Ascend Wellness Holdings Inc. (AWH), a multistate, vertically integrated cannabis operator, filed an amended complaint against MedMed Enterprises Inc. and a motion to dismiss “baseless counterclaims” on Feb. 14 in New York.
The filings are the latest in Ascend’s legal battle with MedMen, which stems from a roughly $73-million definitive investment agreement between the two companies on Feb. 25, 2021.
Under the signed agreement, Ascend was to acquire 86.7% interest in MedMen NY Inc. (MMNY), MedMen’s subsidiary in New York, through investing $35 million in cash and issuing a senior secured promissory note in favor of MMNY’s senior secured lender in the principal amount of $28 million.
In addition, Ascend held an option to acquire the remaining equity in MedMen’s New York operation through an additional investment of $10 million, which also was intended to be used to repay MMNY’s senior secured lender if adult-use cannabis sales commence in MMNY’s dispensaries, according to a February 2021 AWH press release.
Ascend would have acquired one of New York’s 10 licenses to distribute medical cannabis through the transaction.
“We believe the proposed transaction will bring fresh capital and a new perspective to New York’s medical marijuana program and its patients,” Ascend founder and CEO Abner Kurtin said in the February 2021 release.
But MedMen backed out of the deal, announcing Jan. 3, 2022, its decision to terminate the investment agreement. MedMen Chairman and CEO Michael Serruya did not provide a statement in the press release announcing the termination.
That announcement came just weeks after the two companies received final approval Dec. 16, 2021, from the New York Cannabis Control Board and the state’s Office of Cannabis Management for the deal. Ascend announced Dec. 31, 2021, it had given notice to MedMen of its intent to close the transactions contemplated by the investment agreement imminently.
That intent included nearly $8.5 million in payments from Ascend to MedMen, according to Ascend.
After MedMen’s termination announcement, Ascend initially filed a suit in the New York Supreme Court last month, seeking to enforce MedMen’s “contractual obligations to sell its New York operations to AWH,” according to an Ascend press release.
MedMen responded by filing counterclaims, stating that AWH exerted “undue influence on New York State government officials in order to obtain regulatory approval of the transaction,” according to the most recent motion filed by Ascend to dismiss MedMen’s counterclaims.
Also, MedMen alleged an Ascend executive attended a fundraiser for New York Gov. Kathy Hochul on Dec. 8, 2021, in Manhattan, and that Ascend’s Kurtin met with the governor’s senior staff on Dec. 10, 2021, leading to a “highly suspect sequence of events,” according to Ascend’s most recent dismissal motion.
Ascend claims travel receipt records show the personnel in question were not at those locations on those dates, and the company is now requesting that the New York Supreme Court strike those allegations from the record.
“The court should see the counterclaims for what they really are—a transparent attempt by MedMen to distract from its own malfeasance in seeking to kill the agreed-upon sale of MedMen NY to Ascend,” the motion states. “This dispute is nothing more than a case about seller’s remorse.”
In addition, Ascend filed an amended complaint Feb. 14 seeking to force MedMen to uphold the February 2021 agreement. The amended complaint refers to MedMen as a “broken and mismanaged cannabis company,” and outlines what AWH plaintiffs refer to as a raft of “regulatory setbacks and lawsuits over its misconduct in recent years.”
According to Ascend, these setbacks include:
- In 2020, MedMen’s cannabis license in Virginia was revoked by its regulator, and the city of Pasadena, Calif., rejected MedMen’s application for a conditional use permit due to the high turnover in MedMen’s leadership;
- MedMen has been sued by a number of its former employees for a wide range of claims; and
- MedMen’s stock price, which was more than $6 per share in late 2019, plummeted to $0.17 per share just before its deal with Ascend was announced in February 2021.
“Suffering from these financial, operational and reputational troubles, MedMen told New York regulators that it needed AWH to turn the company around,” an Ascend Feb. 15, 2022, press releases stated. “MedMen described AWH as ‘a well-capitalized investor’ with a ‘strong reputation’ that could ‘breathe new life into MedMen NY.’”