Court File and Parties

COURT FILE NO.: CV-21-00667501-00CL

DATE: 20210920

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: GOTHAM GREEN PARTNERS, LLC and GOTHAM GREEN ADMIN 1, LLC, Applicants

AND:

IANTHUS CAPITAL HOLDINGS, INC., IANTHUS CAPITAL MANAGEMENT, LLC, OASIS INVESTMENTS II MASTER FUND LTD., HADRON HEALTHCARE and CONSUMER SPECIAL OPPORTUNITIES MASTER FUND, SENVEST GLOBAL (KY), LP, and SENVEST MASTER FUND, LP, Respondents

AND:

MICHAEL WEISSER, Proposed Intervener/Moving Party

BEFORE: Cavanagh J.

COUNSEL: Harry Underwood and Ryan Lapensee for Michael Weisser, moving party Eliot Kolers and Muzhgan Wahaj for Oasis Investments II Master Fund Ltd. Matthew Milne-Smith and Chantelle Cseh for Applicants Timothy Pinos and John Picone for Hadron Healthcare and Consumer Special Opportunities Master Fund, Senvest Global (KY), LP and Senvest Master Fund, LP Trevor Courtis and Connor Campbell for iAnthus Capital Holdings, Inc. and iAnthus Capital Management, LLC

HEARD: September 17, 2021

ENDORSEMENT

Introduction

[1] This is a motion by a proposed intervener, Michael Weisser, for an order granting him leave to intervene as an added party to this application, to file an affidavit and a factum, and to make oral submissions on the hearing of this application.

[2] The motion is opposed by the Applicants and by the Respondents other than iAnthus Capital Holdings, Inc. (“iAnthus Capital”) and iAnthus Capital Management, LLC. The Respondents iAnthus Capital and iAnthus Capital Management, LLC take no position on this motion.

[3] For the following reasons, Mr. Weisser’s motion is dismissed.

Background Facts

[4] Collectively, iAnthus Capital and its subsidiaries (together, “iAnthus”) grow, process, and distribute cannabis products throughout the United States. iAnthus operates in nine different states.

[5] The application arises out of a Plan of Arrangement that was approved by the shareholders of iAnthus Capital on September 14, 2020 and by the Supreme Court of British Columbia on October 5, 2020 (the “Plan”). An appeal of the decision of the Supreme Court of British Columbia was denied by the British Columbia Court of Appeal on January 29, 2021.

[6] The Plan implemented a Restructuring Support Agreement made as of July 10, 2020 (the “RSA”) among iAnthus, certain holders of secured debentures issued by iAnthus (the “Lenders”), and holders of unsecured debentures issued by iAnthus (the “Initial Consenting Debenture Holders”). The Applicants are Lenders. The Respondents, other than iAnthus Capital and iAnthus Capital Management, LLC, are Initial Consenting Debenture Holders. The RSA sets out the agreement among the parties regarding a recapitalization transaction (the “Recapitalization Transaction”) to be implemented pursuant to the Plan.

[7] The Recapitalization Transaction provided for by the RSA is subject to satisfaction of conditions. One such condition is that Plan requires, among other things, approval by no later than the “Outside Date” from a number of regulatory bodies in various states in the United States of America. In some states the regulations include a requirement that changes in ownership be pre-approved by the regulators.

[8] The term “Outside Date” is defined in the RSA:

“Outside Date” means (i) in respect of the Arrangement Proceedings, June 30, 2021, and (ii) in respect of the CCAA Proceedings commenced in accordance with this Support Agreement, August 31, 2021, provided that, in either case, such date shall be automatically extended, upon the written consent of the Lenders and the Initial Consenting Debenture Holders, acting reasonably, to the date on which any regulatory approval or consent condition to implementation of the Plan or the CCAA Plan, as applicable, is satisfied or waived.

[9] The Lenders, the Initial Consenting Debenture Holders and iAnthus entered into an Amending Agreement effective June 15, 2021 by which the words “June 30, 2021” in the definition of “Outside Date” were replaced with the words “August 31, 2021”. The Amending Agreement was made without prejudice to any party’s position concerning the interpretation of the term “Outside Date”.

[10] On August 19, 2021, the Lenders and the Initial Consenting Debenture Holders formally notified iAnthus that they confirmed and agreed that the date August 31, 2021 in clause (i) of the definition of “Outside Date” is extended “to the date on which any regulatory approval or consent condition to implementation of the Plan is satisfied or waived”.

