Preview
FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 702 RECEIVED NYSCEF: 05/20/2022
Exhibit AAA
Excerpts from the Deposition of A. Scott Davidson taken April 8, 2022
Index No. 652343/2018 Motion Sequence 11
FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018
NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022
April 08, 2022
· · · · · ·SUPREME COURT OF THE STATE OF NEW YORK
· · · ·APPELLATE DIVISION, FIRST JUDICIAL DEPARTMENT
· · · · · · · · · · · · · · -· - -
· · ·CRESCO LABS, NEW YORK,· · ) Index No.: 652343/18
· · ·LLC, etc., et al.,· · · · ) Case No. 2021-00561
· · · · · · · · · · · · · · · ·)
· · ·Plaintiffs-Appellants,· · )
· · · · · · · · · · · · · · · ·)
· · · · · · · · · · · · · · · ·)
· · · · · · -against-· · · · · )
· · · · · · · · · · · · · · · ·)
· · · · · · · · · · · · · · · ·)
· · ·FIORELLO· · · · · · · · · )
· · ·PHARMACEUTICALS, INC.,· · )
· · ·etc.,· · · · · · · · · · ·)
· · · · · · · · · · · · · · · ·)
· · · · · · · · · · · · · · · ·)
· · ·Defendant-Respondent.· · ·)
· · · · · · · · · · · · · · · ·)
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·
· · · · · · · · · · · · · · · ·-· - -
· · · · · · · · ·VIRTUAL VIDEOTAPED DEPOSITION OF
· · · · · · · · · · · · ·A. SCOTT DAVIDSON
·
·
·
·
· · · ·****PAGES 39 THROUGH 51 CONTAIN ATTORNEYS AND
· · · ·EXPERTS EYES ONLY****
·
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·
· · · ·REPRODUCTION OF THIS TRANSCRIPT IS PROHIBITED
· · · ·WITHOUT AUTHORIZATION FROM THE CERTIFYING
· · · ·AGENCY
·
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·1· · · · · Q.· · Is there a factual basis for that
·2· · ·assumption that the transaction would have
·3· · ·closed?
·4· · · · · A.· · Well, there is a Letter of Intent.
·5· · · · · Q.· · Aside from the existence of the
·6· · ·Letter of Intent, are there other factual bases
·7· · ·for your belief that the transaction would have
·8· · ·closed?
·9· · · · · · · · · · ·MR. HIPP:· Objection.
10· · · · · · · · · · ·THE WITNESS:· Well, I was
11· · ·asked to assume that the transaction would
12· · ·close and I did not undertake, if you will, an
13· · ·independent review as to the possibility of it
14· · ·not closing.
15· · ·BY MS. IZOWER-FADDE:
16· · · · · Q.· · But you do, in your report, speak to
17· · ·the various -- you talk about DOH approval and
18· · ·you give an opinion that DOH would have
19· · ·approved.
20· · · · · · · · · · ·MR. HIPP:· Objection.· Sorry,
21· · ·there is a delay, I think, but objection.
22· · ·BY MS. IZOWER-FADDE:
23· · · · · Q.· · Go ahead.
24· · · · · A.· · So I may have misspoke in my
25· · ·previous answer.· Certainly, I speak about the
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·1· · ·possibility of there not being DOH approval and
·2· · ·provide a scenario in that circumstance.
·3· · · · · Q.· · What is that scenario?· So DOH does
·4· · ·not approve; what's the scenario then?
·5· · · · · · · · · · ·MR. HIPP:· Objection.
·6· · · · · · · · · · ·THE WITNESS:· Well, I would
·7· · ·refer you to my report.· I've got Scenario 1
·8· · ·and Scenario 2, Scenario 2 effectively being a
·9· · ·different purchase price for Fiorello in those
10· · ·circumstances.
11· · ·BY MS. IZOWER-FADDE:
12· · · · · Q.· · Were you asked to assume that
13· · ·Fiorello would be obligated to negotiate with
14· · ·or to reach some sort of agreement with Cresco
15· · ·after DOH -- you know, in the event that DOH
16· · ·did not approve?
17· · · · · A.· · Just give it to me one more time.
18· · ·I'm sorry.
19· · · · · Q.· · Yeah.· Were you -- you stated before
20· · ·that you were asked to assume that the
21· · ·transaction would have closed?
22· · · · · A.· · Correct.
23· · · · · Q.· · At least in terms of -- and that you
24· · ·did that, and that's your Scenario 1?
25· · · · · A.· · That is correct.
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·1· · · · · Q.· · Versus Scenario 2, were you asked to
·2· · ·assume that if the DOH did not approve the
·3· · ·transaction, that Fiorello and Cresco would
·4· · ·reach an agreement --
·5· · · · · A.· · And that the transaction would have
·6· · ·closed?
·7· · · · · Q.· · -- you know, and that the new
·8· · ·agreement would eventually be approved and
·9· · ·eventually close?
10· · · · · A.· · Yes.· I think that's fair.
11· · · · · Q.· · Do you have an opinion as to the
12· · ·likelihood that that assumption or the --
13· · ·sorry.· Let me strike that.
14· · · · · · · · Do you have an opinion as to the
15· · ·reasonableness of that assumption?
