Preview
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 194 RECEIVED NYSCEF: 06/05/2020
Exhibit 6
May 24, 2019 Decision and Order on Motion to Dismiss the Amended
Complaint
Index No. 652343/2018 Motion Seq. No. 9
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. ANDREW BORROK PART IAS MOTION 53EFM
Justice
--------------------------------------------------------------------------------X
INDEX NO. 652343/2018
CRESCO LABS NEW YORK, LLC,CRESCO LABS LLC,AN
ILLINOIS LIMITED LIABILITY COMPANY, MOTION DATE 05/16/2019
Plaintiff, MOTION SEQ. NO. 007
-v-
FIORELLO PHARMACEUTICALS, INC.,ERIC SIROTA, SUSAN
YOSS, JOHN DOES 1 - 10 DECISION AND ORDER
Defendant.
---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 007) 84, 85, 86, 87, 88,
89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 113, 114, 116
were read on this motion to/for DISMISSAL .
Defendants Fiorello Pharmaceuticals, Inc. (Fiorello), Eric Sirota, and Susan Yoss (Fiorello,
Susan Yoss, and Eric Sirota, collectively, the Defendants) move for an order dismissing the
amended complaint pursuant to CPLR § 3211 [a] [1] and [7]. For the reasons set forth below,
the motion is granted to the extent that the second and fourth causes of action are dismissed and
is otherwise denied.
FACTS RELEVANT TO THE MOTION
Cresco Labs, LLC is a medical cannabis company organized under the laws of Illinois and
holding interests in medical cannabis licenses and cultivation facilities in Arizona, California,
Illinois, Nevada, Ohio, and Pennsylvania (Amended Complaint ¶ 5). Cresco Labs New York,
LLC, a limited liability company organized under the laws of New York, is a wholly-owned
subsidiary of Cresco Labs, LLC and was created to facilitate a potential reverse subsidiary
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 1 of 13
Motion No. 007
1 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
merger transaction with Fiorello (Cresco Labs LLC and Cresco Labs New York, LLC,
collectively, Cresco) (id. ¶ 6). Fiorello is a corporation organized under the laws of the State
New York and holds one of New York’s ten medical cannabis licenses (id. ¶ 7). As a
“Registered Organization” under New York’s medical cannabis program, Fiorello possesses a
vertically-integrated license authorizing it to cultivate and process medical cannabis and
establish up to four medical cannabis dispensaries within the State of New York (id. ¶ 14).
To position itself favorably for its planned initial public offering on the Canadian Securities
Exchange in December 2018, Cresco sought to increase its valuation by expanding into new
markets, including New York (id. ¶ 13). To that end, in December 2017, Cresco and Fiorello
entered into negotiations regarding a potential sale of Fiorello’s equity to Cresco, and with it, the
right to apply to transfer its medical cannabis license (id. ¶ 15). After extensive negotiations, the
parties entered into an Equity Purchase Agreement Letter of Intent (LOI), dated February 14,
2018, by and between Fiorello and Cresco, which set forth the proposed terms for the acquisition
by Cresco of 100% of the outstanding and issued shares of Fiorello (LOI at 1, Lefton aff, exhibit
A1). Pursuant to the proposed terms of the LOI, the parties agreed that Cresco would commit to
provide a minimum funding amount of $22.5 million in consideration for the acquisition of
100% of Fiorello’s shares (id.). The LOI states that it is “intended to be binding on the parties
until supplanted by a definitive agreement” (the Definitive Agreement) (id. at 1). The LOI
further provides that the parties will “endeavor to execute the Definitive Agreement as soon as
practicable; provided, however, the closing shall be set to occur on or about April 15, 2018”
subject to satisfactory due diligence, board and shareholder approvals, and approval by the New
York State Department of Health (id. at 2).
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 2 of 13
Motion No. 007
2 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
Pursuant to the LOI, Cresco agreed to pay Fiorello a good-faith payment of $500,000 (the Good
Faith Payment), due and payable upon the execution and delivery of the LOI (id.). The Good
Faith Payment is to be credited against Cresco’s payment for the shares upon closing of the
Definitive Agreement (id.). The LOI further states that the Good Faith Payment will be refunded
to Cresco in the event that (i) Cresco is unable to complete its due diligence review of Fiorello
within 30 days of execution of the LOI due to Fiorello’s failure to timely provide Cresco with
requested materials, or (ii) the Parties fail to close the Definitive Agreement for any reason other
than illegal actions, intentional misconduct, or grossly negligent conduct by Cresco (id.). The
LOI provides that, “[t]he binding nature of this LOI notwithstanding,” both parties are entitled to
perform due diligence and “will endeavor to complete their respective due diligence reviews as
promptly as practicable” (id. at 3). The LOI further states that the parties will work in good faith
to prepare and execute agreements including, but not limited to, operating and investment
agreements and any ancillary agreements—together constituting the Definitive Agreement—
which will “contain terms substantially consistent with this LOI” (id.). The parties agreed to,
“with reasonable diligence, do all such things and provide all such reasonable assurances as may
be required to consummate the transaction” (id.).
The “Timing” section of the LOI states as follows:
Both Parties agree that they will each use their respective best efforts to complete
and execute the Definitive Agreement and conclude due diligence consistent with
the terms of this LOI at the earliest possible date but no later than thirty (30)
business days from the date of the execution of this LOI (unless otherwise extended
by the mutual agreement of the Parties) (id. at 4 [emphasis in original]).
