Preview
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NYSCEF DOC. NO. 98 RECEIVED NYSCEF: 02/05/2019
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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CRESCO LABS, NEW YORK, LLC, a New York
limited liability company, and CRESCO LABS LLC, Index No.: 652343/2018
an Illinois limited liability company, Hon. Andrew J. Borrok
Plaintiff,
-against- Mot. Seq. No. 07
FIORELLO PHARMACEUTICALS, INC., a New York
corporation, ERIC SIROTA, an individual, SUSAN
YOSS, an individual, and JOHN DOES 1-10,
Defendants.
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DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT
OF MOTION TO DISMISS THE AMENDED COMPLAINT
IZOWER FELDMAN, LLP
Attorneys for Defendants Fiorello
Pharmaceuticals, Eric Sirota and
Susan Yoss
85 Broad Street, Floor 18
New York, New York 10004
Tel: (646) 688-3232
Fax: (646) 304-7071
On the brief
Ronald D. Lefton
Rachel Izower-Faddé
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TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................................................ ii
PRELIMINARY STATEMENT .......................................................................................................... 1
THE LETTER OF INTENT ................................................................................................................. 2
ARGUMENT ........................................................................................................................................ 6
I. CRESCO HAS NOT ALLEGED THE ELEMENTS OF BREACH OF CONTRACT ......6
A. The LOI Is An Unenforceable Agreement To Agree ..............................................6
1. The Owners Of The Shares That Plaintiffs Sought To Purchase Are Not
Parties To The LOI And Cannot Be Bound By It ...............................................7
2. The LOI Is Riddled With Material Missing Terms.............................................9
B. CRESCO Has Not Performed Under the LOI .......................................................10
C. Even If A Contract Was Formed, There Was No Breach ......................................11
1. The LOI’s Term Ended on March 29, 2018 .....................................................11
2. The Complaint Does Not Adequately Allege “Bad Faith” ..............................13
3. The Allegations Of Frustration Of A Condition Precedent Misconstrue
the LOI .............................................................................................................16
D. Even If The LOI Is Binding, CRESCO’s Claims Must Still Be Limited To
Out-of-Pocket Costs It Expended During The LOI’s Term...................................17
II. SIROTA AND YOSS WERE NOT UNJUSTLY ENRICHED AT CRESCO’S
EXPENSE ........................................................................................................................19
III. CRESCO HAS NOT STATED A CLAIM FOR TORTIOUS INTERFERENCE
WITH CONTRACT .........................................................................................................20
CONCLUSION ..............................................................................................................................22
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TABLE OF AUTHORITIES
CASES
180 Water Street Associates, L.P. v. Lehman Brothers Holdings, Inc.
7 A.D.3d 316, (1st Dep’t 2004) ............................................................................................17
Cantor Fitzgerald Assoc., L.P. v. Tradition N. Am., Inc.
299 A.D.2d 204 (1st Dep’t 2002), lv denied 99 N.Y.2d 508 (2002) .................................21
City of New York v. 17 Vista Associates
84 N.Y.2d 299, 306 (1994) ...................................................................................................17
CKC Chiropractic v. Republic W. Ins. Co.
5 Misc.3d 492 (Civ. Ct. 2004) .......................................................................................16, n.7
Clifford R. Gray, Inc. v. LeChase Const. Services, LLC
31 A.D.3d 983 (3d Dep’t 2006) ............................................................................................19
Corsello v. Verizon New York, Inc.
18 N.Y.3d 777, 790-91 (2012) ............................................................................................... 20
Dong v. First Korean Church of N.Y.
151 A.D.3d 930 (2d Dep’t 2017) ............................................................................................8
Double Fortune Prop. Investors Corp. v. Gordon
55 A.D.3d 406 (1st Dep’t 2008) ...........................................................................................12
Durante Bros. Const. Corp. v. Coll. Point Sports Ass’n, Inc.
207 A.D.2d 379, 380 (2d Dep’t 1994) .................................................................................................20
Eastern States Health & Welfare Fund v Philip Morris, Inc.
188 Misc.2d 638 (Sup Ct N.Y. Cty 2000) ..................................................................................6
ERC 16W Ltd. P’ship v. Xanadu Mezz Holds. LLC
2015 WL 247404 (Sup. Ct. N.Y. Cty Jan. 14, 2015)
aff’d, 133 A.D.3d 444 (1st Dep’t 2015).................................................................................19
GMC Mercantile Corp. v. Bon Worth, Inc.
