Preview
FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
----------------------------------------------------------- X
CRESCO LABS NEW YORK, LLC, a New :
York limited liability company, and CRESCO :
LABS, LLC, an Illinois limited liability : Index No. 652343/2018
company, :
: Hon. Andrew Borrok
:
Plaintiffs/Counterclaim Defendants, :
: AFFIRMATION OF JASON P.
v. : HIPP IN SUPPORT OF
: PLAINTIFFS’ PROPOSED
: ORDER TO SHOW CAUSE TO
FIORELLO PHARMACEUTICALS, INC., a : PRECLUDE EXPERT REPORT
New York corporation, :
:
Defendant/Counterclaimant.
----------------------------------------------------------- X
I, Jason P. Hipp, being duly sworn, depose and say the following statements to be true:
1. I am an attorney at the law firm Jenner & Block, LLP and represent Cresco Labs
New York, LLC and Cresco Labs, LLC (collectively, “Cresco” or “Plaintiffs”), in this
proceeding against Fiorello Pharmaceuticals, Inc. (“Fiorello” or “Defendant”).
2. I submit this affirmation in support of Cresco’s Proposed Order to Show Cause to
Preclude Defendant’s Expert Report. I make these statements based on my personal knowledge
or my review of the record in this case.
3. The purpose of this affirmation is to attach documents relevant to the Court’s
determination of the Proposed Order to Show Cause and to provide relevant procedural
background.
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4. This case concerns a binding, mutual No-Shop Provision in a letter of intent
(“LOI”) between Cresco and Fiorello. Unlike a typical no-shop provision, this No-Shop
Provision was mutual, meaning that while Fiorello was prohibited from engaging in discussions
with other potential acquirers, Cresco was similarly prohibited from engaging in discussions with
other potential targets. Despite Fiorello’s commitment not to discuss the sale of its stock to any
third party while the No-Shop Provision with Cresco was in place, Fiorello egregiously breached
the No-Shop Provision by discussing the sale of its stock with multiple third parties, and
ultimately entered into a deal with one of them. Fiorello’s breach meant that Cresco could no
longer acquire Fiorello’s stock and obtain a foothold in the New York market without paying a
premium for the last available New York-licensed company—precisely the harm the No-Shop
Provision was intended to prevent.
5. On June 26, 2018, Cresco filed its initial complaint. NYSCEF Doc. No. 8. On
November 20, 2018, Cresco filed the Amended Complaint, which included a claim against
Fiorello for breach of the No-Shop Provision in the LOI between Cresco and Fiorello. NYSCEF
Doc. No. 60. On May 24, 2019, this Court issued a decision and order denying Defendants’
motion to dismiss the claim for breach of the No-Shop Provision. NYSCEF Doc. No. 119.
6. Fact discovery in this matter proceeded following the decision on the motion to
dismiss. Beginning as early as November 2020, near the end of fact discovery, Cresco’s counsel
attempted to negotiate a schedule for expert discovery with Fiorello’s counsel. A true and
correct copy of a November 11, 2020 email I sent to Fiorello’s counsel proposing a schedule for
expert discovery is attached hereto as Exhibit 1. In response, Fiorello’s counsel proposed to
delay expert discovery until after Fiorello had moved for summary judgment and the Court had
ruled on that motion.
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7. At a court conference in January 2021, Cresco requested a schedule for expert
discovery. Relevant excerpts of a true and correct copy of the transcript of the January 13, 2021
conference is attached hereto as Exhibit 2. Fiorello proposed to delay expert discovery until after
the Court had ruled on summary judgment motions. The Court declined to delay expert
discovery, emphasizing that the Commercial Division rules expect the parties to engage in expert
discovery.
8. Pursuant to Commercial Division Rule 13, my colleagues repeatedly attempted to
negotiate an expert discovery schedule with Fiorello’s counsel. Fiorello’s counsel refused to
engage in flat violation of the Court’s ruling. A true and correct copy of my colleagues’ email
correspondence requesting feedback on our proposed expert discovery schedule on January 29,
2021, February 4, 2021, and February 18, 2021, is attached hereto as Exhibit 3.
9. The parties contacted the Court to request entry of a scheduling order or a
conference to discuss a scheduling order. A true and correct copy of the emails that Fiorello’s
counsel and I sent to the court in February and March 2021 is attached hereto as Exhibit 4.
