. BALABANIAN: We don't want the company to
17 enter into a transaction that results in the sale of their
18 shareholder stock to a third party; correct.
19 THE COURT: Assuming you have a contract that is
20 otherwise enforceable, what evidence do you have that
21 Fiorello Pharmaceuticals is being sold to someone in
22 violation of this letter of intent?
23 MR. BALABANIAN: We allege two breaches, Your
24 Honor, two ways they breached the LOI: the obligation to
25 negotiate in good faith and obligation to negotiate
26 exclusively with our client.
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
7
1 Proceedings
2 And we think that the opposition papers actually
3 make quite clear that as far as exclusivity was concerned,
4 and the two obligations are interrelated, but as far as
5 exclusivity was concerned, there was likely a breach during
6 the pendency of the LOI.
7 Now, they claim in their affidavit by Eric Sirota
8 that somehow received "unsolicited offers" the
they during
9 time that the LOI was pending, and they don't dispute that
10 it was pending at that time. And it begs the question of
11 how those offers supposedly came about and how they could
12 be unsolicited.
13 There is no information that they provide along
14 those lines whatsoever, but the limited information that
15 they do provide shows that exclusivity was not on it.
16 THE COURT: Hold on. You have to come in here
17 and show me you have a likelihood of success on the merits
18 in order to get an injunction.
19 MR. BALABANIAN: Yes, Your Honor.
20 THE COURT: I believe, in discussions we have had
21 before off the record, that this corporation owns a license
22 that cannot be transferred without the consent of the State
23 of New York.
24 Number two, the defendants or the counsel
25 , the defendants never contends that -- I think
representing
26 both parties contended that what was really intended was
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
8
1 Proceedings
2 the sale of the stock. Is that true?
3 MR. LEFTON: Yes, Your Honor.
4 THE COURT: Is that true?
5 MR. BALABANIAN: That is true, Your Honor.
6 THE COURT: All right. Do you have an agreement
7 with the shareholders in which they agree to engage in
8 whatever the contract provides for them towards the sale of
9 their stock to your client?
10 MR. BALABANIAN: No, but may I add to that why I
11 don't think that's dispositive of the issue?
12 THE COURT: All right. It better be good,
13 because I think it is dispositive.
14 MR. BALABANIAN: I understand, and I appreciate
15 the opportunity. The reason it is not dispositive of the
16 issue, Your Honor, is that irrespective of whether the LOI
17 bound the shareholders, it bound the company to engage in
18 negotiations exclusively with Cresco and in good faith for
19 the ultimate goal of reaching a definitive agreement that
then presented both parties' shareholders
20 would be to and
21 board of directors for approval.
22 That didn't ever happen. The good faith
23 negotiation exclusively between our parties never happened
24 and in their opposition papers --
they,
25 THE COURT: Why didn't they happen?
BALABANIAN: didn ' t happen?
2 6 MR. Why they Because
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
9
1 Proceedings
2 we allege they breached exclusivity. And it couldn't
3 happen at that time, because at that point they got a
4 better, supposedly unsolicited offer, which we believe was
5 unsolicited, and it completely poisoned the well for
6 purposes of our ongoing negotiations.
7 At that point in time, there was no way to get
8 any good name/good faith negotiation.
9 THE COURT: Again, we are faced with a problem,
10 and that is you're alleging, on no information but on
11 belief, that this was a solicited offer. At this point we
12 have no evidence there was a solicitation by Fiorello
13 dangling this alleged offer.
14 MR. BALABANIAN: We have circumstantial evidence
15 if you look at the timeline.
16 THE COURT: What's the obligation under the
17 contract? What does Fiorello have to do, because this is a
18 contract, supposedly, with Fiorello.
19 MR. BALABANIAN: Yes, Your Honor. Fiorello is
20 required to, among other things, engage with Cresco in
21 terms of drafting the definitive agreements. They were to
22 provide Cresco access for purposes of due diligence, access
23 to their materials and documents for purposes of due
24 diligence. were --
They
25 THE COURT: Well, have your parties prepared the
26 draft of the definitive agreements?
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
10
1 Proceedings
2 MR. BALABANIAN: Yes, Your Honor.
3 THE COURT: And you have submitted them to the
4 other side.
5 MR. BALABANIAN: Yes, Your Honor.
6 THE COURT: And they haven't agreed to it.
7 MR. BALABANIAN: They rejected them.
8 THE COURT: Who says they can't reject them? Do
9 I have a copy of this?
10 MR. BALABANIAN: But that's my point.
11 THE COURT: No, no. Do I have a copy of your
12 version of the definitive agreement in those papers?