16· · · · · A.· · Well, I have no reason to think it's
17· · ·not a reasonable assumption.· I understand
18· · ·there may be a dispute in the case and there
19· · ·may be a legal overlay on top of all of that to
20· · ·which I am not party.
21· · · · · Q.· · Did Fiorello have any obligation to
22· · ·continue working with Cresco post-DOH rejection
23· · ·of the deal?
24· · · · · · · · · · ·MR. HIPP:· Objection.
25· · · · · · · · · · ·THE WITNESS:· Sorry.· I think
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·1· · · · · · · · · · ·THE WITNESS:· Did they play a
·2· · ·role?· Sorry.· I'm not trying to split hairs,
·3· · ·but I'm not sure I understand what that means.
·4· · ·BY MS. IZOWER-FADDE:
·5· · · · · Q.· · Did you consider whether -- sorry.
·6· · ·You have assumed in your report that there
·7· · ·would be DOH approval?
·8· · · · · · · · · · ·MR. HIPP:· Objection.
·9· · ·BY MS. IZOWER-FADDE:
10· · · · · Q.· · Is that true?
11· · · · · · · · · · ·MR. HIPP:· Objection.
12· · ·BY MS. IZOWER-FADDE:
13· · · · · Q.· · Scenario 1 assumes that.
14· · · · · A.· · Scenario --
15· · · · · Q.· · And Scenario 1 assumes that there
16· · ·would be DOH approval, some time down the line
17· · ·at least; is that correct?
18· · · · · A.· · I think that's fair.· Scenario 1
19· · ·assumes DOH approval, correct.
20· · · · · Q.· · And Scenario 2, somewhere down the
21· · ·line?
22· · · · · A.· · Correct.
23· · · · · Q.· · Because if there is no DOH approval,
24· · ·there is no loss?
25· · · · · · · · · · ·MR. HIPP:· Objection.
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·1· · ·circumstances in which DOH rejected because of
·2· · ·the contingency.
·3· · · · · Q.· · But, ultimately, if they didn't
·4· · ·accept Scenario 2, there is no loss; isn't that
·5· · ·correct?
·6· · · · · · · · · · ·MR. HIPP:· Objection.
·7· · · · · · · · · · ·THE WITNESS:· I would have to
·8· · ·think about that.· I am not -- it may not be
·9· · ·framed in the same fashion as I have been asked
10· · ·to address it, assuming that the transaction
11· · ·would close.
12· · ·BY MS. IZOWER-FADDE:
13· · · · · Q.· · Fair to say that your replacement
14· · ·cost analysis requires the assumption that DOH
15· · ·will approve the deal; is that at least fair to
16· · ·say?
17· · · · · A.· · It is fair to say that my analysis
18· · ·is constructed on the assumption that the
19· · ·transaction would close and whatever is
20· · ·necessary to close would close -- would happen,
21· · ·if you will.
22· · · · · Q.· · And if -- let me actually -- I think
23· · ·it's an appropriate time for a lunch break.
24· · · · · A.· · I didn't hear that.
25· · · · · · · · · · ·MS. IZOWER-FADDE:· I want to
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·1· · · · · Q.· · Do you know whether anybody at Duff
·2· · ·& Phelps has?
·3· · · · · A.· · I don't.· It's possible.
·4· · · · · · · · · · ·MS. IZOWER-FADDE:· We would
·5· · ·request disclosure of the matters, at least the
·6· · ·subject matter of the matters in which Duff &
·7· · ·Phelps or Mr. -- and Mr. Davidson, whether
·8· · ·Mr. Davidson was at Duff & Phelps or previously
·9· · ·had done work for either Cresco or Jenner &
10· · ·Block and how much was paid in connection --
11· · ·how much Duff & Phelps or Davidson or whatever
12· · ·entity he was at at the time was paid in
13· · ·connection with that representation.
14· · · · · · · · · · ·MR. HIPP:· We will take it
15· · ·under advisement.
16· · ·BY MS. IZOWER-FADDE:
17· · · · · Q.· · In connection with your replacement
18· · ·cost analysis, you mentioned the word
19· · ·"mitigation."· What does mitigation mean?
20· · · · · · · · · · ·MR. HIPP:· Objection.
21· · ·BY MS. IZOWER-FADDE:
22· · · · · Q.· · I believe you called it the
23· · ·mitigating transaction or the mitigation
24· · ·transaction in your report?
25· · · · · A.· · I don't recall exactly how I
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·1· · ·described it in the report, and the answer I
·2· · ·give you may not be the correct legal
·3· · ·definition of "mitigation."
·4· · · · · · · · From my perspective, it is -- the
·5· · ·financial result of it is the financial
·6· · ·implications, if you will, of actions taken to
·7· · ·reduce a loss or eliminate a loss or -- in the
·8· · ·circumstances of, I will say, a wrongdoing.
·9· · · · · Q.· · What is the loss that was mitigated
10· · ·by Cresco's purchase of Valley?
11· · · · · · · · · · ·MR. HIPP:· Objection.
12· · · · · · · · · · ·THE WITNESS:· So I think that,
13· · ·perhaps, "harm" is better than "loss" in the
14· · ·answer I just gave, though it may be, from a
15· · ·quantitative perspective, a loss quantum or
16· · ·loss amount.