[11] In response, iAnthus advised on August 20, 2021 that the RSA does not afford the Lenders and the Consenting Debenture Holders a unilateral right to extend the Outside Date and, as such, the Outside Date remains August 31, 2021, subject to any extension in accordance with the RSA.

[12] This application was commenced by Notice of Application issued on August 23, 2021. In the application, the Applicants seek an Order declaring that the “Outside Date” has been and is extended to the date on which any regulatory approval or consent condition to implementation of the Plan is satisfied or waived, together with alternative and related relief. The Respondents who are Initial Consenting Debenture Holders support the relief sought. IAnthus opposes the application.

Analysis

[13] Rule 13.01(1) of the Rules of Civil Procedure provides that a person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims, (a) an interest in the subject matter of the proceeding; (b) that the person may be adversely affected by judgment in the proceeding; or (c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding. Rule 13.01 (2) provides that on the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and make such order as is just.

[14] Mr. Weisser is a shareholder of iAnthus Capital. He acquired his shares after the Plan was approved by iAnthus shareholders and by the British Columbia Supreme Court, and after the appeal of the approval decision was denied. Mr. Weisser is also the leader of an investor group intent on acquiring a controlling interest in iAnthus should the RSA be terminated.

[15] Mr. Weisser asserts that he meets the first two of the criteria in rule 13.01(1) and, because the test is disjunctive, he qualifies as a person who may move for leave to intervene as an added party.

[16] Mr. Weisser submits that the order sought by the Applicants affects his interests in two ways. First, as a shareholder of iAnthus Capital, he asserts that he has a significant financial interest through his shareholding in iAnthus Capital whose valuation would be substantially reduced if the Outside Date were to be indefinitely extended. Second, Mr. Weisser asserts that he has a commercial interest in this matter as the organizer and a member of a group of investors that intends to acquire a controlling interest in iAnthus Capital should the RSA be terminated.

[17] Mr. Weisser submits that he may be adversely affected by the judgment sought by the Applicants in the same two ways.

[18] Mr. Weisser relies on three authorities where a person who was a shareholder of a corporate party was found to have a sufficient interest in the subject matter of a proceeding to qualify to move for leave to intervene as an added party: Ontario (Attorney General) v. Ballard Estate, 1994 CarswellOnt 587; L & B Electric Ltd. v. Selig, 2006 NSCA 130; and Paul Daoust Construction & Associates Ltd. v. Caisse populaire Trillium Inc., 2012 ONSC 2709, at para. 42.

[19] In Ballard, the moving parties were significant minority shareholders of a corporate defendant in an action in which the legitimacy of the sale by an estate of its interest the corporate defendant was questioned. They sought leave to intervene to allow them to advance parallel oppression claims in the action. The proposed interveners submitted that, as a practical matter, if intervention was not granted, they would commence a separate oppression action seeking to set aside the same transaction that the plaintiffs were seeking to set aside, which, undoubtedly, would be ordered to be tried together with the first action. Ground J., at para. 14, held that the relief sought by the proposed interveners was virtually identical to certain of the relief sought by the plaintiffs. Ground J., at para. 16, wrote that he was satisfied that the proposed interveners qualify under each of clauses (a), (b), and (c) of r. 13.01(1) to move for leave to intervene and that it appeared that the proposed interveners clearly have a financial interest in the main action because if the sale were to be set aside, other bids would be made for the shares of the company at a higher price than offered by one of the defendants. Ground J., for the same reason, held that the proposed interveners could be adversely affected by a judgment in the main action upholding the sale.

[20] In L & B Electric, the action involved a dispute among three shareholders of a closely held corporation. The remaining shareholders who were employees of the company sought to intervene and their application was granted. On appeal, the Nova Scotia Court of Appeal noted, at para. 10, that the application judge held that the proposed interveners, as employees and shareholders, “have a direct and … profound financial interest in the subject matter of the litigation and its eventual outcome”. The Nova Scotia Court of Appeal held, at para. 11, that the proposed interveners had a direct interest in the action because the outcome of the litigation had the potential to significantly affect the value of their shareholdings, their working conditions, and possibly their future employment.

[21] In Daoust, the plaintiff, a corporation, moved for an interim mandatory injunction to require a financial institution to comply with a banking resolution made during the annual general meeting of the company. The plaintiff was one of a series of interrelated, privately held companies whose majority shareholders were two brothers who had equal shareholdings. One of the brothers, who had retired as an employee of the plaintiff company but remained a director and officer, moved for leave to intervene as an added party. The proposed intervener wished to contest the validity of the annual general meeting and, therefore, of the banking resolution passed at that meeting. The motion judge held, at para. 48, that the proposed intervener holds a stake equal to that of his brother in all of the interrelated companies, and that he has a genuine and direct interest in the proceeding because of the interdependence of his companies and his brother’s companies, and because of his position as a director of the plaintiff.