13 MR. BALABANIAN: You do not, Your Honor. You do
14 not. That took place both during the pendency of the LOI.
15 So we did provide them with drafts of the definitive
16 agreements.
17 THE COURT: Then tell me, what do the definitive
18 agreements provide for, do they provide for the sale of the
19 stock?
20 MR. BALABANIAN: Yes.
21 THE COURT: Oh. So it's not the sale of the
22 license, it's the sale of the stock.
23 MR. BALABANIAN: Correct. You're tracking, Your
24 r Honor. You have it correct in terms of what the
25 transaction contemplated it to do. I am not particularly
26 content about how the transaction contemplated the sale of
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
11
1 Proceedings
2 the license, so I acknowledge that perhaps we were a little
3 loose in some of our terminology.
4 THE COURT: Is there something in the letter of
5 intent that speaks to the sale of the stock from the
6 present shareholders to your client?
7 MR. BALABANIAN: It does.
8 THE COURT: Where?
9 MR. BALABANIAN: It speaks to their ultimate
10 to sign off --
ability
11 THE COURT: I have the agreement in front of me.
12 Under which proposed terms?
13 MR. LEFTON: Your Honor, if you look at the
14 section on there is an amount -- I won't
consideration, say
15 the amount, because it was redacted in consideration for
16 the acquisition for 100 percent of the issued and
17 outstanding shares of Fiorello, and it goes on to say that
18 it was payable for two years. The agreement --
19 THE COURT: How can the company agree to sell the
20 stock when the company doesn't own its own stock?
21 MR. LEFTON: Correct, Your Honor.
22 MR. BALABANIAN: Your Honor, putting that aside
23 for a moment --
24 THE COURT: Putting that aside? How can we put
25 it aside? You got a contract that makes no legal sense.
26 MR. BALABANIAN: Well, the contract says they
MM
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020
12
1 Proceedings
2 have to do certain things and if they do those certain
3 things, then maybe they get a definitive deal
Preview
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 Exhibit 5 Order denying preliminary injunction and Transcript of July 10, 2018 preliminary injunction hearing Index No. 652343/2018 Motion Seq. No. 9 FILED: FILED: NEW NEW YORK YORK COUNTY COUNTY CLERK CLERK 06/05/2020 08/02/2018 01:13 03:09 PM PM| INDEX INDEX NO. NO. 652343/2018 652343/2018 NYSCEF NYSCEF DOC. DOC. NO. NO. 193 36 RECEIVED RECEIVED NYSCEF: NYSCEF: 06/05/2020 08/02/2018 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. CHARLES E. RAMÓS PART _ Justice Index Number : 652343/2018 CRESCO LABS NEW INDEX NO. YORK, LLC, vs· MOTION DATE FIORELLO PHARMACEUTICALS, MOTION SEQ. NO. SEQUENCE NUMBER : 002 PRELIMINARY INJUNCTION/TRO The fuliuw:ñgpapers, numbered 1 to _ , were read on this motion to/for Notice of Motien!Order to Show Cause - Affidavits - Exhibits |No(s). Answering Affidavits - Exhibits No(s). Replying Affidavits No(s). Upon the foragoing papers, itis ordered that this motionis Motion denied as reflected in w the Court's transcript. Any party to this matter request Order" may that this Court "So the transcript a by submitting copy of the Court Stenographer's together with record, an errata sheet correcting all errors in the record (counsel's as well as the Court's), to the Clerk of Part 53. If all parties consent to the proposed corrections or agree that no corrections are required, a stipulation to that effect shall accompany said errata sheet or transcript. In the absence of .. consent, the requesting shall notice party the record for > settlement pursuant to CPLR Rule 5525 (c). No proposed order will be accepted unless specifically n y authorized at the oral argument. In the event the ruling authorizes the entry of a judgment or other action by the clerks, the submission of a proposed order or judgment shall be made to the Judgment Clerk or other appropriate clerk. O O :E u. Dated: J.S.C. CH . 1. CHECK ONE: .....D CASE DISPOSED NON-FINAL DISPOSITION 2. CHECK AS APPROPRIATE: MOTION IS: 0 GRANTED ÓED GRANTED IN PART ¤ OTHER 3. CHECK IF APPROPRIATE: SETTLE ORDER ¤ SUBMIT ORDER DO NOT POST O FIDUCIARY APPOINTMENT ¤ REFERENCE 1 of 1 FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 1 2 SUPREME COURT OF THE STATE OF NEW YORK 3 COUNTY OF NEW YORK- CIVIL BRANCH - PART: 53 --------------------------------------X 4 CRESCO LABS NEW YORK, LLC, 5 Plaintiff, INDEX No. 6 - against - 652343/18 7 FIORELLO PHARMACEUTICALS , INC. , 8 Defendant. --------------------------------------X CONFERENCE 9 60 Centre Street 10 New York, New York July 10, 2018 11 B E F O R E : 12 HONORABLE CHARLES E. RAMOS, Justice. 