The “Timing” section further provides:
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 3 of 13
Motion No. 007
3 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
By executing this LOI, the Parties agree that they will not discuss or enter into any
transaction with any third-party involving (a) the sale of a majority equity stake in,
or all or substantially all of the assets of, Fiorello or any subsidiary or parent entities
of Fiorello, including without limitation, any sale or other transfer of the grower
and dispensary license used or owned by Fiorello to any third-party or (b) the
purchase of any equity interest in or assets of another medical marijuana company
in the State of New York by [Cresco] (id.).
The LOI’s deadlines passed and a Definitive Agreement never materialized. In an email dated
April 4, 2018, Fiorello co-CEO Eric Sirota informed Cresco CEO Charles Bachtell that, despite
diligent efforts to reach an agreement, “we still have a number of substantive issues to resolve”
(NYSCEF Doc. No. 24). “Given this,” Mr. Sirota added, “after the LOI expired on March 28th,
our attorneys advised us to discontinue discussions until we had an extension of the LOI in place
and a clearer picture of where this transaction is headed given the above” (id.). In a subsequent
email sent on April 6, 2018, Fiorello indicated that its Board of Directors had determined that an
amended LOI would have to be executed for negotiations regarding a Definitive Agreement to
continue (Amended Complaint ¶ 30). On April 8, 2018, Fiorello sent an email alleging that
Cresco had breached its confidentiality obligations under the LOI (id. ¶ 31). Then, in an email
dated April 12, 2018, Fiorello indicated that it was “ending discussions” with Cresco and offered
to refund the Good Faith Payment (id. ¶ 32).
By this time, Fiorello had entered into discussions with one or more third parties, John Does 1-
10, regarding the potential sale of a majority stake in Fiorello (id. ¶ 25). On May 22, 2018,
Counsel for Fiorello informed the Court during oral arguments on the motion to seal the record
in this matter that Fiorello was “negotiating with other prospective suitors who have actually
offered 68% more than” Cresco’s offer (Lefton aff, exhibit A2 7:17-19). On June 14, 2018,
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 4 of 13
Motion No. 007
4 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
Fiorello’s counsel solicited best and final bids by email for the potential acquisition of Fiorello’s
equity to be submitted by June 22, 2018 (Amended Complaint ¶ 35).
Fiorello ultimately entered into a reverse subsidiary merger transaction with a third-party entity,
a defendant John Doe herein. Pursuant to the Written Consent of the Board of Directors of
Fiorello Pharmaceuticals, Inc., dated June 25, 2018, by and between Fiorello and its Board of
Directors, and Written Consent of the Shareholders of Fiorello Pharmaceuticals, Inc., dated June
29, 2018, by and between Fiorello and its shareholders, Fiorello’s shareholders agreed to sell
100% of the outstanding shares of Fiorello to an acquisition subsidiary, which will merge with
and into Fiorello, with Fiorello continuing as the surviving entity and a wholly-owned subsidiary
of the parent entity of the acquisition subsidiary (Lefton aff, exhibit A3). This reverse subsidiary
merger transaction requires the approval of the New York State Department of Health, which it
has not yet received. Accordingly, the transaction has not been consummated as of the date of
this Decision and Order (Lefton aff ¶ 7).
PROCEDURAL HISTORY
Cresco commenced this action on May 11, 2018 by filing a summons with notice, together with
an order to show cause seeking a temporary restraining order and an order to seal the record of
the case in its entirety (NYSCEF Doc. Nos. 1, 2). During oral arguments on the order to show
cause, New York State Supreme Court Justice Charles E. Ramos denied the motion to seal the
record but instructed that the parties may “redact to your heart’s content” (Lefton aff, exhibit B
¶¶ 10:1-20). On June 26, 2018, Cresco filed its original complaint (NYSCEF Doc. No. 8).
Cresco then moved by order to show cause for a temporary restraining order and preliminary
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 5 of 13
Motion No. 007
5 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
injunction seeking, inter alia, to enjoin Fiorello from selling its business operations, including its
medical cannabis license (NYSCEF Doc. No. 16). Following oral arguments, Justice Ramos
denied the motion for a preliminary injunction (NYSCEF Doc. No. 97 ¶ 16:16-18). The
Decision and Order denying the motion for a preliminary injunction was entered on August 2,
2018 (NYSCEF Doc. No. 36). On November 20, 2018, Cresco filed an amended complaint
adding Cresco Labs LLC as a plaintiff (Lefton aff, exhibit A). On January 16, 2019, the
Defendants brought the instant motion to dismiss the amended complaint (NYSCEF Doc. No.
84).