60 Misc.3d 1218(A), at 5 (Sup. Ct. N.Y. Cty 2018) …………………..………..……….19
Goel v. Ramachandran
111 A.D.3d 783, 786 (2d Dep’t 2013)…………………………………………………...19
Goodstein Constr. Corp v City of New York
80 N.Y.2d 366 (1992) ...........................................................................................................17
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Goshen v. Mut. Life Ins. Co. of NY
98 N.Y.2d 314 (2002) .............................................................................................................................. 6
Harris v. Seward Park Hous. Corp.
79 A.D.3d 425 (1st Dep’t 2010) .............................................................................................................. 6
IDT Corp. v. Tyco Group, S.A.R.L.
23 N.Y.3d 497, 504 (2014) ....................................................................................... 13-14, 16
IDT Corp v. Tyco Group, S.A.R.L.
13 N.Y.3d 209, 212 (2009) ...................................................................................................16
Interweb, Inc. v. iPayment, Inc.
12 A.D.3d 164 (1st Dep’t 2004) ............................................................................................12
Janusonis v. Carauskas
137 A.D.3d 1218, 1220 (2d Dep’t 2016) ......................................................................19, n. 8
Kaye v. Grossman
202 F.3d 611, 616 (2d Cir. 2000)..........................................................................................19
Keitel v. E*Trade Fin. Corp.
55 Misc.3d 1211(A) (Sup. Ct. N.Y. Cty 2017) ................................................................. 9-10
Lama Holding Co. v. Smith Barney Inc.,
88 N.Y.2d 413, 424 (1996) ...................................................................................................20
Lipton v. Green
51 Misc.3d 1210(A) (Sup. Ct. N.Y. Cty 2016) .....................................................................12
M & G Polymers USA, LLC v Tackett
135 S Ct 926, 936 (2015) ..............................................................................................12, n. 5
Meyers Assocs., L.P. v. Conolog Corp.
19 Misc.3d 1104(A) (Sup. Ct., N.Y. Cty, 2008)................................................................................ 7
MG West 100 LLC v St Michaels Protestant Episcopal Church
127 A.D.3d 624 (1st Dep’t 2015), ........................................................................................10
Mode Contempo, Inc. v. Raymours Furniture Co., Inc.
80 A.D.3d 464 (1st Dep’t 2011) ........................................................................................9, 13
NBT Bancorp Inc. v Fleet/Norstar Fin. Group Inc.
87 N.Y. 2d 614 (1996) ..........................................................................................................15
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Noise in the Attic Prods., Inc. v. London Records
10 A.D.3d 303, 304 (1st Dep’t 2004) ......................................................................................6
Promerica Fin. Corp. v. Immoholdings, Inc.
107 A.D.3d 474 (1st Dep’t 2013) ............................................................................................................ 7
Pursuit Inv. Mgt. LLC v. Alpha Beta Cap. Partners, L.P.
127 A.D.3d 580 (1st Dep’t 2015) ..................................................................................21, n.9
Reva Capital Mkts. LLC v. Northend Energy Ltd.
49 Misc.3d 1219(A) (Sup. Ct. N.Y. Cty 2015) ..............................................................21 n. 9
S. Fourth St. Props., Inc. v. Muschel
1 A.D.3d 347 (2d Dep’t 2003) ..............................................................................................21
Stone v. Solarbrite
512 N.Y.S.2d 784, 784-85 (App. Div. 2d Dep’t 1987).........................................................19
Syncora Guar. Inc. v Alinda Capital Partners LLC
2017 NY Slip Op 30288[U], 13–16 (Sup Ct N.Y. Cty 2017) .......................................19, n. 8
Tess Color Hair Salon, Inc. v. First Sigma Capital Inc.
2008 WL 3847331 (Sup. Ct. N.Y. Cty., July 31, 2008) .................................................21, n. 9
Teutul v. Teutul
79 A.D.3d 851 (2d Dep’t 2010)................................................................................................... 6
Wrobel v. Shaw Envtl. & Infrastructure Eng’g of New York, P.C.