[22] The responding parties rely on the decision of Pattillo J. in Baffinland Iron Mines v. Tower-EBC, 2021 ONSC 5639. In that case, an award in an arbitration provided for damages to the claimant which included an amount for lost profits and standby charges that would be paid to a subcontractor of the claimant. An application was brought by the unsuccessful party to the arbitration to set aside the award. The subcontractor moved for leave to intervene on the basis that the subcontractor had an interest in the subject matter of the proceeding and, if the award was set aside, the subcontractor would be adversely affected. Pattillo J., at para. 23, accepted that the subcontractor has a financial interest in the outcome or result of the proceeding but not in the subject matter of the proceeding which was concerned with an arbitration involving a contract to which the subcontractor was not a party. Pattillo J. held, at para. 32, that while the subcontractor can show a greater adverse impact than a member of the public in respect of the possible outcome of the application, the impact is incidental to and separate from the subject matter of the application given that the subcontractor is a non-party to the arbitration and its claim is against the claimant and not the party seeking to set aside the award.

[23] In my view, the three cases upon which Mr. Weisser relies are distinguishable because they involve facts that are materially different from those on this motion. In Ballard, the shareholders who sought to intervene wished to make a parallel claim for oppression that was the same as the claim made in the main action. The factual background to the claims in the main action and the intervener claims was common. In L & B the interveners were shareholders as well as employees of a closely held company and the outcome of the litigation had the potential to significantly affect their interests, not only as shareholders, but as employees. In Daoust, the proposed intervener held ownership interests in companies that were interdependent with companies owned by his brother, including the plaintiff company, and he was a director and officer of the plaintiff. In each of these cases, the proposed interveners were shareholders of companies who, in the factual circumstances of each case, claimed an interest in the subject matter of the proceeding that was more than one arising only from the effect of the outcome of the litigation on the value of their shareholdings.

[24] If Mr. Weisser were to be held to qualify as a person who may move for leave to intervene solely because he has become a shareholder of iAnthus, and the value of his shares may be affected by the outcome of the application, this would mean that every shareholder of a company involved in private litigation where the value of the shareholdings may be affected by the outcome of the litigation would so qualify. A person who wishes to influence the outcome of litigation in which a company is a party, where the outcome could affect the value of the shareholdings, could simply acquire shares of the company during the course of litigation and then seek leave to intervene as an added party. In my view, for the Court to hold that such an interest of a shareholder in the outcome of a proceeding is, standing alone, sufficient for a person to qualify under rule 13.01(1) to move for leave to intervene as an added party would leave private litigation involving a corporate party susceptible to abuse through opportunistic motions for leave to intervene. In this regard, I accept the distinction made by Pattillo J. in Baffinland, at para. 23, between a person who claims only a financial interest in the outcome of a proceeding and a person who claims an interest in the subject matter of the proceeding.

[25] I conclude that Mr. Weisser’s claim to an interest in the application based on his status as a shareholder of iAnthus that is limited to the effect of the outcome of the application on the value of his shareholdings is not, alone, sufficient for Mr. Weisser to qualify under rule 13.01(1)(a) and (b) to move for leave to intervene as an added party.

[26] Mr. Weisser submits that in addition to his status as a shareholder of iAnthus, he qualifies under rule 13.01(1) to move for leave to intervene as an added party to the application because of his role as a member of an investor group that, if the RSA is terminated, intends to acquire a controlling interest in iAnthus. Mr. Weisser’s membership in the investor group does not, in my view, elevate his status to one who qualifies to move for leave to intervene. Mr. Weisser’s sole interest as a member of the investor group is a commercial interest in the outcome of the application. Mr. Weisser’s stated intention to attempt to acquire an ownership interest in iAnthus does not amount to an interest in the subject matter of the application. See Baffinland, at para. 23.

[27] I conclude that Mr. Weisser has failed to show that, as a shareholder of iAnthus and as a member of an investment group that, if the RSA is terminated, intends to acquire a controlling interest in iAnthus, he qualifies under rule 13.01(1) of the Rules of Civil Procedure to move for leave to intervene in this application as an added party.