17· · · · · · · · So to answer your question here, I
18· · ·think that the difficulty Cresco found itself
19· · ·in was that it was not able to complete the
20· · ·acquisition it intended to complete, which
21· · ·would have given it access to the New York
22· · ·market, and it was that that they were trying
23· · ·to alleviate.
24· · ·BY MS. IZOWER-FADDE:
25· · · · · Q.· · Could Cresco have spent any amount
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·1· · ·of money -- let me -- to purchase an alternate
·2· · ·New York licensee, was there any ceiling to the
·3· · ·amount for that transaction to be considered by
·4· · ·you to be a mitigating transaction?
·5· · · · · · · · · · ·MR. HIPP:· Objection, form.
·6· · · · · · · · · · ·THE WITNESS:· I'm not sure I
·7· · ·understand the question.· Was there any ceiling
·8· · ·amount?· In other words, are you asking if
·9· · ·there is some dollar amount by which it could
10· · ·not exceed?
11· · ·BY MS. IZOWER-FADDE:
12· · · · · Q.· · Yes.· Actually, let me just strike
13· · ·that.
14· · · · · · · · In this case -- sorry.· Could Cresco
15· · ·have paid $250 million for value -- for Valley
16· · ·and -- sorry, strike that again.
17· · · · · · · · If Cresco paid $250 million for
18· · ·Valley, would that be something you would
19· · ·consider as a mitigation or mitigating
20· · ·transaction?
21· · · · · A.· · Well, it's speculative because they
22· · ·didn't.· However --
23· · · · · Q.· · It's a hypothetical question and
24· · ·you're here as an expert.
25· · · · · A.· · And I was about to go on.· So let me
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·1· · ·go back.· First of all, speculative because
·2· · ·they didn't do that.· I would have thought that
·3· · ·they would have undertaken to address the issue
·4· · ·in a -- you know, in a financially prudent way.
·5· · ·So I wouldn't have thought they would have, for
·6· · ·example, voluntarily paid more than they had
·7· · ·to.
·8· · · · · · · · I presume they would pay what the
·9· · ·market would require them to pay under that
10· · ·circumstances.
11· · · · · Q.· · Is that an assumption that your
12· · ·report is based on, that the price Cresco paid
13· · ·for Valley was financially prudent?
14· · · · · A.· · Well, I'm not sure it's an explicit
15· · ·assumption, but I have no reason to think that
16· · ·Cresco intentionally overpaid.· So I think it's
17· · ·inherent in the nature of an arm's length
18· · ·transaction.
19· · · · · Q.· · Did you do any analysis to determine
20· · ·whether the price that Cresco paid to acquire
21· · ·Valley was financially prudent?
22· · · · · A.· · Not explicitly but, again, as I have
23· · ·said before, I think that it was an open market
24· · ·transaction between arm's length parties as I
25· · ·understand it.· It was the transaction that
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·1· · ·they saw fit to make at the time, and it
·2· · ·reflects the pricing that they negotiated at
·3· · ·the time.
·4· · · · · · · · Beyond that, I'm not sure I have
·5· · ·much to add.
·6· · · · · Q.· · So you didn't consider whether
·7· · ·Cresco paid more than was financially prudent;
·8· · ·did you?
·9· · · · · A.· · I'm not sure I agree with you there.
10· · ·I think that they paid what they had to pay.
11· · ·That would be my understanding, assumption and
12· · ·expectation, given the nature of the
13· · ·transaction we're talking about.
14· · · · · Q.· · So -- but by your reasoning, any
15· · ·agreement that's reached is always going to be
16· · ·financially prudent because why would two
17· · ·parties operating at arm's length enter into
18· · ·anything that, you know, wasn't financially
19· · ·prudent?
20· · · · · · · · It just feels -- unless I'm
21· · ·misunderstanding you, I mean, can you explain
22· · ·that?· Like how is it that what you're saying
23· · ·is not just it's an arm's length transaction so
24· · ·it must have been financially prudent?
25· · · · · · · · · · ·MR. HIPP:· Objection, form.
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·1· · · · · · · · · · ·THE WITNESS:· So I'll put it
·2· · ·in my words again.· It was a price that I
·3· · ·understand they paid and they would not have
·4· · ·overpaid, as I understand, at least voluntarily
·5· · ·overpaid for something.
·6· · · · · · · · Presumably it was a market -- it was
·7· · ·a market transaction, an in-market transaction
·8· · ·between arm's length parties and, therefore,
·9· · ·indicative of the then-market conditions for
10· · ·that acquisition.
11· · ·BY MS. IZOWER-FADDE:
12· · · · · Q.· · Do you know whether Cresco did a
13· · ·valuation of Valley in connection with
14· · ·determining how much it was willing to pay?
15· · · · · A.· · I do not.
16· · · · · Q.· · Have you seen any analysis that
17· · ·Cresco did in connection with its -- with
18· · ·valuing Valley?
19· · · · · A.· · No.· I have seen the result of the
20· · ·transaction.
21· · · · · Q.· · Meaning the final transaction
22· · ·documents?
23· · · · · A.· · Correct.
24· · · · · Q.· · Do you know whether Cresco conducted
25· · ·any due diligence?
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·1· · ·report.
·2· · · · · A.· · Correct.