56 Misc.3d 798, 806 (N.Y. Sup. Ct. 2017) .................................................................16, n.7
STATUTES AND RULES
N.Y. C.P.L.R. § 3211 .....................................................................................................1, 6, 19, n. 8
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PRELIMINARY STATEMENT
Defendants Fiorello Pharmaceuticals, Inc. (“Fiorello”), Susan Yoss and Eric Sirota submit
this memorandum in support of their motion to dismiss the amended complaint1 pursuant to
C.P.L.R. §3211(a)(1) & (7). Plaintiffs Cresco Labs NY (“CLNY”) and Cresco Labs LLC
(“Cresco”) assert claims against Fiorello for breach of a February 14, 2018 Equity Purchase
Agreement Letter Of Intent (“LOI”) to acquire 100% of the equity of Fiorello from its 17
shareholders. Plaintiffs also allege claims against Fiorello’s two principal officers, Yoss and
Sirota, for unjust enrichment and against John Doe’s for tortious interference with contract.
Plaintiffs’ amendment refashions their claims to focus on a purported “no shop” provision in the
LOI but fails to redress the fundamental flaws requiring dismissal of their action.
First, the LOI does not bind the target sellers, those 17 persons who own Fiorello’s stock.
None of those shareholders were party to the LOI. Fiorello itself was not selling or issuing any
stock to Plaintiffs. Instead the LOI anticipated that a definitive agreement would be drafted and
submitted to Fiorello’s shareholders for their review and their decision whether or not to sell to
Plaintiffs. Whether any transaction would occur was also conditioned on approval by other
nonparties to the LOI, including the New York Department of Health (“DOH”). This renders
Cresco’s claims unenforceable as speculative. Moreover, Plaintiffs’ interpretation of the LOI
would require Fiorello’s board of directors to breach their fiduciary duties by not disclosing all
relevant information, including any changes of circumstances or perceived market value, that
might arise prior to Fiorello shareholders’ individual decisions to sell. Here, as reflected in the
Amended Complaint, there was a rapid and tremendous change in market conditions that made
Plaintiffs’ offer uneconomic.
1
The Amended Complaint and exhibits thereto, respectively, are Exhibits A, A1-4, to the accompanying
Affirmation of Ronald D. Lefton. All references to “Ex. _” correspond to the lettered exhibits to that Affirmation.
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Second, Plaintiffs ignore that the LOI expired by its own terms on March 29, 2018. The
factual allegations of the supposed breach of the “no shop” provision occurred after that date.
Nevertheless, Plaintiffs conclude that there was a breach prior to the LOI’s expiration. That
unsupported conclusion is not entitled to any credence.
Plaintiffs claims are insufficient as a matter of law and should be dismissed with prejudice
with no leave to further amend. As this Court already suggested, the LOI was an unenforceable
agreement to agree. And even were it somehow enforceable, it expired before any alleged
breach. Plaintiffs’ unjust enrichment claim against Sirota and Yoss also must fail. Sirota and
Yoss owed no duty to Plaintiffs and were free to sell their Fiorello shares at the best price they
could obtain. Further Sirota and Yoss’s alleged “unjust” actions were taken as shareholders and
corporate officers, but that is not actionable. Finally, Plaintiffs’ tortious interference claim
similarly fails because there was no contract and no breach; the alleged tortious actions were
neither tortious nor the “but for” cause of the alleged breach; and the John Does had an
independent economic reason for seeking a deal with Fiorello.
THE LETTER OF INTENT
The LOI on which Plaintiffs bring their claims is no more than a proposal to negotiate a
potential acquisition of 100% of the shares of Fiorello from its 17 shareholders. Exs. A3-A4
(listing Fiorello’s shareholders). None of those shareholders were parties to the LOI even though
it explicitly contemplated a proposed stock purchase transaction, not a corporate merger. Ex. A1.
The only parties to the LOI were Cresco and Fiorello. Id. Fiorello was neither to sell nor issue
stock to Cresco. The LOI defines Cresco and CLNY together as “buyers.” Ex. A1 at 1. Fiorello
is not defined as the seller. Rather the LOI makes clear that, if a sale were to be completed, the
sellers would be all of Fiorello’s shareholders. Id.
Nor did Fiorello make any representations about how its shareholders might respond to
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any proposed definitive agreement. There was no lock up clause, or any other restrictive
provision. Fiorello’s Directors were not required to recommend approval of any definitive
agreement that might be reached. Sirota and Yoss were not required to sell their own Fiorello
stock based upon any definitive agreement that might be reached. Id.