DISCUSSION
On a motion to dismiss pursuant to CPLR 3211 [a] [7], the court affords the pleadings a liberal
construction (CPLR 3026; Leon v Martinez, 84 NY2d 83, 87 [1994]). The court must accept the
facts alleged in the complaint as true and accord the plaintiff the benefit of every favorable
inference (Morone v Morone, 50 NY2d 481, 484 [1980]). The court’s inquiry on a motion to
dismiss is whether the facts alleged fit within any cognizable legal theory (id.). Dismissal under
CPLR 3211 [a] [1] is warranted only where the documentary evidence conclusively establishes a
defense to the plaintiff’s claims as a matter of law (Goshen v Mutual Life Ins. Co. of New York,
98 NY2d 314, 326 [2002]).
First Cause of Action: Breach of the LOI
The first cause of action alleges breach of the LOI’s “no-shop” or exclusivity provision against
Fiorello (Amended Complaint ¶¶ 42-47). To state a claim for breach of contract, a plaintiff must
allege (i) the existence of a valid contract, (ii) the plaintiff’s performance, (iii) the defendant’s
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 6 of 13
Motion No. 007
6 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
breach, and (iv) resulting damages [Second Source Funding, LLC v Yellowstone Capital, LLC,
144 AD3d 445, 445-46 [1st Dept 2016]). Fiorello argues that the LOI was merely a preliminary
agreement, i.e., an agreement to agree, but “[e]ven where the parties acknowledge that they
intend to hammer out details of an agreement subsequently, a preliminary agreement may be
binding” (Art and Fashion Group Corp. v Cyclops Production, Inc., 120 AD3d 436, 438 [1st
Dept 2014], quoting Richbell Information Services, Inc. v Jupiter Partners, L.P., 309 AD2d 288,
289 [1st Dept 2003]).
The amended complaint alleges the existence of a valid and binding agreement, the LOI, which
contains a no-shop provision (Amended Complaint ¶ 43). The amended complaint alleges that
Cresco fulfilled its obligations under the LOI as it “refrain[ed] from engaging in discussions or
transactions with other New York medical cannabis companies (id. ¶¶ 39, 45). The amended
complaint further alleges that Fiorello beached the LOI by engaging in discussions with other
New York medical cannabis companies “and ultimately by entering into a transaction for the sale
of Fiorello to a third party” in contravention of the no-shop provision (id. ¶ 46). Specifically,
Cresco states that Fiorello’s breach occurred “soon after” the execution of the LOI on February
14, 2018 (id. ¶¶ 25-28). The allegations set forth in the amended complaint, which are accepted
as true for the purposes of this motion, support the inference that Fiorello’s discussions with
third-party medical cannabis companies began during the period of exclusivity under the no-shop
provision of the LOI. The amended complaint also sufficiently alleges that Cresco has incurred
monetary damages as a result of Fiorello’s breach of the no-shop provision. Accordingly, the
motion to dismiss is denied with respect to the first cause of action for breach of the no-shop
provision of the LOI.
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 7 of 13
Motion No. 007
7 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
Second Cause of Action: Breach of Contract for the Sale of Fiorello’s Stock
Cresco’s second cause of action alleges breach of contract against Fiorello. Cresco alleges that
the LOI itself is a binding agreement for the sale of Fiorello’s equity, even in the absence of a
Definitive Agreement. Binding preliminary agreements fall into two categories: Type I
preliminary agreements, which reflect a meeting of the minds as to all perceived issues, and
Type II preliminary agreements, which may reflect agreement as to some of the material terms,
but call for further negotiations as to other terms (IDT Corp. v Tyco Group, S.A.R.L., 54 AD3d
273, 274-75 [1st Dept 2008], citing Brown v Cara, 420 F3d 148, 153 [2d Cir 2005]). While “a
Type I preliminary agreement binds both sides to their ultimate contractual objective,” (Brown,
420 F3d at 153 [internal quotation marks omitted]), “Type II agreements do not commit the
parties to their ultimate contractual objective but rather to the obligation to negotiate the open
issues in good faith in an attempt to reach the . . . objective within the agreed framework (id.
[internal quotation marks omitted]).
The agreement at issue in this case falls into the category of a Type II preliminary agreement.
The terms set forth in the LOI were referred to as “proposed terms” and the LOI expressly
contemplated further negotiations and a subsequent Definitive Agreement (LOI at 1, Lefton aff,
exhibit A1). There was no meeting of the minds here as to the final terms of the agreement. In
its April 4, 2018 email to Cresco, Fiorello indicated that there were material issues with the terms
being negotiated (NYSCEF Doc. No. 24). In a follow-up email to Cresco dated April 6, 2018,
Fiorello indicated that its board of directors determined that an amended LOI was required if
negotiations regarding a Definitive Agreement were to continue (Amended Complaint ¶ 30).
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 8 of 13
Motion No. 007
8 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
These communications, along with the express terms of the LOI, unequivocally demonstrate that
the parties never reached agreement as to the terms of the prospective deal. In short, the LOI in
this case is an agreement to agree as to a prospective deal that never came to fruition. The
motion to dismiss is granted with respect to the second cause of action for breach of contract.
Third Cause of Action: Tortious Interference with Contract
The third cause of action alleges tortious interference with contract against defendants John Doe
1-10. To state a claim for tortious interference with contract, the pleading must allege (i) the
existence of a valid contract between the plaintiff and a third party, (ii) the defendant had
knowledge of the contract, (iii) the defendant intentionally procured a breach of the contract
without justification, (iv) actual breach of the contract, and (v) resulting damages to the plaintiff
(Snyder v Sony Music Entertainment, Inc., 252 AD2d 294, 299 [1st Dept 1999]). There can be
no remedy for tortious interference with contract if there is no underlying breach of contract
(NBT Bancorp Inc. v Fleet/Norstar Financial Group, Inc., 87 NY2d 614, 621-622 [1996]). The
nature of the plaintiff’s enforceable legal rights dictates the degree to which the plaintiff is
entitled to protection for a tortious interference with a contract by a third-party competitor
(Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, 193 [1980]). Where a
complaint alleges interference with prospective contract rights rather than breach of an existing
contract, the plaintiff has a heightened burden to establish wrongful means or more culpable
conduct by the defendant (id. at 193-94).