·3· · · · · Q.· · Okay.· So would it be relevant to
·4· · ·your consideration -- let me strike that.
·5· · · · · · · · Are you aware that there was a
·6· · ·bidding process, an auction of Fiorello
·7· · ·following the expiration of the Letter of
·8· · ·Intent?
·9· · · · · A.· · I'm not aware of the details of
10· · ·that, no.
11· · · · · Q.· · Are you aware that there was one?
12· · · · · A.· · No.
13· · · · · Q.· · Would it be relevant to your
14· · ·consideration that Cresco participated in that
15· · ·bidding process?
16· · · · · · · · · · ·MR. HIPP:· Objection.
17· · · · · · · · · · ·THE WITNESS:· It actually
18· · ·might.
19· · ·BY MS. IZOWER-FADDE:
20· · · · · Q.· · Would that be relevant?
21· · · · · · · · · · ·MR. HIPP:· Objection.
22· · · · · · · · · · ·THE COURT REPORTER:· I'm
23· · ·sorry, the answer is getting cut off.
24· · · · · · · · · · ·THE WITNESS:· My apologies. I
25· · ·was answering too soon, I think.
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·1· · · · · A.· · So not to split hairs, I think that
·2· · ·what you said is correct insofar as I assumed
·3· · ·or was asked to assume that the transaction
·4· · ·would close.· As against that assumption,
·5· · ·however, the question then becomes the pricing,
·6· · ·and that constitutes what I refer to as "but
·7· · ·for" here.
·8· · · · · Q.· · You're not evaluating whether the
·9· · ·breach actually was the reason that the
10· · ·transaction did not close; isn't that correct?
11· · · · · A.· · First of all, I assume you meant
12· · ·alleged breach.· But whether the breach was the
13· · ·reason that the transaction did not close?
14· · · · · Q.· · (Nodded head affirmatively.)
15· · · · · A.· · Again, I'm assuming that but for the
16· · ·alleged breach, the transaction would have
17· · ·closed, as that's what I was asked to assume.
18· · ·I hope that made sense.
19· · · · · Q.· · It did.· And I appreciate -- I mean,
20· · ·certainly, I agree that the breach is only
21· · ·alleged.· I think part of what I was trying to
22· · ·say is, even if you were to assume the breach,
23· · ·you didn't sort of look at other steps that
24· · ·might have been required before the transaction
25· · ·could close; you didn't evaluate any of those
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·1· · ·Cresco was obviously interested in New York
·2· · ·and, hence, the Fiorello LOI, et cetera, and
·3· · ·that they must have remained interested in New
·4· · ·York given the acquisition they made.
·5· · · · · Q.· · Why do you think that a replacement
·6· · ·transaction, like replacement cost, is an
·7· · ·appropriate measure of damages here?
·8· · · · · · · · · · ·MR. HIPP:· Objection.
·9· · · · · · · · · · ·THE WITNESS:· So I think that
10· · ·the basis for my approach and thinking is set
11· · ·out in the report.· The essence of it here,
12· · ·however, is that Cresco, having not been able
13· · ·to complete the Fiorello acquisition and
14· · ·wanting a New York footprint, did that through
15· · ·the acquisition of Valley and it cost them
16· · ·more.
17· · ·BY MS. IZOWER-FADDE:
18· · · · · Q.· · Is it your opinion that Cresco was
19· · ·forced to buy Valley?
20· · · · · A.· · I don't think "forced" is the right
21· · ·word.· I don't know who would force them to do
22· · ·it.· However, I expect that they pursued the
23· · ·market that they thought was important to their
24· · ·business.
25· · · · · Q.· · And have you seen any documents that
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·1· · ·BY MS. IZOWER-FADDE:
·2· · · · · Q.· · And not all the multistate operators
·3· · ·have presence in New York; do they?
·4· · · · · A.· · I'm sorry, I didn't hear you.
·5· · · · · Q.· · Not all multistate operators have a
·6· · ·presence in New York; do they?
·7· · · · · A.· · Fair enough.
·8· · · · · Q.· · That's correct; right?
·9· · · · · A.· · I believe so.
10· · · · · Q.· · And isn't it also correct that not
11· · ·all publicly listed multistate operators in the
12· · ·cannabis industry have a presence in New York;
13· · ·isn't that also correct?
14· · · · · A.· · I believe that's correct, yes.
15· · · · · Q.· · At the time in 2018, was it also
16· · ·correct then?
17· · · · · A.· · Yes.
18· · · · · Q.· · And in 2018, both before and --
19· · ·sorry.
20· · · · · · · · It was also correct after Cresco's
21· · ·deal with Valley closed, isn't it, that there
22· · ·were other multistate cannabis licensees that
23· · ·did not have licenses in New York?
24· · · · · A.· · I believe that's correct, yes.