The Parties intended that the LOI was to be “supplanted by a definitive agreement
through the Parties’ good faith negotiation, execution and delivery of one or more definitive
agreements and ancillary documents (collectively, the ‘Definitive Agreement’).” Id. at 1, 4. The
LOI next sets forth the “PROPOSED TERMS” for the “Proposed Transaction.” The “Base
Consideration” section makes plain that the shareholders, not Fiorello, would be the ultimate
party to any agreement. It provided that “Cresco … will commit to provide [$XX million in
cash] in consideration for the acquisition of One Hundred Percent (100%) of the issued and
outstanding shares of Fiorello,” or at the election of each shareholder, in equity in Cresco. Id.
Cresco was therefore not yet committed but only “will commit” if all of Fiorello’s shareholders
agreed to sell all of their shares. Id. The LOI is silent as to what might happen if less than 100%
of Fiorello’s shareholders agreed to sell. Id.
Closing was subject to the Parties’ satisfactory completion of due diligence, approval of
the “Definitive Agreement” by the shareholders/members and boards of directors of all Parties,
and by the DOH. Id. at 3. None of these conditions were met when the LOI expired, and the
Amended Complaint does not allege otherwise. The contemplated Definitive Agreement, even if
executed, would be a mere proposal to be submitted to all those non-parties who would then
have to approve whatever document might be drafted, and then determine whether to agree to the
proposed sale. Ex. A1.
The installment payment obligations were to be reflected in promissory notes the terms of
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which (e.g. interest rate, valuation issues in the event of an equity exchange, the details of how to
implement the shareholders’ election, and events of default), are not addressed in the LOI, and
therefore were left for subsequent negotiation. Ex. A1 at 1-2, 4. Installment payments entail
credit risk, which also was not addressed. Also left to later negotiation were tax issues, the terms
of Cresco’s guaranty and any attendant collateral, a fiduciary out, and the apportionment of risks
associated with the staggered period between execution and closing made necessary by the
requirement for DOH approval. Id.
The LOI’s “Timing” section reads:
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 not 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). 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 or
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 Buyer.
Ex. A1 at 4. The “Timing” provision’s first sentence sets the LOI’s 30-business day term and its
second sentence provides for exclusivity during that term. Thus, the exclusivity provision is part
and parcel of the Timing provision, a fact Plaintiffs ignore. The Amended Complaint, which
quotes it out of context, calling it a “no shop” provision. Compare Id. to Ex. A ¶18. Notably,
nothing in the above language prohibits or restricts Fiorello in connection with subjects other
than the sale of its assets or a potential sale of a majority equity stake. There is:
• nothing prohibiting Fiorello from receiving unsolicited offers to purchase its assets or
equity;
• nothing obligating Fiorello to disclose any unsolicited offers it received to Cresco;
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• nothing restricting how Fiorello might respond to any unsolicited offer, other than not
actively pursuing or discussing it before the LOI’s expiration; and
• nothing that purports to prevent any Fiorello shareholder, or all of them from selling their
Fiorello shares during the pendency of the LOI.
Indeed, there is no lock up provision, representation, warranty or other covenant imposed upon
Fiorello’s directors and officers to agree to any prospective Definitive Agreement.
The limited term provided by the Timing provision is consistent with other LOI
provisions. The “Closing” section anticipated that closing would occur on or about April 15,
2018. Ex. A1 at 2. The parties would either reach Definitive Agreements or they would move on
with each becoming free to consider other options. Similarly, the LOI contemplates
circumstances when the good faith payment might be returned to Cresco and the return or
destruction of confidential material which applies only if no transaction would be consummated.
Id. at 3, 5. Thus, the parties contemplated exactly what occurred.
Pursuant to the Timing provision, the LOI expired on the 30th business day, March 29,
2018. The Amended Complaint confirms that by March 29th, the Parties were far from reaching
definitive agreements and certainly not prepared to seek approval of any specific transaction
from their respective boards of directors, Fiorello’s shareholders, Cresco’s members, or the
DOH. Exs. A ¶¶27-28; A1 at 3.
Nevertheless, Cresco seeks to strip the exclusivity language from the balance of the LOI
and elevate it to a standalone obligation creating liability that extends far beyond what Cresco
could ever recover for breach of the LOI, even if it were an enforceable preliminary agreement to
agree. In doing so, Plaintiffs do not allege any breach during the LOI period. Instead they make
allegations based upon subsequent events and conclude, without foundation, a prior breach.