13 A P P E A R A N C E S: 14 EDELSON PC Attorneys for the Plaintiff 15 350 North LaSalle Street 14th Floor 16 Chicago, Illinois 60654 BY: RAFEY S. BALABANIAN, ESQ. 17 BENJAMIN H. RICHMAN, ESQ. 18 IZOWER FELDMAN, LLP Attorneys for the Defendant 19 85 Broad Street Floor 18 20 New York, New York 10004 BY: RONALD D. LEFTON, ESQ. 21 22 MICHELLE MAHAFFEY, CSR, RPR Official Court Reporter 23 24 25 26 FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 2 1 Proceedings 2 THE COURT: Good morning. 3 MR. BALABANIAN: Good morning, Your Honor. 4 MR. LEFTON: Good morning, Judge Ramos. 5 THE COURT: How are we doing? 6 MR. LEFTON: Great. How are you? 7 THE COURT: Good. Have we settled this thing 8 yet? No? Then we are not doing so good. 9 All right. This is a situation where, as I 10 recall, defendants had an agreement to sell their stock or 11 made an attempt to sell their stock, but the company had 12 agreed not to sell itself. 13 MR. LEFTON: Correct. The only party to the 14 letter of intent is the corporate entity, not the seller. 15 It's not an asset purchase. It was intended to be a 16 proposed agreement to submit to shareholders and they would 17 be the sellers. are not -- none of the none They sellers, 18 of the shareholders are party to the letter of intent. The 19 letter of intent also expired on the 30th business day, 20 which was March 29. 21 THE COURT: Okay. Plaintiff, you're the one who 22 wants an injunction. There is the lectern. 23 MR. BALABANIAN: Yes, Your Honor. 24 THE COURT: Give me the whole motion. 25 MR. BALABANIAN: Your Honor, I think the 26 opposition papers -- FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 3 1 Proceedings 2 THE COURT: This involves a sale of -- this 3 involves a license to sell marijuana in New York State. 4 It's licensed by the Department of Health, I suppose? 5 MR. BALABANIAN: That's correct, Your Honor. 6 THE COURT: And your folks want to buy this 7 company or want to buy the license. 8 MR. BALABANIAN: They want to buy the stock of 9 the company. It was a stock purchase agreement that was 10 contemplated by the LOI, and the motion for preliminary 11 injunction seeks to enjoin the defendants from entering 12 into a transaction would result in the sale of their 13 shareholder stock. 14 THE COURT: Well, defendants are the corporation 15 and the individual shareholders; right? 16 MR . BALABANIAN: Corre c t . 17 THE COURT: At least three defendants. 18 MR. LEFTON: No, Your Honor. 19 MR. BALABANIAN: It may be the individual 20 officers. 21 MR. LEFTON: No. The defendants are only the 22 corporate defendant. They have also added two executive 23 officers, one of whom signed the agreement in his capacity 24 as co-chief executive officer. There are no 25 representations in the letter of instinct, no lockup 26 agreement, no restrictions. He signed only as a corporate MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 4 1 Proceedings 2 officer -- 3 THE COURT: Let's get technical. 4 MR. LEFTON: -- not as a shareholder. 5 THE COURT: Let's look at what's being sought 6 here in the order to show cause. They are seeking to 7 enjoin defendants from negotiating sale of the company from 8 its business operations, including its license. 9 MR. LEFTON: So the John Does, Your Honor, are 10 not the shareholders. The John Does are the other 11 potential buyers. 12 THE COURT: So the only question before me is 13 whether or not we have a contract that stops -- that would 14 prohibit the defendants from selling the corporation; 15 right; the corporation's business operations, including its 16 license. 17 Okay. And the basis of this application is a 18 contract, letter of intent, whatever? 19 MR. BALABANIAN: Yes, Your Honor. 20 THE COURT: And that is annexed as exhibit -- 21 MR. BALABANIAN: Plaintiffs annexed it as 22 Exhibit 1 to their complaint. That, however, is an 23 meaningless -- unsigned, 24 THE COURT: Where is the complaint? 25 MR. BALABANIAN: -- meaningless draft. 26 THE COURT: Where is the complaint? All I have MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 5 1 Proceedings 2 is the order to show cause with a short affidavit and no 3 exhibit. 