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FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 RECEIVED NYSCEF: 05/20/2022 Exhibit AAA Excerpts from the Deposition of A. Scott Davidson taken April 8, 2022 Index No. 652343/2018 Motion Sequence 11 FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 · · · · · ·SUPREME COURT OF THE STATE OF NEW YORK · · · ·APPELLATE DIVISION, FIRST JUDICIAL DEPARTMENT · · · · · · · · · · · · · · -· - - · · ·CRESCO LABS, NEW YORK,· · ) Index No.: 652343/18 · · ·LLC, etc., et al.,· · · · ) Case No. 2021-00561 · · · · · · · · · · · · · · · ·) · · ·Plaintiffs-Appellants,· · ) · · · · · · · · · · · · · · · ·) · · · · · · · · · · · · · · · ·) · · · · · · -against-· · · · · ) · · · · · · · · · · · · · · · ·) · · · · · · · · · · · · · · · ·) · · ·FIORELLO· · · · · · · · · ) · · ·PHARMACEUTICALS, INC.,· · ) · · ·etc.,· · · · · · · · · · ·) · · · · · · · · · · · · · · · ·) · · · · · · · · · · · · · · · ·) · · ·Defendant-Respondent.· · ·) · · · · · · · · · · · · · · · ·) · · · · · · · · · · · · · · · · · ·-· - - · · · · · · · · ·VIRTUAL VIDEOTAPED DEPOSITION OF · · · · · · · · · · · · ·A. SCOTT DAVIDSON · · · · · · · ·****PAGES 39 THROUGH 51 CONTAIN ATTORNEYS AND · · · ·EXPERTS EYES ONLY**** · · · · · · ·REPRODUCTION OF THIS TRANSCRIPT IS PROHIBITED · · · ·WITHOUT AUTHORIZATION FROM THE CERTIFYING · · · ·AGENCY · U.S. Legal Support | www.uslegalsupport.com · FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · · · · Q.· · Is there a factual basis for that ·2· · ·assumption that the transaction would have ·3· · ·closed? ·4· · · · · A.· · Well, there is a Letter of Intent. ·5· · · · · Q.· · Aside from the existence of the ·6· · ·Letter of Intent, are there other factual bases ·7· · ·for your belief that the transaction would have ·8· · ·closed? ·9· · · · · · · · · · ·MR. HIPP:· Objection. 10· · · · · · · · · · ·THE WITNESS:· Well, I was 11· · ·asked to assume that the transaction would 12· · ·close and I did not undertake, if you will, an 13· · ·independent review as to the possibility of it 14· · ·not closing. 15· · ·BY MS. IZOWER-FADDE: 16· · · · · Q.· · But you do, in your report, speak to 17· · ·the various -- you talk about DOH approval and 18· · ·you give an opinion that DOH would have 19· · ·approved. 20· · · · · · · · · · ·MR. HIPP:· Objection.· Sorry, 21· · ·there is a delay, I think, but objection. 22· · ·BY MS. IZOWER-FADDE: 23· · · · · Q.· · Go ahead. 24· · · · · A.· · So I may have misspoke in my 25· · ·previous answer.· Certainly, I speak about the U.S. Legal Support | www.uslegalsupport.com 123 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·possibility of there not being DOH approval and ·2· · ·provide a scenario in that circumstance. ·3· · · · · Q.· · What is that scenario?· So DOH does ·4· · ·not approve; what's the scenario then? ·5· · · · · · · · · · ·MR. HIPP:· Objection. ·6· · · · · · · · · · ·THE WITNESS:· Well, I would ·7· · ·refer you to my report.· I've got Scenario 1 ·8· · ·and Scenario 2, Scenario 2 effectively being a ·9· · ·different purchase price for Fiorello in those 10· · ·circumstances. 11· · ·BY MS. IZOWER-FADDE: 12· · · · · Q.· · Were you asked to assume that 13· · ·Fiorello would be obligated to negotiate with 14· · ·or to reach some sort of agreement with Cresco 15· · ·after DOH -- you know, in the event that DOH 16· · ·did not approve? 17· · · · · A.· · Just give it to me one more time. 18· · ·I'm sorry. 19· · · · · Q.· · Yeah.· Were you -- you stated before 20· · ·that you were asked to assume that the 21· · ·transaction would have closed? 22· · · · · A.· · Correct. 23· · · · · Q.· · At least in terms of -- and that you 24· · ·did that, and that's your Scenario 1? 25· · · · · A.· · That is correct. U.S. Legal Support | www.uslegalsupport.com 124 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · · · · Q.· · Versus Scenario 2, were you asked to ·2· · ·assume that if the DOH did not approve the ·3· · ·transaction, that Fiorello and Cresco would ·4· · ·reach an agreement -- ·5· · · · · A.· · And that the transaction would have ·6· · ·closed? ·7· · · · · Q.· · -- you know, and that the new ·8· · ·agreement would eventually be approved and ·9· · ·eventually close? 10· · · · · A.· · Yes.· I think that's fair. 11· · · · · Q.· · Do you have an opinion as to the 12· · ·likelihood that that assumption or the -- 13· · ·sorry.· Let me strike that. 14· · · · · · · · Do you have an opinion as to the 15· · ·reasonableness of that assumption? 16· · · · · A.· · Well, I have no reason to think it's 17· · ·not a reasonable assumption.· I understand 18· · ·there may be a dispute in the case and there 19· · ·may be a legal overlay on top of all of that to 20· · ·which I am not party. 21· · · · · Q.· · Did Fiorello have any obligation to 22· · ·continue working with Cresco post-DOH rejection 23· · ·of the deal? 24· · · · · · · · · · ·MR. HIPP:· Objection. 