Here, the LOI was a binding agreement between the parties to work exclusively, diligently, and
in good faith to consummate a Definitive Agreement within 30 days. It was not binding with
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 9 of 13
Motion No. 007
9 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
respect to the terms of the proposed reverse subsidiary merger transaction. In that regard,
although binding on the parties as to its own operative terms such as the no-shop provision, it
was nothing more than an agreement to agree with respect to a potential future deal. It set forth
the “proposed terms” of such a deal, not the final terms. In sum, consummation of the LOI
“represented no more than a hope that [the] shareholders . . . would in fact approve the
transaction” (NBT Bancorp Inc. v Fleet/Norstar Financial Group, Inc., 87 NY2d 614, 622
[1996]). Therefore, this is best viewed as a cause of action for tortious interference with
precontractual or prospective economic relations.
To state a claim for tortious interference with prospective economic relations, the pleading must
allege that the plaintiff would have entered into a contract but for the defendant’s wrongful or
culpable conduct (Vigoda v DCA Productions Plus, Inc., 293 AD2d 265, 266 [1st Dept 2002]).
Here, Cresco has failed to allege that Cresco and Fiorello would have entered into a Definitive
Agreement for the acquisition of Fiorello’s equity and medical cannabis license but for the
alleged interference of John Does 1-10. As such, the amended complaint fails to allege an
essential element of the cause of action.
To the extent that this cause of action is premised on the LOI itself rather than a prospective
Definitive Agreement, the allegations in the amended complaint are sufficient to withstand the
Defendants’ motion to dismiss. The amended complaint alleges that Fiorello and Cresco entered
into a binding agreement, i.e., the LOI, and that the John Doe defendants knew or should have
known of the LOI’s existence, including the no-shop provision calling for exclusive negotiations
(Amended Complaint ¶¶ 59-60). The amended complaint further alleges that the John Doe
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 10 of 13
Motion No. 007
10 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
defendants intentionally procured Fiorello’s breach of the LOI by initiating negotiations with
Fiorello, and that they did so without justification (id. ¶¶ 61-62). The amended complaint asserts
that Cresco was ready, willing, and able to perform its obligations under the agreement and
suffered monetary damages as a result of the conduct of the John Doe defendants (id. ¶¶ 63-64).
Cresco has therefore stated a cause of action for tortious interference with contract as it relates to
the LOI, and the motion to dismiss the third cause of action is denied.
Fourth Cause of Action: Unjust Enrichment
The fourth cause of action alleges unjust enrichment against Susan Yoss and Eric Sirota. The
elements of a cause of action for unjust enrichment are “(1) the other party was enriched, (2) at
that party’s expense, and (3) that it is against equity and good conscience to permit the other
party to retain what is sought to be recovered” (Georgia Malone & Co., Inc. v Rieder, 19 NY3d
511, 516 [2012]). Here, the complaint fails to allege that Eric Sirota and Susan Yoss were
enriched at Cresco’s expense. The complaint asserts that, “[a]s substantial shareholders in
Fiorello, Sirota and Yoss stand to benefit from Fiorello’s breaches of contract by receiving a
large proportion of the additional compensation that Fiorello would receive from selling itself to
a third party rather than to Cresco” (Amended Complaint ¶ 66 [emphasis added]). Cresco has
failed to allege that Eric Sirota and Susan Yoss actually benefited in any way at Cresco’s
expense, or that Cresco suffered any cognizable loss (Edelman v Starwood Capital Group, LLC,
70 AD3d 246, 251 [1st Dept 2009]). There is no allegation, for example, that Fiorello’s deal
with the John Doe defendant was ever approved by the Department of Health or that Eric Sirota
and Susan Yoss personally profited from the transaction. As pleaded, the amended complaint
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 11 of 13
Motion No. 007
11 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
alleges only speculative and unascertainable damages. Accordingly, the motion to dismiss the
fourth cause of action for unjust enrichment is granted.
Sealing Order
The parties have failed to show good cause for sealing the record in this case. Therefore, in the
interest of preserving public access to court records, the court orders that the record be unsealed
in its entirety subject to any appropriate redactions and the parties shall submit any such
replacement documents by May 31, 2019 with appropriate redactions for the court’s review. In
the event that the court does not receive a replacement document which may be filed under a
new NYSCEF number by May 31, 2019, all currently uploaded documents will be unsealed as of
June 5, 2019.
Accordingly, it is
ORDERED that the Defendants’ motion to dismiss is granted to the extent that the second cause
of action for breach of contract and the third cause of action for tortious interference with
contract are dismissed and is otherwise denied in its entirety; and it is further
ORDERED that the parties are directed to submit any proposed redactions and replacement
documents to the court no later than May 31, 2019 for the court’s review; and it is further
ORDERED that the parties are directed to appear for a preliminary conference forthwith.
