Verano is seeking a court dismissal of fellow multistate cannabis operator Goodness Growth’s request for a summary determination in ongoing litigation between the companies stemming from a terminated merger agreement in 2022. Specifically, Goodness Growth filed an application for summary determination on May 2 in the Supreme Court of British Columbia, seeking $860.9 million in damages from the terminated agreement.
Recent Developments
On June 20, Verano publicly rejected the damages claim and announced it filed a notice of application with the court seeking a full trial instead of a summary determination, which Verano believes would deny due process and the fairness afforded by a full trial. The court has set August 27 and 28, 2024, as the hearing dates for Verano’s application.
“While Goodness Growth’s filings with the court may have been fit to bolster Goodness Growth’s public statements and press releases, Verano considers Goodness Growth’s application to the court to be no more than an effort to sway public opinion and put forward a baseless and irresponsible damages calculation in an attempt to create false hope for its investors,” according to a June 20 press release from Verano.
Merger Agreement Details
The definitive agreement from January 2022 was for Chicago-based Verano to acquire Minneapolis-based Goodness Growth in an all-stock transaction valued at $413 million. However, in October 2022, Goodness Growth announced that Verano delivered a notice to terminate the agreement, stating that it believed Verano had no legal basis for doing so.
Conversely, Verano stated in October 2022 that it was exercising its termination rights under the arranged agreement based on Goodness Growth’s “breaches of covenants and representations.” Goodness Growth rejected the claim that it made misrepresentations in its public filings.
Financial Implications
Verano claims there was a decline in value for Goodness Growth shareholders to approximately $182 million in the subsequent eight months of the original agreement. Additionally, Verano asserted in October 2022 that Goodness Growth owed it a termination fee of nearly $14.9 million plus up to $3 million in transaction expenses.
“We believe the decision to terminate this arrangement agreement was in the best interest of Verano and our shareholders,” Verano founder and CEO George Archos said at the time.
Legal and Strategic Perspectives
As part of Goodness Growth’s application with the Supreme Court of British Columbia last month, the company claimed Verano breached the 2022 contract and “its duty of good faith and honest performance” to try and close the agreement.
“Verano appears to have sought to delay the consummation of the arrangement agreement to determine if the terms of the agreement remained economically favorable, at the same time that it struggled to gain control over its own internal financial turmoil,” Goodness Growth’s legal team wrote in the application.
Future Steps
In Verano’s June 20 court response, the company denied Goodness Growth’s “unfounded damages claim” and requested the court exclude Goodness Growth’s damages report from the record.
Verano argued, in part, that:
Verano had the right to terminate the arrangement because Goodness Growth’s board refused to reaffirm and update its qualified, outdated recommendation to its shareholders to approve the arrangement.
Goodness Growth was materially misleading its shareholders and exposing Verano to significant risk.
Goodness Growth did not fulfill its contractual obligations honestly and in good faith.
Goodness Growth breached numerous covenants in the arrangement.
If Verano prevails and the litigation proceeds to a full trial, Verano believes the trial will likely be scheduled for the spring or summer of 2026 based on the court’s current calendar.