25· · · · · · · · · · ·THE WITNESS:· Sorry.· I think U.S. Legal Support | www.uslegalsupport.com 125 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · · · · · · · · · ·THE WITNESS:· Did they play a ·2· · ·role?· Sorry.· I'm not trying to split hairs, ·3· · ·but I'm not sure I understand what that means. ·4· · ·BY MS. IZOWER-FADDE: ·5· · · · · Q.· · Did you consider whether -- sorry. ·6· · ·You have assumed in your report that there ·7· · ·would be DOH approval? ·8· · · · · · · · · · ·MR. HIPP:· Objection. ·9· · ·BY MS. IZOWER-FADDE: 10· · · · · Q.· · Is that true? 11· · · · · · · · · · ·MR. HIPP:· Objection. 12· · ·BY MS. IZOWER-FADDE: 13· · · · · Q.· · Scenario 1 assumes that. 14· · · · · A.· · Scenario -- 15· · · · · Q.· · And Scenario 1 assumes that there 16· · ·would be DOH approval, some time down the line 17· · ·at least; is that correct? 18· · · · · A.· · I think that's fair.· Scenario 1 19· · ·assumes DOH approval, correct. 20· · · · · Q.· · And Scenario 2, somewhere down the 21· · ·line? 22· · · · · A.· · Correct. 23· · · · · Q.· · Because if there is no DOH approval, 24· · ·there is no loss? 25· · · · · · · · · · ·MR. HIPP:· Objection. U.S. Legal Support | www.uslegalsupport.com 127 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·circumstances in which DOH rejected because of ·2· · ·the contingency. ·3· · · · · Q.· · But, ultimately, if they didn't ·4· · ·accept Scenario 2, there is no loss; isn't that ·5· · ·correct? ·6· · · · · · · · · · ·MR. HIPP:· Objection. ·7· · · · · · · · · · ·THE WITNESS:· I would have to ·8· · ·think about that.· I am not -- it may not be ·9· · ·framed in the same fashion as I have been asked 10· · ·to address it, assuming that the transaction 11· · ·would close. 12· · ·BY MS. IZOWER-FADDE: 13· · · · · Q.· · Fair to say that your replacement 14· · ·cost analysis requires the assumption that DOH 15· · ·will approve the deal; is that at least fair to 16· · ·say? 17· · · · · A.· · It is fair to say that my analysis 18· · ·is constructed on the assumption that the 19· · ·transaction would close and whatever is 20· · ·necessary to close would close -- would happen, 21· · ·if you will. 22· · · · · Q.· · And if -- let me actually -- I think 23· · ·it's an appropriate time for a lunch break. 24· · · · · A.· · I didn't hear that. 25· · · · · · · · · · ·MS. IZOWER-FADDE:· I want to U.S. Legal Support | www.uslegalsupport.com 129 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · · · · Q.· · Do you know whether anybody at Duff ·2· · ·& Phelps has? ·3· · · · · A.· · I don't.· It's possible. ·4· · · · · · · · · · ·MS. IZOWER-FADDE:· We would ·5· · ·request disclosure of the matters, at least the ·6· · ·subject matter of the matters in which Duff & ·7· · ·Phelps or Mr. -- and Mr. Davidson, whether ·8· · ·Mr. Davidson was at Duff & Phelps or previously ·9· · ·had done work for either Cresco or Jenner & 10· · ·Block and how much was paid in connection -- 11· · ·how much Duff & Phelps or Davidson or whatever 12· · ·entity he was at at the time was paid in 13· · ·connection with that representation. 14· · · · · · · · · · ·MR. HIPP:· We will take it 15· · ·under advisement. 16· · ·BY MS. IZOWER-FADDE: 17· · · · · Q.· · In connection with your replacement 18· · ·cost analysis, you mentioned the word 19· · ·"mitigation."· What does mitigation mean? 20· · · · · · · · · · ·MR. HIPP:· Objection. 21· · ·BY MS. IZOWER-FADDE: 22· · · · · Q.· · I believe you called it the 23· · ·mitigating transaction or the mitigation 24· · ·transaction in your report? 25· · · · · A.· · I don't recall exactly how I U.S. Legal Support | www.uslegalsupport.com 141 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·described it in the report, and the answer I ·2· · ·give you may not be the correct legal ·3· · ·definition of "mitigation." ·4· · · · · · · · From my perspective, it is -- the ·5· · ·financial result of it is the financial ·6· · ·implications, if you will, of actions taken to ·7· · ·reduce a loss or eliminate a loss or -- in the ·8· · ·circumstances of, I will say, a wrongdoing. ·9· · · · · Q.· · What is the loss that was mitigated 10· · ·by Cresco's purchase of Valley? 11· · · · · · · · · · ·MR. HIPP:· Objection. 12· · · · · · · · · · ·THE WITNESS:· So I think that, 13· · ·perhaps, "harm" is better than "loss" in the 14· · ·answer I just gave, though it may be, from a 15· · ·quantitative perspective, a loss quantum or 16· · ·loss amount. 17· · · · · · · · So to answer your question here, I 18· · ·think that the difficulty Cresco found itself 19· · ·in was that it was not able to complete the 20· · ·acquisition it intended to complete, which 21· · ·would have given it access to the New York 22· · ·market, and it was that that they were trying 23· · ·to alleviate. 24· · ·BY MS. IZOWER-FADDE: 25· · · · · Q.