4 MR. BALABANIAN: We have a of the copy complaint, 5 Your Honor. I am not sure why the Court doesn't have it. 6 THE COURT: It would be nice if the Court has a 7 copy of the complaint. I don't have it. 8 MR. BALABANIAN: Yes, Your Honor. I apologize. 9 May I approach, Your Honor? 10 THE COURT: Please. 11 (Handed.) 12 THE COURT: I now have a complaint and it has an 13 Exhibit A, although now it's Exhibit 1. 14 MR. LEFTON: Your Honor, may I inquire? Do you 15 have our opposition papers? 16 THE COURT: I'm sorry? 17 MR. LEFTON: Do you have our opposition papers? 18 THE COURT: I do. This is equity purchase 19 agreement letter of intent, okay, and it's signed by 20 nobody. 21 MR. LEFTON: Correct. 22 THE COURT: Okay. I can enjoin nobody. That's 23 easy. 24 MR. BALABANIAN: I'm sorry? 25 THE COURT: I can enjoin nobody. That's easy, 26 but you want me to enjoin somebody. Nobody signed this. MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 6 1 Proceedings 2 MR. BALABANIAN: Well, the agreement that we 3 appended to our complaint was not the signed version. We 4 do have a signed version that was appended in defendant's 5 papers and they are not materially different, Your Honor. 6 THE COURT: Where do I find defendant's papers? 7 MR. BALABANIAN: I don't think the defendants are 8 disputing that they entered into a letter of intent with my 9 client; is that correct? 10 THE COURT: Let's see. Eric Sirota -- 11 MR. BALABANIAN: Yes. 12 THE COURT: -- signs on behalf of Fiorello 13 Pharmaceuticals. Okay. So you've got something signed by 14 Eric Sirota and you don't want them to sell the company or 15 the license. 16 MR. BALABANIAN: We don't want the company to 17 enter into a transaction that results in the sale of their 18 shareholder stock to a third party; correct. 19 THE COURT: Assuming you have a contract that is 20 otherwise enforceable, what evidence do you have that 21 Fiorello Pharmaceuticals is being sold to someone in 22 violation of this letter of intent? 23 MR. BALABANIAN: We allege two breaches, Your 24 Honor, two ways they breached the LOI: the obligation to 25 negotiate in good faith and obligation to negotiate 26 exclusively with our client. MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 7 1 Proceedings 2 And we think that the opposition papers actually 3 make quite clear that as far as exclusivity was concerned, 4 and the two obligations are interrelated, but as far as 5 exclusivity was concerned, there was likely a breach during 6 the pendency of the LOI. 7 Now, they claim in their affidavit by Eric Sirota 8 that somehow received "unsolicited offers" the they during 9 time that the LOI was pending, and they don't dispute that 10 it was pending at that time. And it begs the question of 11 how those offers supposedly came about and how they could 12 be unsolicited. 13 There is no information that they provide along 14 those lines whatsoever, but the limited information that 15 they do provide shows that exclusivity was not on it. 16 THE COURT: Hold on. You have to come in here 17 and show me you have a likelihood of success on the merits 18 in order to get an injunction. 19 MR. BALABANIAN: Yes, Your Honor. 20 THE COURT: I believe, in discussions we have had 21 before off the record, that this corporation owns a license 22 that cannot be transferred without the consent of the State 23 of New York. 24 Number two, the defendants or the counsel 25 , the defendants never contends that -- I think representing 26 both parties contended that what was really intended was FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 8 1 Proceedings 2 the sale of the stock. Is that true? 3 MR. LEFTON: Yes, Your Honor. 4 THE COURT: Is that true? 5 MR. BALABANIAN: That is true, Your Honor. 6 THE COURT: All right. Do you have an agreement 7 with the shareholders in which they agree to engage in 8 whatever the contract provides for them towards the sale of 9 their stock to your client? 10 MR. BALABANIAN: No, but may I add to that why I 11 don't think that's dispositive of the issue? 12 THE COURT: All right. It better be good, 13 because I think it is dispositive. 