10. On July 2, 2021, while Cresco was waiting for the Court’s response about expert
discovery, Fiorello filed a notice of motion of summary judgment on Cresco’s claim for breach
of the No-Shop Provision. NYSCEF Doc. No. 221. Fiorello’s motion for summary judgment
seeks, inter alia, to limit Cresco’s damages. It is premature to limit damages now, after Fiorello
deliberately moved for summary judgment prior to Cresco’s expert report on damages and thus
attempted to obtain dismissal of certain damages theories without fully understanding those
theories or their support. As a result, Fiorello’s motion is limited to only one of the damages
theories Cresco actually intends to pursue at trial.
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11. In opposition to Fiorello’s summary judgment motion, Cresco produced the
expert report of A. Scott Davidson. A true and correct copy of Mr. Davidson’s report is attached
hereto as Exhibit 5.
12. In his report, Mr. Davidson draws on his experience advising corporate mergers
and acquisitions, including as related to letters of intent and exclusivity provisions. Mr.
Davidson’s report notes that, by agreeing to a mutual No-Shop Provision, Cresco accepted the
risk of a meaningful opportunity cost in the event that the acquisition of Fiorello did not proceed
and Cresco needed to make a replacement acquisition at a higher price.
13. In response to Mr. Davidson’s report, Fiorello produced the report of Douglas S.
Land. A true and correct copy of Mr. Land’s report is attached hereto as Exhibit 6.
14. Mr. Land’s report oversteps the role of an expert witness by speculating, offering
legal opinions, and usurping the fact-finding role of the jury. The first two sections of Mr.
Land’s report purport to set forth numerous opinions that are based on impermissible speculation
about the mindset of a “reasonable buyer or seller in a corporate acquisition.” These opinions
are pure speculation. Mr. Land’s report also includes opinions on issues which should only be
determined by a factfinder or the Court, not an expert.
15. Because Fiorello refused to participate in expert discovery, Fiorello did not
disclose its intention to rely on Mr. Land as an expert. Cresco learned of Fiorello’s reliance on
Mr. Land’s report only upon its submission. Fiorello’s failure to disclose Mr. Land has deprived
Cresco of an opportunity to cross-examine Mr. Land.
16. At a court conference on November 10, 2021, after Cresco had produced the
expert report of Mr. Davidson but before Fiorello had produced the expert report of Mr. Land,
Fiorello’s counsel stated their intention to file a motion to preclude Mr. Davidson’s report. The
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clerk, Mr. Kelly, instructed Fiorello’s counsel to bring the motion to preclude as an order to
show cause. Accordingly, Cresco is similarly bringing its motion to preclude an expert report as
an order to show cause.
17. On November 10, 2021, the Court entered a case management order in this case
stating that “[e]xpert discovery shall conclude on March 10, 2022.” NYSCEF Doc. No. 225.
18. I affirm that the foregoing is true under penalty of perjury.
New York, New York /s Jason P. Hipp _
January 7, 2022 Jason P. Hipp, Esq.
Jenner & Block LLP
Counsel for Plaintiffs
Cresco Labs New York, LLC and Cresco
Labs, LLC
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FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022
CERTIFICATION OF COMPLIANCE WITH WORD COUNT LIMIT
I hereby certify pursuant to Rule 17 of the Rules of Practice for the Commercial Division
that the total number of words in this affirmation, exclusive of the caption and signature block, is
1,123.
Dated: January 7, 2022
New York, New York /s Jason P. Hipp
Jason P. Hipp
1155 Avenue of the Americas
New York, New York 10022
212-891-1670
jhipp@jenner.com
Counsel for Plaintiffs
Cresco Labs New York, LLC and Cresco
Labs, LLC
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NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022
CERTIFICATION OF COMPLIANCE WITH CPLR 2217
I hereby certify and affirm pursuant to New York Court Rule 2217 that no previous
application has been made for the relief requested in Plaintiffs’ Proposed Order to Show Cause to
Preclude Defendant’s Expert Report.