Indeed, Cresco’s allegations about itsdesire to enter the New York medical marijuana market
(Ex. A, ¶¶1, 3-4, 40-41) highlight the intense interest pervading this marketplace and the few
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available licensees. During the relevant period, the news was flooded with stories about the
great potential of the New York marijuana market and the anticipated actions of New York
politicians and regulators that were expected to dramatically broaden that market. Fiorello’s
shareholders would not have been ignorant of this news coverage. Regardless, Fiorello, Sirota
and Yoss, had a fiduciary obligation to present Fiorello’s shareholders with information about
Fiorello’s valuation and the changes in the market along with all offers presented to them,
including Cresco’s. Plaintiffs’ unsupported conclusion of breach, like the balance of their
complaint, is without merit.
ARGUMENT
Dismissal is warranted for failure to state a claim where the facts alleged do not “fit within
any cognizable legal theory.” E. States Health & Welfare Fund v Philip Morris, Inc., 188 Misc 2d
638, 643–44 (Sup Ct N.Y. Cty 2000) (internal quotations and citations omitted). Conclusory
allegations are insufficient and dismissal should be granted where documentary evidence refutes
the claim. Id.; CPLR 3211(a)(1); Goshen v. Mut. Life Ins. Co. of NY, 98 N.Y.2d 314 (2002).
I. CRESCO HAS NOT ALLEGED THE ELEMENTS OF BREACH OF CONTRACT
Plaintiffs claim that Fiorello breached the LOI and its exclusivity provision. To support
those claims, Cresco must allege a valid enforceable contract, its performance under the contract,
and a breach by Fiorello that caused damages. Noise in the Attic Prods., Inc. v. London Records,
10 A.D.3d 303, 304 (1st Dep’t 2004). Cresco has failed to adequately allege even one, much less
all, of these elements.
A. The LOI Is An Unenforceable Agreement To Agree
Absent an enforceable agreement, Fiorello cannot be liable for breach of contract. Harris
v. Seward Park Hous. Corp., 79 A.D.3d 425, 426 (1st Dep’t 2010). “A mere agreement to agree,
in which a material term is left for future negotiations, is unenforceable.” Teutul v. Teutul, 79
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AD3d 851 (2d Dep’t 2010). The LOI falls into this category. While Plaintiffs insist they had a
“stock purchase agreement” to “acquire all of the shares of Fiorello” (Ex. A ¶¶1-2, 51), they had
only an agreement to negotiate a Definitive Agreement which would contain all of the details of
a formal proposal, which if approved by the boards of Cresco and Fiorello, would then be
submitted to Fiorello’s shareholders for their consideration. Ex. A1. If they agreed, itwould
then be submitted to DOH for approval. Id.
The LOI provided only a general framework for a potential deal on “PROPOSED
TERMS” for a “Proposed Transaction.” (Ex. A1, p. 1); it left open material terms on which no
agreement had been reached. Id. Most fundamentally, the LOI left out the essential
counterparty, the Fiorello shareholders. Whether there would ever have been a transaction is
rank speculation. There is no legally sufficient claim and this action should be dismissed.
1. The Owners Of The Shares That Plaintiffs Sought To Purchase Are Not
Parties To The LOI And Cannot Be Bound By It
The LOI is an unenforceable preliminary agreement between parties that do not own the
shares which are its subject. Ex. A1. As the Court observed in denying CLNY’s request for a
preliminary injunction:
This is an agreement for somebody else to agree, not even an agreement to agree.
It is an agreement for the corporation to see if it can convince the shareholders to
sell their stock.
Ex. D at 13:10-13. As non-parties, Fiorello’s shareholders could not be bound by the LOI and
were under no obligation to sell their shares, much less to Cresco at the LOI price. Promerica
Fin. Corp. v. Immoholdings, Inc., 107 A.D.3d 474 (1st Dep’t 2013) (LOI clause among shareholders
was not binding on non-signatory corporation); Meyers Assocs., L.P. v. Conolog Corp., 19 Misc.3d
1104(A) (Sup. Ct., N.Y. Cty, 2008), *2 (dismissing contract claim by agent because it “did not
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constitute an agreement between the [issuer and agent]. [Issuer] and ‘the Purchaser’ are the only
parties to this document.”)