· · Could Cresco have spent any amount U.S. Legal Support | www.uslegalsupport.com 142 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·of money -- let me -- to purchase an alternate ·2· · ·New York licensee, was there any ceiling to the ·3· · ·amount for that transaction to be considered by ·4· · ·you to be a mitigating transaction? ·5· · · · · · · · · · ·MR. HIPP:· Objection, form. ·6· · · · · · · · · · ·THE WITNESS:· I'm not sure I ·7· · ·understand the question.· Was there any ceiling ·8· · ·amount?· In other words, are you asking if ·9· · ·there is some dollar amount by which it could 10· · ·not exceed? 11· · ·BY MS. IZOWER-FADDE: 12· · · · · Q.· · Yes.· Actually, let me just strike 13· · ·that. 14· · · · · · · · In this case -- sorry.· Could Cresco 15· · ·have paid $250 million for value -- for Valley 16· · ·and -- sorry, strike that again. 17· · · · · · · · If Cresco paid $250 million for 18· · ·Valley, would that be something you would 19· · ·consider as a mitigation or mitigating 20· · ·transaction? 21· · · · · A.· · Well, it's speculative because they 22· · ·didn't.· However -- 23· · · · · Q.· · It's a hypothetical question and 24· · ·you're here as an expert. 25· · · · · A.· · And I was about to go on.· So let me U.S. Legal Support | www.uslegalsupport.com 143 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·go back.· First of all, speculative because ·2· · ·they didn't do that.· I would have thought that ·3· · ·they would have undertaken to address the issue ·4· · ·in a -- you know, in a financially prudent way. ·5· · ·So I wouldn't have thought they would have, for ·6· · ·example, voluntarily paid more than they had ·7· · ·to. ·8· · · · · · · · I presume they would pay what the ·9· · ·market would require them to pay under that 10· · ·circumstances. 11· · · · · Q.· · Is that an assumption that your 12· · ·report is based on, that the price Cresco paid 13· · ·for Valley was financially prudent? 14· · · · · A.· · Well, I'm not sure it's an explicit 15· · ·assumption, but I have no reason to think that 16· · ·Cresco intentionally overpaid.· So I think it's 17· · ·inherent in the nature of an arm's length 18· · ·transaction. 19· · · · · Q.· · Did you do any analysis to determine 20· · ·whether the price that Cresco paid to acquire 21· · ·Valley was financially prudent? 22· · · · · A.· · Not explicitly but, again, as I have 23· · ·said before, I think that it was an open market 24· · ·transaction between arm's length parties as I 25· · ·understand it.· It was the transaction that U.S. Legal Support | www.uslegalsupport.com 144 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·they saw fit to make at the time, and it ·2· · ·reflects the pricing that they negotiated at ·3· · ·the time. ·4· · · · · · · · Beyond that, I'm not sure I have ·5· · ·much to add. ·6· · · · · Q.· · So you didn't consider whether ·7· · ·Cresco paid more than was financially prudent; ·8· · ·did you? ·9· · · · · A.· · I'm not sure I agree with you there. 10· · ·I think that they paid what they had to pay. 11· · ·That would be my understanding, assumption and 12· · ·expectation, given the nature of the 13· · ·transaction we're talking about. 14· · · · · Q.· · So -- but by your reasoning, any 15· · ·agreement that's reached is always going to be 16· · ·financially prudent because why would two 17· · ·parties operating at arm's length enter into 18· · ·anything that, you know, wasn't financially 19· · ·prudent? 20· · · · · · · · It just feels -- unless I'm 21· · ·misunderstanding you, I mean, can you explain 22· · ·that?· Like how is it that what you're saying 23· · ·is not just it's an arm's length transaction so 24· · ·it must have been financially prudent? 25· · · · · · · · · · ·MR. HIPP:· Objection, form. U.S. Legal Support | www.uslegalsupport.com 145 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · · · · · · · · · ·THE WITNESS:· So I'll put it ·2· · ·in my words again.· It was a price that I ·3· · ·understand they paid and they would not have ·4· · ·overpaid, as I understand, at least voluntarily ·5· · ·overpaid for something. ·6· · · · · · · · Presumably it was a market -- it was ·7· · ·a market transaction, an in-market transaction ·8· · ·between arm's length parties and, therefore, ·9· · ·indicative of the then-market conditions for 10· · ·that acquisition. 11· · ·BY MS. IZOWER-FADDE: 12· · · · · Q.· · Do you know whether Cresco did a 13· · ·valuation of Valley in connection with 14· · ·determining how much it was willing to pay? 15· · · · · A.· · I do not. 16· · · · · Q.· · Have you seen any analysis that 17· · ·Cresco did in connection with its -- with 18· · ·valuing Valley? 19· · · · · A.· · No.· I have seen the result of the 20· · ·transaction. 21· · · · · Q.· · Meaning the final transaction 22· · ·documents? 23· · · · · A.· · Correct. 24· · · · · Q.