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 12 of 13
Motion No. 007
12 of 13
FILED: NEW YORK COUNTY CLERK 05/24/2019
06/05/2020 11:41
01:13 AM
PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 119
194 RECEIVED NYSCEF: 05/24/2019
06/05/2020
5/17/2019
DATE ANDREW BORROK, J.S.C.
CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION
GRANTED DENIED X GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 13 of 13
Motion No. 007
13 of 13
Preview
FILED: NEW YORK COUNTY CLERK 06/05/2020 01:13 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 194 RECEIVED NYSCEF: 06/05/2020 Exhibit 6 May 24, 2019 Decision and Order on Motion to Dismiss the Amended Complaint Index No. 652343/2018 Motion Seq. No. 9 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. ANDREW BORROK PART IAS MOTION 53EFM Justice --------------------------------------------------------------------------------X INDEX NO. 652343/2018 CRESCO LABS NEW YORK, LLC,CRESCO LABS LLC,AN ILLINOIS LIMITED LIABILITY COMPANY, MOTION DATE 05/16/2019 Plaintiff, MOTION SEQ. NO. 007 -v- FIORELLO PHARMACEUTICALS, INC.,ERIC SIROTA, SUSAN YOSS, JOHN DOES 1 - 10 DECISION AND ORDER Defendant. ---------------------------------------------------------------------------------X The following e-filed documents, listed by NYSCEF document number (Motion 007) 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 113, 114, 116 were read on this motion to/for DISMISSAL . Defendants Fiorello Pharmaceuticals, Inc. (Fiorello), Eric Sirota, and Susan Yoss (Fiorello, Susan Yoss, and Eric Sirota, collectively, the Defendants) move for an order dismissing the amended complaint pursuant to CPLR § 3211 [a] [1] and [7]. For the reasons set forth below, the motion is granted to the extent that the second and fourth causes of action are dismissed and is otherwise denied. FACTS RELEVANT TO THE MOTION Cresco Labs, LLC is a medical cannabis company organized under the laws of Illinois and holding interests in medical cannabis licenses and cultivation facilities in Arizona, California, Illinois, Nevada, Ohio, and Pennsylvania (Amended Complaint ¶ 5). Cresco Labs New York, LLC, a limited liability company organized under the laws of New York, is a wholly-owned subsidiary of Cresco Labs, LLC and was created to facilitate a potential reverse subsidiary 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 1 of 13 Motion No. 007 1 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 merger transaction with Fiorello (Cresco Labs LLC and Cresco Labs New York, LLC, collectively, Cresco) (id. ¶ 6). Fiorello is a corporation organized under the laws of the State New York and holds one of New York’s ten medical cannabis licenses (id. ¶ 7). As a “Registered Organization” under New York’s medical cannabis program, Fiorello possesses a vertically-integrated license authorizing it to cultivate and process medical cannabis and establish up to four medical cannabis dispensaries within the State of New York (id. ¶ 14). To position itself favorably for its planned initial public offering on the Canadian Securities Exchange in December 2018, Cresco sought to increase its valuation by expanding into new markets, including New York (id. ¶ 13). To that end, in December 2017, Cresco and Fiorello entered into negotiations regarding a potential sale of Fiorello’s equity to Cresco, and with it, the right to apply to transfer its medical cannabis license (id. ¶ 15). After extensive negotiations, the parties entered into an Equity Purchase Agreement Letter of Intent (LOI), dated February 14, 2018, by and between Fiorello and Cresco, which set forth the proposed terms for the acquisition by Cresco of 100% of the outstanding and issued shares of Fiorello (LOI at 1, Lefton aff, exhibit A1). Pursuant to the proposed terms of the LOI, the parties agreed that Cresco would commit to provide a minimum funding amount of $22.5 million in consideration for the acquisition of 100% of Fiorello’s shares (id.). The LOI states that it is “intended to be binding on the parties until supplanted by a definitive agreement” (the Definitive Agreement) (id. at 1). The LOI further provides that the parties will “endeavor to execute the Definitive Agreement as soon as practicable; provided, however, the closing shall be set to occur on or about April 15, 2018” subject to satisfactory due diligence, board and shareholder approvals, and approval by the New York State Department of Health (id. at 2). 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 2 of 13 Motion No. 007 2 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 Pursuant to the LOI, Cresco agreed to pay Fiorello a good-faith payment of $500,000 (the Good Faith Payment), due and payable upon the execution and delivery of the LOI (id.). The Good Faith Payment is to be credited against Cresco’s payment for the shares upon closing of the Definitive Agreement (id.). The LOI further states that the Good Faith Payment will be refunded to Cresco in the event that (i) Cresco is unable to complete its due diligence review of Fiorello within 30 days of execution of the LOI due to Fiorello’s failure to timely provide Cresco with requested materials, or (ii) the Parties fail to close the Definitive Agreement for any reason other than illegal actions, intentional misconduct, or grossly negligent conduct by Cresco (id.). The LOI provides that, “[t]he binding nature of this LOI notwithstanding,” both parties are entitled to perform due diligence and “will endeavor to complete their respective due diligence reviews as promptly as practicable” (id. at 3). The LOI further states that the parties will work in good faith to prepare and execute agreements including, but not limited to, operating and investment agreements and any ancillary agreements—together constituting the Definitive Agreement— which will “contain terms substantially consistent with this LOI” (id.). The parties agreed to, “with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transaction” (id.). The “Timing” section of the LOI states as follows: Both Parties agree that they will each use their respective best efforts to