Dated: January 11, 2022
New York, New York /s Jason P. Hipp
Jason P. Hipp
1155 Avenue of the Americas
New York, New York 10022
212-891-1670
jhipp@jenner.com
Counsel for Plaintiffs
Cresco Labs New York, LLC and Cresco
Labs, LLC
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Preview
FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------- X CRESCO LABS NEW YORK, LLC, a New : York limited liability company, and CRESCO : LABS, LLC, an Illinois limited liability : Index No. 652343/2018 company, : : Hon. Andrew Borrok : Plaintiffs/Counterclaim Defendants, : : AFFIRMATION OF JASON P. v. : HIPP IN SUPPORT OF : PLAINTIFFS’ PROPOSED : ORDER TO SHOW CAUSE TO FIORELLO PHARMACEUTICALS, INC., a : PRECLUDE EXPERT REPORT New York corporation, : : Defendant/Counterclaimant. ----------------------------------------------------------- X I, Jason P. Hipp, being duly sworn, depose and say the following statements to be true: 1. I am an attorney at the law firm Jenner & Block, LLP and represent Cresco Labs New York, LLC and Cresco Labs, LLC (collectively, “Cresco” or “Plaintiffs”), in this proceeding against Fiorello Pharmaceuticals, Inc. (“Fiorello” or “Defendant”). 2. I submit this affirmation in support of Cresco’s Proposed Order to Show Cause to Preclude Defendant’s Expert Report. I make these statements based on my personal knowledge or my review of the record in this case. 3. The purpose of this affirmation is to attach documents relevant to the Court’s determination of the Proposed Order to Show Cause and to provide relevant procedural background. 1 1 of 7 FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 4. This case concerns a binding, mutual No-Shop Provision in a letter of intent (“LOI”) between Cresco and Fiorello. Unlike a typical no-shop provision, this No-Shop Provision was mutual, meaning that while Fiorello was prohibited from engaging in discussions with other potential acquirers, Cresco was similarly prohibited from engaging in discussions with other potential targets. Despite Fiorello’s commitment not to discuss the sale of its stock to any third party while the No-Shop Provision with Cresco was in place, Fiorello egregiously breached the No-Shop Provision by discussing the sale of its stock with multiple third parties, and ultimately entered into a deal with one of them. Fiorello’s breach meant that Cresco could no longer acquire Fiorello’s stock and obtain a foothold in the New York market without paying a premium for the last available New York-licensed company—precisely the harm the No-Shop Provision was intended to prevent. 5. On June 26, 2018, Cresco filed its initial complaint. NYSCEF Doc. No. 8. On November 20, 2018, Cresco filed the Amended Complaint, which included a claim against Fiorello for breach of the No-Shop Provision in the LOI between Cresco and Fiorello. NYSCEF Doc. No. 60. On May 24, 2019, this Court issued a decision and order denying Defendants’ motion to dismiss the claim for breach of the No-Shop Provision. NYSCEF Doc. No. 119. 6. Fact discovery in this matter proceeded following the decision on the motion to dismiss. Beginning as early as November 2020, near the end of fact discovery, Cresco’s counsel attempted to negotiate a schedule for expert discovery with Fiorello’s counsel. A true and correct copy of a November 11, 2020 email I sent to Fiorello’s counsel proposing a schedule for expert discovery is attached hereto as Exhibit 1. In response, Fiorello’s counsel proposed to delay expert discovery until after Fiorello had moved for summary judgment and the Court had ruled on that motion. 2 2 of 7 FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 7. At a court conference in January 2021, Cresco requested a schedule for expert discovery. Relevant excerpts of a true and correct copy of the transcript of the January 13, 2021 conference is attached hereto as Exhibit 2. Fiorello proposed to delay expert discovery until after the Court had ruled on summary judgment motions. The Court declined to delay expert discovery, emphasizing that the Commercial Division rules expect the parties to engage in expert discovery. 8. Pursuant to Commercial Division Rule 13, my colleagues repeatedly attempted to negotiate an expert discovery schedule with Fiorello’s counsel. Fiorello’s counsel refused to engage in flat violation of the Court’s ruling. A true and correct copy of my colleagues’ email correspondence requesting feedback on our proposed expert discovery schedule on January 29, 2021, February 4, 2021, and February 18, 2021, is attached hereto as Exhibit 3. 