Even if a Definitive Agreement might be reached, Fiorello’s shareholders could not be
compelled to sell pursuant to it. As the Court neatly summarized:
You got a contract that makes no legal sense. ...All I understand [Cresco] can do
is make an offer to the shareholders. You can’t bind the shareholders.
Ex. D at 12:12-14. Yet, the LOI outlined a proposal for the purchase of 100% of the outstanding
stock. Ex. A1. For it to be enforceable, all of Fiorello’s shareholders would have to have been
party to it. None were. Id. And the LOI is utterly silent about how to involve these nonparty
shareholders, obtain their agreement or effect the sale of their stock. Dong v. First Korean
Church of N.Y., 151 A.D.3d 930, 931 (2d Dep’t 2017) (contract was not binding and unenforceable
where law required church’s board of trustees and court to approve sale of church property); MG
W. 100 LLC v. St. Michael’s Protestant Episcopal Church, 127 A.D.3d 624, 626 (1st Dep’t 2015)
(same).
The LOI did not obligate Fiorello’s directors to approve or recommend any potential
definitive agreement and did not require them or the shareholder officers to vote in favor of the
Definitive Agreement. Ex. A1. Notably absent from the LOI was any lock up agreement. Id.
The transaction Cresco sought was a stock purchase from shareholders directly, not a corporate
merger where negotiations with the corporate entity might have legal effect. Id. Indeed, the
amended complaint calls the LOI a “stock purchase agreement.” Ex. A, ¶1. Shareholder
approval was not a mere contractual condition precedent to performance, but rather essential to
contract formation.
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2. The LOI Is Riddled With Material Missing Terms
Plaintiffs correctly allege that the proposed transaction was dependent on multiple
conditions: the satisfactory completion of due diligence; approval by each of the Parties’
respective boards of directors and shareholders or members; agreement by all of Fiorello’s
Shareholders to sell 100% of their shares; and approval by the DOH. Ex. A1 at 3. DOH
approval would then have been a condition precedent to performance of that separate contract
with the shareholders. See, e.g. MG W. 100 LLC, supra at 626 (agreement was unenforceable
where approval was required by third party not bound to the contract).
Absent a meeting of the minds on all material terms, there can be no ensuing breach. Mode
Contempo, Inc. v. Raymours Furniture Co., Inc., 80 A.D.3d 464 (1st Dep’t 2011) (where there was no
meeting of the minds on a material term, there was no contract and no breach); Keitel v. E*Trade
Fin. Corp., 55 Misc.3d 1211(A) (Sup Ct NY Cty 2017) (term sheet’s indefiniteness on
termination, ownership and confidentiality rendered it unenforceable).
Cresco’s offer to buy was limited to the purchase of 100% of the shares; it was ineffective
for any lesser amount. Ex. A1 at 1. Yet, the LOI is silent on this critical, material question of
what would happen should less than 100% of Fiorello’s shareholders agreed to sell.
Other material terms missing from the LOI included: (1) the terms of the notes for the
installment payments, (2) the process to effectuate the shareholders’ equity exchange option, (3)
the roll over tax issues, (4) the terms and scope of Cresco’s guaranty of its promise to pay,
including the collateral to give meaning to the guaranty, (5) a fiduciary out, (6) indemnification,
(7) the amount of bridge financing Fiorello was to receive during negotiation of the Definitive
Agreement, and (8) the terms of a management oversight agreement through which the funding
was to be provided. Ex. A1.
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The LOI expressly calls for multiple ancillary written agreements to be negotiated.
Without such executed agreements, there could be no contract. Keitel, supra (“It is undisputed
that the Term Sheet provides for a subsequent written agreement. Thus, absent a signed writing
providing for material terms as mandated by the Term Sheet, there is no contract between the
parties”). In light of the open material issues and the requirement that the full agreement be
memorialized in subsequent documents, the use of the term “binding” cannot magically
transform the unenforceable agreement to agree into a binding contract. Id. (“Mr. Keitel has
failed to establish that adding the terms “binding and final” and “Harvey Keitel Firm Offer”
intentionally and voluntarily abandoned the writing requirement”).
Moreover, the parties never finalized the Definitive Agreement and other documents
contemplated by the LOI. Therefore, there was no formal proposal to present to Fiorello’s
shareholders for their consideration and agreement. As the First Department explained in M