· · Do you know whether Cresco conducted 25· · ·any due diligence? U.S. Legal Support | www.uslegalsupport.com 146 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·report. ·2· · · · · A.· · Correct. ·3· · · · · Q.· · Okay.· So would it be relevant to ·4· · ·your consideration -- let me strike that. ·5· · · · · · · · Are you aware that there was a ·6· · ·bidding process, an auction of Fiorello ·7· · ·following the expiration of the Letter of ·8· · ·Intent? ·9· · · · · A.· · I'm not aware of the details of 10· · ·that, no. 11· · · · · Q.· · Are you aware that there was one? 12· · · · · A.· · No. 13· · · · · Q.· · Would it be relevant to your 14· · ·consideration that Cresco participated in that 15· · ·bidding process? 16· · · · · · · · · · ·MR. HIPP:· Objection. 17· · · · · · · · · · ·THE WITNESS:· It actually 18· · ·might. 19· · ·BY MS. IZOWER-FADDE: 20· · · · · Q.· · Would that be relevant? 21· · · · · · · · · · ·MR. HIPP:· Objection. 22· · · · · · · · · · ·THE COURT REPORTER:· I'm 23· · ·sorry, the answer is getting cut off. 24· · · · · · · · · · ·THE WITNESS:· My apologies. I 25· · ·was answering too soon, I think. U.S. Legal Support | www.uslegalsupport.com 163 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · · · · A.· · So not to split hairs, I think that ·2· · ·what you said is correct insofar as I assumed ·3· · ·or was asked to assume that the transaction ·4· · ·would close.· As against that assumption, ·5· · ·however, the question then becomes the pricing, ·6· · ·and that constitutes what I refer to as "but ·7· · ·for" here. ·8· · · · · Q.· · You're not evaluating whether the ·9· · ·breach actually was the reason that the 10· · ·transaction did not close; isn't that correct? 11· · · · · A.· · First of all, I assume you meant 12· · ·alleged breach.· But whether the breach was the 13· · ·reason that the transaction did not close? 14· · · · · Q.· · (Nodded head affirmatively.) 15· · · · · A.· · Again, I'm assuming that but for the 16· · ·alleged breach, the transaction would have 17· · ·closed, as that's what I was asked to assume. 18· · ·I hope that made sense. 19· · · · · Q.· · It did.· And I appreciate -- I mean, 20· · ·certainly, I agree that the breach is only 21· · ·alleged.· I think part of what I was trying to 22· · ·say is, even if you were to assume the breach, 23· · ·you didn't sort of look at other steps that 24· · ·might have been required before the transaction 25· · ·could close; you didn't evaluate any of those U.S. Legal Support | www.uslegalsupport.com 177 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·Cresco was obviously interested in New York ·2· · ·and, hence, the Fiorello LOI, et cetera, and ·3· · ·that they must have remained interested in New ·4· · ·York given the acquisition they made. ·5· · · · · Q.· · Why do you think that a replacement ·6· · ·transaction, like replacement cost, is an ·7· · ·appropriate measure of damages here? ·8· · · · · · · · · · ·MR. HIPP:· Objection. ·9· · · · · · · · · · ·THE WITNESS:· So I think that 10· · ·the basis for my approach and thinking is set 11· · ·out in the report.· The essence of it here, 12· · ·however, is that Cresco, having not been able 13· · ·to complete the Fiorello acquisition and 14· · ·wanting a New York footprint, did that through 15· · ·the acquisition of Valley and it cost them 16· · ·more. 17· · ·BY MS. IZOWER-FADDE: 18· · · · · Q.· · Is it your opinion that Cresco was 19· · ·forced to buy Valley? 20· · · · · A.· · I don't think "forced" is the right 21· · ·word.· I don't know who would force them to do 22· · ·it.· However, I expect that they pursued the 23· · ·market that they thought was important to their 24· · ·business. 25· · · · · Q.· · And have you seen any documents that U.S. Legal Support | www.uslegalsupport.com 205 YVer1f FILED: NEW YORK COUNTY CLERK 05/20/2022 02:10 PM INDEX NO. 652343/2018 NYSCEF DOC. NO. 702 A. Scott Davidson RECEIVED NYSCEF: 05/20/2022 April 08, 2022 ·1· · ·BY MS. IZOWER-FADDE: ·2· · · · · Q.· · And not all the multistate operators ·3· · ·have presence in New York; do they? ·4· · · · · A.· · I'm sorry, I didn't hear you. ·5· · · · · Q.· · Not all multistate operators have a ·6· · ·presence in New York; do they? ·7· · · · · A.· · Fair enough. ·8· · · · · Q.· · That's correct; right? ·9· · · · · A.· · I believe so. 10· · · · · Q.· · And isn't it also correct that not 11· · ·all publicly listed multistate operators in the 12· · ·cannabis industry have a presence in New York; 13· · ·isn't that also correct? 14· · · · · A.· · I believe that's correct, yes. 15· · · · · Q.· · At the time in 2018, was it also 16· · ·correct then? 17· · · · · A.· · Yes. 18· · · · · Q.· · And in 2018, both before and -- 19· · ·sorry. 20· · · · · · · · It was also correct after Cresco's 21· · ·deal with Valley closed, isn't it, that there 22· · ·were other multistate cannabis licensees that 23· · ·did not have licenses in New York? 24· · · · · A.· · I believe that's correct, yes.