9. The parties contacted the Court to request entry of a scheduling order or a conference to discuss a scheduling order. A true and correct copy of the emails that Fiorello’s counsel and I sent to the court in February and March 2021 is attached hereto as Exhibit 4. 10. On July 2, 2021, while Cresco was waiting for the Court’s response about expert discovery, Fiorello filed a notice of motion of summary judgment on Cresco’s claim for breach of the No-Shop Provision. NYSCEF Doc. No. 221. Fiorello’s motion for summary judgment seeks, inter alia, to limit Cresco’s damages. It is premature to limit damages now, after Fiorello deliberately moved for summary judgment prior to Cresco’s expert report on damages and thus attempted to obtain dismissal of certain damages theories without fully understanding those theories or their support. As a result, Fiorello’s motion is limited to only one of the damages theories Cresco actually intends to pursue at trial. 3 3 of 7 FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 11. In opposition to Fiorello’s summary judgment motion, Cresco produced the expert report of A. Scott Davidson. A true and correct copy of Mr. Davidson’s report is attached hereto as Exhibit 5. 12. In his report, Mr. Davidson draws on his experience advising corporate mergers and acquisitions, including as related to letters of intent and exclusivity provisions. Mr. Davidson’s report notes that, by agreeing to a mutual No-Shop Provision, Cresco accepted the risk of a meaningful opportunity cost in the event that the acquisition of Fiorello did not proceed and Cresco needed to make a replacement acquisition at a higher price. 13. In response to Mr. Davidson’s report, Fiorello produced the report of Douglas S. Land. A true and correct copy of Mr. Land’s report is attached hereto as Exhibit 6. 14. Mr. Land’s report oversteps the role of an expert witness by speculating, offering legal opinions, and usurping the fact-finding role of the jury. The first two sections of Mr. Land’s report purport to set forth numerous opinions that are based on impermissible speculation about the mindset of a “reasonable buyer or seller in a corporate acquisition.” These opinions are pure speculation. Mr. Land’s report also includes opinions on issues which should only be determined by a factfinder or the Court, not an expert. 15. Because Fiorello refused to participate in expert discovery, Fiorello did not disclose its intention to rely on Mr. Land as an expert. Cresco learned of Fiorello’s reliance on Mr. Land’s report only upon its submission. Fiorello’s failure to disclose Mr. Land has deprived Cresco of an opportunity to cross-examine Mr. Land. 16. At a court conference on November 10, 2021, after Cresco had produced the expert report of Mr. Davidson but before Fiorello had produced the expert report of Mr. Land, Fiorello’s counsel stated their intention to file a motion to preclude Mr. Davidson’s report. The 4 4 of 7 FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 clerk, Mr. Kelly, instructed Fiorello’s counsel to bring the motion to preclude as an order to show cause. Accordingly, Cresco is similarly bringing its motion to preclude an expert report as an order to show cause. 17. On November 10, 2021, the Court entered a case management order in this case stating that “[e]xpert discovery shall conclude on March 10, 2022.” NYSCEF Doc. No. 225. 18. I affirm that the foregoing is true under penalty of perjury. New York, New York /s Jason P. Hipp _ January 7, 2022 Jason P. Hipp, Esq. Jenner & Block LLP Counsel for Plaintiffs Cresco Labs New York, LLC and Cresco Labs, LLC 5 5 of 7 FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 CERTIFICATION OF COMPLIANCE WITH WORD COUNT LIMIT I hereby certify pursuant to Rule 17 of the Rules of Practice for the Commercial Division that the total number of words in this affirmation, exclusive of the caption and signature block, is 1,123. Dated: January 7, 2022 New York, New York /s Jason P. Hipp Jason P. Hipp 1155 Avenue of the Americas New York, New York 10022 212-891-1670 jhipp@jenner.com Counsel for Plaintiffs Cresco Labs New York, LLC and Cresco Labs, LLC 6 6 of 7 FILED: NEW YORK COUNTY CLERK 01/07/2022 10:53 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 427 RECEIVED NYSCEF: 01/11/2022 CERTIFICATION OF COMPLIANCE WITH CPLR 2217 I hereby certify and affirm pursuant to New York Court Rule 2217 that no previous application has been made for the relief requested in Plaintiffs’ Proposed Order to Show Cause to Preclude Defendant’s Expert Report. Dated: January 11, 2022 New York, New York /s Jason P. Hipp Jason P. Hipp 1155 Avenue of the Americas New York, New York 10022 212-891-1670 jhipp@jenner.com Counsel for Plaintiffs Cresco Labs New York, LLC and Cresco Labs, LLC 1 7 of 7