14 MR. BALABANIAN: I understand, and I appreciate 15 the opportunity. The reason it is not dispositive of the 16 issue, Your Honor, is that irrespective of whether the LOI 17 bound the shareholders, it bound the company to engage in 18 negotiations exclusively with Cresco and in good faith for 19 the ultimate goal of reaching a definitive agreement that then presented both parties' shareholders 20 would be to and 21 board of directors for approval. 22 That didn't ever happen. The good faith 23 negotiation exclusively between our parties never happened 24 and in their opposition papers -- they, 25 THE COURT: Why didn't they happen? BALABANIAN: didn ' t happen? 2 6 MR. Why they Because FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 9 1 Proceedings 2 we allege they breached exclusivity. And it couldn't 3 happen at that time, because at that point they got a 4 better, supposedly unsolicited offer, which we believe was 5 unsolicited, and it completely poisoned the well for 6 purposes of our ongoing negotiations. 7 At that point in time, there was no way to get 8 any good name/good faith negotiation. 9 THE COURT: Again, we are faced with a problem, 10 and that is you're alleging, on no information but on 11 belief, that this was a solicited offer. At this point we 12 have no evidence there was a solicitation by Fiorello 13 dangling this alleged offer. 14 MR. BALABANIAN: We have circumstantial evidence 15 if you look at the timeline. 16 THE COURT: What's the obligation under the 17 contract? What does Fiorello have to do, because this is a 18 contract, supposedly, with Fiorello. 19 MR. BALABANIAN: Yes, Your Honor. Fiorello is 20 required to, among other things, engage with Cresco in 21 terms of drafting the definitive agreements. They were to 22 provide Cresco access for purposes of due diligence, access 23 to their materials and documents for purposes of due 24 diligence. were -- They 25 THE COURT: Well, have your parties prepared the 26 draft of the definitive agreements? MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 10 1 Proceedings 2 MR. BALABANIAN: Yes, Your Honor. 3 THE COURT: And you have submitted them to the 4 other side. 5 MR. BALABANIAN: Yes, Your Honor. 6 THE COURT: And they haven't agreed to it. 7 MR. BALABANIAN: They rejected them. 8 THE COURT: Who says they can't reject them? Do 9 I have a copy of this? 10 MR. BALABANIAN: But that's my point. 11 THE COURT: No, no. Do I have a copy of your 12 version of the definitive agreement in those papers? 13 MR. BALABANIAN: You do not, Your Honor. You do 14 not. That took place both during the pendency of the LOI. 15 So we did provide them with drafts of the definitive 16 agreements. 17 THE COURT: Then tell me, what do the definitive 18 agreements provide for, do they provide for the sale of the 19 stock? 20 MR. BALABANIAN: Yes. 21 THE COURT: Oh. So it's not the sale of the 22 license, it's the sale of the stock. 23 MR. BALABANIAN: Correct. You're tracking, Your 24 r Honor. You have it correct in terms of what the 25 transaction contemplated it to do. I am not particularly 26 content about how the transaction contemplated the sale of MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 11 1 Proceedings 2 the license, so I acknowledge that perhaps we were a little 3 loose in some of our terminology. 4 THE COURT: Is there something in the letter of 5 intent that speaks to the sale of the stock from the 6 present shareholders to your client? 7 MR. BALABANIAN: It does. 8 THE COURT: Where? 9 MR. BALABANIAN: It speaks to their ultimate 10 to sign off -- ability 11 THE COURT: I have the agreement in front of me. 12 Under which proposed terms? 13 MR. LEFTON: Your Honor, if you look at the 14 section on there is an amount -- I won't consideration, say 15 the amount, because it was redacted in consideration for 16 the acquisition for 100 percent of the issued and 17 outstanding shares of Fiorello, and it goes on to say that 18 it was payable for two years. The agreement -- 19 THE COURT: How can the company agree to sell the 20 stock when the company doesn't own its own stock? 21 MR. LEFTON: Correct, Your Honor. 22 MR. BALABANIAN: Your Honor, putting that aside 23 for a moment -- 24 THE COURT: Putting that aside? How can we put 25 it aside? You got a contract that makes no legal sense. 26 MR. BALABANIAN: Well, the contract says they MM FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 193 RECEIVED NYSCEF: 06/05/2020 12 1 Proceedings 2 have to do certain things and if they do those certain 3 things, then maybe they get a definitive deal