complete and execute the Definitive Agreement and conclude due diligence consistent with the terms of this LOI at the earliest possible date but no later than thirty (30) business days from the date of the execution of this LOI (unless otherwise extended by the mutual agreement of the Parties) (id. at 4 [emphasis in original]). The “Timing” section further provides: 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 3 of 13 Motion No. 007 3 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 By executing this LOI, the Parties agree that they will not discuss or enter into any transaction with any third-party involving (a) the sale of a majority equity stake in, or all or substantially all of the assets of, Fiorello or any subsidiary or parent entities of Fiorello, including without limitation, any sale or other transfer of the grower and dispensary license used or owned by Fiorello to any third-party or (b) the purchase of any equity interest in or assets of another medical marijuana company in the State of New York by [Cresco] (id.). The LOI’s deadlines passed and a Definitive Agreement never materialized. In an email dated April 4, 2018, Fiorello co-CEO Eric Sirota informed Cresco CEO Charles Bachtell that, despite diligent efforts to reach an agreement, “we still have a number of substantive issues to resolve” (NYSCEF Doc. No. 24). “Given this,” Mr. Sirota added, “after the LOI expired on March 28th, our attorneys advised us to discontinue discussions until we had an extension of the LOI in place and a clearer picture of where this transaction is headed given the above” (id.). In a subsequent email sent on April 6, 2018, Fiorello indicated that its Board of Directors had determined that an amended LOI would have to be executed for negotiations regarding a Definitive Agreement to continue (Amended Complaint ¶ 30). On April 8, 2018, Fiorello sent an email alleging that Cresco had breached its confidentiality obligations under the LOI (id. ¶ 31). Then, in an email dated April 12, 2018, Fiorello indicated that it was “ending discussions” with Cresco and offered to refund the Good Faith Payment (id. ¶ 32). By this time, Fiorello had entered into discussions with one or more third parties, John Does 1- 10, regarding the potential sale of a majority stake in Fiorello (id. ¶ 25). On May 22, 2018, Counsel for Fiorello informed the Court during oral arguments on the motion to seal the record in this matter that Fiorello was “negotiating with other prospective suitors who have actually offered 68% more than” Cresco’s offer (Lefton aff, exhibit A2 7:17-19). On June 14, 2018, 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 4 of 13 Motion No. 007 4 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 Fiorello’s counsel solicited best and final bids by email for the potential acquisition of Fiorello’s equity to be submitted by June 22, 2018 (Amended Complaint ¶ 35). Fiorello ultimately entered into a reverse subsidiary merger transaction with a third-party entity, a defendant John Doe herein. Pursuant to the Written Consent of the Board of Directors of Fiorello Pharmaceuticals, Inc., dated June 25, 2018, by and between Fiorello and its Board of Directors, and Written Consent of the Shareholders of Fiorello Pharmaceuticals, Inc., dated June 29, 2018, by and between Fiorello and its shareholders, Fiorello’s shareholders agreed to sell 100% of the outstanding shares of Fiorello to an acquisition subsidiary, which will merge with and into Fiorello, with Fiorello continuing as the surviving entity and a wholly-owned subsidiary of the parent entity of the acquisition subsidiary (Lefton aff, exhibit A3). This reverse subsidiary merger transaction requires the approval of the New York State Department of Health, which it has not yet received. Accordingly, the transaction has not been consummated as of the date of this Decision and Order (Lefton aff ¶ 7). PROCEDURAL HISTORY Cresco commenced this action on May 11, 2018 by filing a summons with notice, together with an order to show cause seeking a temporary restraining order and an order to seal the record of the case in its entirety (NYSCEF Doc. Nos. 1, 2). During oral arguments on the order to show cause, New York State Supreme Court Justice Charles E. Ramos denied the motion to seal the record but instructed that the parties may “redact to your heart’s content” (Lefton aff, exhibit B ¶¶ 10:1-20). On June 26, 2018, Cresco filed its original complaint (NYSCEF Doc. No. 8). Cresco then moved by order to show cause for a temporary restraining order and preliminary 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 5 of 13 Motion No. 007 5 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 injunction seeking, inter alia, to enjoin Fiorello from selling its business operations, including its medical cannabis license (NYSCEF Doc. No. 16). Following oral arguments, Justice Ramos denied the motion for a preliminary injunction (NYSCEF Doc. No. 97 ¶ 16:16-18). The Decision and Order denying the motion for a preliminary injunction was entered on August 2, 2018 (NYSCEF Doc. No. 36). On November 20, 2018, Cresco filed an amended complaint adding Cresco Labs LLC as a plaintiff (Lefton aff, exhibit A). On January 16, 2019, the Defendants brought the instant motion to dismiss the amended complaint (NYSCEF Doc. No. 84). DISCUSSION On a motion to dismiss pursuant to CPLR 3211 [a] [7], the court affords the pleadings a liberal construction (CPLR 3026; Leon v Martinez, 84 NY2d 83, 87 [1994]). The court must accept the facts alleged in the complaint as true and accord the plaintiff the benefit of every favorable inference (Morone v Morone, 50 NY2d 481, 484 [1980]). The court’s inquiry on a motion to dismiss is whether the facts alleged fit within any cognizable legal theory (id.). Dismissal under CPLR 3211 [a] [1] is warranted only where the documentary evidence conclusively establishes a defense to the plaintiff’s claims as a matter of law (Goshen v Mutual Life Ins. Co. of New York, 98 NY2d 314, 326 [2002]). First Cause of Action: Breach of the LOI The first cause of action alleges breach of the LOI’s “no-shop” or exclusivity provision against Fiorello (Amended Complaint ¶¶ 42-47). To state a claim for breach of contract, a plaintiff must allege (i) the existence of a valid contract, (ii) the plaintiff’s performance, (iii) the defendant’s 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 6 of 13 Motion No. 007 6 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 breach, and (iv) resulting damages [Second Source Funding, LLC v Yellowstone Capital, LLC, 144 AD3d 445, 445-46 [1st Dept 2016]). Fiorello argues that the LOI was merely a preliminary agreement, i.e., an agreement to agree, but “[e]ven where the parties acknowledge that they intend to hammer out details of an agreement subsequently, a preliminary agreement may be binding” (Art and Fashion Group Corp. v Cyclops Production, Inc., 120 AD3d 436, 438 [1st Dept 2014], quoting Richbell Information Services, Inc. v Jupiter Partners, L.P., 309 AD2d 288, 289 [1st Dept 2003]). The amended complaint alleges the existence of a valid and binding agreement, the LOI, which contains a no-shop provision (Amended Complaint ¶ 43). The amended complaint alleges that Cresco fulfilled its obligations under the LOI as it “refrain[ed] from engaging in discussions or transactions with other New York medical cannabis companies (id. ¶¶ 39, 45). The amended complaint further alleges that Fiorello beached the LOI by engaging in discussions with other New York medical cannabis companies “and ultimately by entering into a transaction for the sale of Fiorello to a third party” in contravention of the no-shop provision (id. ¶ 46). Specifically, Cresco states that Fiorello’s breach occurred “soon after” the execution of the LOI on February 14, 2018 (id. ¶¶ 25-28). The allegations set forth in the amended complaint, which are accepted as true for the purposes of this motion, support the inference that Fiorello’s discussions with third-party medical cannabis companies began during the period of exclusivity under the no-shop provision of the LOI. The amended complaint also sufficiently alleges that Cresco has incurred monetary damages as a result of Fiorello’s breach of the no-shop provision. Accordingly, the motion to dismiss is denied with respect to the first cause of action for breach of the no-shop provision of the LOI. 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 7 of 13 Motion No. 007 7 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 Second Cause of Action: Breach of Contract for the Sale of Fiorello’s Stock Cresco’s second cause of action alleges breach of contract against Fiorello. Cresco alleges that the LOI itself is a binding agreement for the sale of Fiorello’s equity, even in the absence of a Definitive Agreement. Binding preliminary agreements fall into two categories: Type I preliminary agreements, which reflect a meeting of the minds as to all perceived issues, and Type II preliminary agreements, which may reflect agreement as to some of the material terms, but call for further negotiations as to other terms (IDT Corp. v Tyco Group, S.A.R.L., 54 AD3d 273, 274-75 [1st Dept 2008], citing Brown v Cara, 420 F3d 148, 153 [2d Cir 2005]). While “a Type I preliminary agreement binds both sides to their ultimate contractual objective,” (Brown, 420 F3d at 153 [internal quotation marks omitted]), “Type II agreements do not commit the parties to their ultimate contractual objective but rather to the obligation to negotiate the open issues in good faith in an attempt to reach the . . . objective within the agreed framework (id. [internal quotation marks omitted]). The agreement at issue in this case falls into the category of a Type II preliminary agreement. The terms set forth in the LOI were referred to as “proposed terms” and the LOI expressly contemplated further negotiations and a subsequent Definitive Agreement (LOI at 1, Lefton aff, exhibit A1). There was no meeting of the minds here as to the final terms of the agreement. In its April 4, 2018 email to Cresco, Fiorello indicated that there were material issues with the terms being negotiated (NYSCEF Doc. No. 24). In a follow-up email to Cresco dated April 6, 2018, Fiorello indicated that its board of directors determined that an amended LOI was required if negotiations regarding a Definitive Agreement were to continue (Amended Complaint ¶ 30). 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 8 of 13 Motion No. 007 8 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 These communications, along with the express terms of the LOI, unequivocally demonstrate that the parties never reached agreement as to the terms of the prospective deal. In short, the LOI in this case is an agreement to agree as to a prospective deal that never came to fruition. The motion to dismiss is granted with respect to the second cause of action for breach of contract. Third Cause of Action: Tortious Interference with Contract The third cause of action alleges tortious interference with contract against defendants John Doe 1-10. To state a claim for tortious interference with contract, the pleading must allege (i) the existence of a valid contract between the plaintiff and a third party, (ii) the defendant had knowledge of the contract, (iii) the defendant intentionally procured a breach of the contract without justification, (iv) actual breach of the contract, and (v) resulting damages to the plaintiff (Snyder v Sony Music Entertainment, Inc., 252 AD2d 294, 299 [1st Dept 1999]). There can be no remedy for tortious interference with contract if there is no underlying breach of contract (NBT Bancorp Inc. v Fleet/Norstar Financial Group, Inc., 87 NY2d 614, 621-622 [1996]). The nature of the plaintiff’s enforceable legal rights dictates the degree to which the plaintiff is entitled to protection for a tortious interference with a contract by a third-party competitor (Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, 193 [1980]). Where a complaint alleges interference with prospective contract rights rather than breach of an existing contract, the plaintiff has a heightened burden to establish wrongful means or more culpable conduct by the defendant (id. at 193-94). Here, the LOI was a binding agreement between the parties to work exclusively, diligently, and in good faith to consummate a Definitive Agreement within 30 days. It was not binding with 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 9 of 13 Motion No. 007 9 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 respect to the terms of the proposed reverse subsidiary merger transaction. In that regard, although binding on the parties as to its own operative terms such as the no-shop provision, it was nothing more than an agreement to agree with respect to a potential future deal. It set forth the “proposed terms” of such a deal, not the final terms. In sum, consummation of the LOI “represented no more than a hope that [the] shareholders . . . would in fact approve the transaction” (NBT Bancorp Inc. v Fleet/Norstar Financial Group, Inc., 87 NY2d 614, 622 [1996]). Therefore, this is best viewed as a cause of action for tortious interference with precontractual or prospective economic relations. To state a claim for tortious interference with prospective economic relations, the pleading must allege that the plaintiff would have entered into a contract but for the defendant’s wrongful or culpable conduct (Vigoda v DCA Productions Plus, Inc., 293 AD2d 265, 266 [1st Dept 2002]). Here, Cresco has failed to allege that Cresco and Fiorello would have entered into a Definitive Agreement for the acquisition of Fiorello’s equity and medical cannabis license but for the alleged interference of John Does 1-10. As such, the amended complaint fails to allege an essential element of the cause of action. To the extent that this cause of action is premised on the LOI itself rather than a prospective Definitive Agreement, the allegations in the amended complaint are sufficient to withstand the Defendants’ motion to dismiss. The amended complaint alleges that Fiorello and Cresco entered into a binding agreement, i.e., the LOI, and that the John Doe defendants knew or should have known of the LOI’s existence, including the no-shop provision calling for exclusive negotiations (Amended Complaint ¶¶ 59-60). The amended complaint further alleges that the John Doe 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 10 of 13 Motion No. 007 10 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 defendants intentionally procured Fiorello’s breach of the LOI by initiating negotiations with Fiorello, and that they did so without justification (id. ¶¶ 61-62). The amended complaint asserts that Cresco was ready, willing, and able to perform its obligations under the agreement and suffered monetary damages as a result of the conduct of the John Doe defendants (id. ¶¶ 63-64). Cresco has therefore stated a cause of action for tortious interference with contract as it relates to the LOI, and the motion to dismiss the third cause of action is denied. Fourth Cause of Action: Unjust Enrichment The fourth cause of action alleges unjust enrichment against Susan Yoss and Eric Sirota. The elements of a cause of action for unjust enrichment are “(1) the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered” (Georgia Malone & Co., Inc. v Rieder, 19 NY3d 511, 516 [2012]). Here, the complaint fails to allege that Eric Sirota and Susan Yoss were enriched at Cresco’s expense. The complaint asserts that, “[a]s substantial shareholders in Fiorello, Sirota and Yoss stand to benefit from Fiorello’s breaches of contract by receiving a large proportion of the additional compensation that Fiorello would receive from selling itself to a third party rather than to Cresco” (Amended Complaint ¶ 66 [emphasis added]). Cresco has failed to allege that Eric Sirota and Susan Yoss actually benefited in any way at Cresco’s expense, or that Cresco suffered any cognizable loss (Edelman v Starwood Capital Group, LLC, 70 AD3d 246, 251 [1st Dept 2009]). There is no allegation, for example, that Fiorello’s deal with the John Doe defendant was ever approved by the Department of Health or that Eric Sirota and Susan Yoss personally profited from the transaction. As pleaded, the amended complaint 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 11 of 13 Motion No. 007 11 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 alleges only speculative and unascertainable damages. Accordingly, the motion to dismiss the fourth cause of action for unjust enrichment is granted. Sealing Order The parties have failed to show good cause for sealing the record in this case. Therefore, in the interest of preserving public access to court records, the court orders that the record be unsealed in its entirety subject to any appropriate redactions and the parties shall submit any such replacement documents by May 31, 2019 with appropriate redactions for the court’s review. In the event that the court does not receive a replacement document which may be filed under a new NYSCEF number by May 31, 2019, all currently uploaded documents will be unsealed as of June 5, 2019. Accordingly, it is ORDERED that the Defendants’ motion to dismiss is granted to the extent that the second cause of action for breach of contract and the third cause of action for tortious interference with contract are dismissed and is otherwise denied in its entirety; and it is further ORDERED that the parties are directed to submit any proposed redactions and replacement documents to the court no later than May 31, 2019 for the court’s review; and it is further ORDERED that the parties are directed to appear for a preliminary conference forthwith. 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 12 of 13 Motion No. 007 12 of 13 FILED: NEW YORK COUNTY CLERK 05/24/2019 06/05/2020 11:41 01:13 AM PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 119 194 RECEIVED NYSCEF: 05/24/2019 06/05/2020 5/17/2019 DATE ANDREW BORROK, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION GRANTED DENIED X GRANTED IN PART OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE 652343/2018 CRESCO LABS NEW YORK, LLC, vs. FIORELLO PHARMACEUTICALS, Page 13 of 13 Motion No. 007 13 of 13