[28] Mr. Weisser submits that in addition to qualifying as a person who may move for leave to intervene, he has shown that he will make a useful contribution to the resolution of the proceeding because he can provide material evidence from a perspective not otherwise reflected in the proceeding. Mr. Weisser submits that iAnthus is unable to give this evidence because Gotham Green has taken over the responsibility for obtaining approval from the Florida regulator and iAnthus is limited in its ability to tender evidence concerning the regulatory process in Florida because it is required by the RSA to support approval.

[29] Mr. Weisser seeks to put evidence before the Court concerning ownership restrictions under Florida law and his understanding that iAnthus and Gotham Green would be in violation of Florida law if the RSA transaction closed because Gotham Green and other Lenders have ownership interests in other publicly traded cannabis companies with licenced operations in Florida which, he states, is a bar to regulatory approval under Florida law. Mr. Weisser seeks to put before the Court (i) evidence that he retained a lawyer to represent his interests before the Florida regulator and oppose iAnthus’ application for approval of its ownership structure under the RSA, (ii) evidence of communications by his lawyer with the Florida regulator and other Florida government officials supporting Mr. Weisser’s opposition to the application for regulatory approval, and (iii) evidence of correspondence from Gotham Green’s Florida lawyer to the Florida regulator and Mr. Weisser’s lawyer’s responses. Mr. Weisser seeks to put evidence before the Court that, based on advice provided to him by his lawyer in Florida, there is no reason to believe that the Florida regulator has reached a conclusion as to whether the application ought to be allowed or that a conclusion is imminent and, to the contrary, the competing interpretations of applicable statutes and regulations, as expressed in the correspondence from Gotham Green’s Florida lawyer and his Florida lawyer, suggest to Mr. Weisser that the dispute is a long way from being resolved. Mr. Weisser seeks to put evidence before the Court that, for reasons given in his affidavit, he strongly believes that Gotham Green and other Lenders would be in violation of Florida’s laws if the application for regulatory approval is granted.

[30] In Peel (Regional Municipality) v. Great Atlantic & Pacific Co. of Canada Ltd. (1990), 1990 CanLII 6886 (ON CA), 74 O.R. (2d) 164, the Court of Appeal held, at para. 10, that the matters to be considered in determining whether an application for intervention should be granted are the nature of the case, the issues which arise, and the likelihood of the applicant being able to make a useful contribution to the resolution of the proceeding before the court without causing injustice to the immediate parties.

[31] I address each of these three considerations.

[32] The first address the nature of the case. This application is a private dispute involving the RSA, a commercial contract. The Applicants and the Initial Consenting Debenture Holders stand to benefit financially if they are successful on the application. iAnthus and its existing shareholders stand to benefit financially if the application is unsuccessful.

[33] In Jones v. Tsige, (2011), 2011 CanLII 99894 (ON CA), 106 O.R. (3d) 721 (C.A.), the Canadian Civil Liberties Association moved for leave to intervene on an appeal in a private dispute where the issue was whether the common law recognized a tort of invasion of privacy. Watt J.A. held that where the litigation in which intervention is sought is a private dispute, rather than a public prosecution pitting an individual against the state, the standard to be met by the proposed intervener is more onerous or more stringently applied. Watt J.A. held that this more onerous threshold may be softened somewhat where issues of public policy arise.

[34] In Authorson (Guardian of) v. Canada (AG), 2001 CanLII 4382 (ON CA), [2001] O.J. No. 2768 (C.A.), McMurtry C.J.O., at para. 8, noted that Ontario courts have interpreted Rule 13 more narrowly in conventional, non-constitutional litigation and held that “[i]ntervention of third parties into essentially private disputes should be carefully considered as any intervention can add to the costs and complexity of litigation, regardless of an agreement to restrict submissions”. McMurtry C.J.O. held, at para. 9, that “the burden on the moving party should be a heavier one in cases that are closer to the ‘private dispute’ end of the spectrum”.

[35] In this case, because the dispute is a conventional, private, one, where issues of public policy do not arise, the burden on Mr. Weisser to show that leave to intervene should be granted is heavier than it would be in a public case involving, for example, constitutional issues.

[36] I next address the issues on the application. The main issue on the application involves the interpretation of the RSA and, in particular, the interpretation of the definition of the term “Outside Date”. Mr. Weisser is not a party to the RSA, and he was not involved in its negotiation or in the drafting of its provisions. He is not able to contribute to the interpretation of the RSA based on its language or the facts known to the parties at the time it was made. The Applicants and iAnthus have provided evidence concerning the status of applications for regulatory approval in various states, including Florida. The evidence that Mr. Weisser seeks to give is concerned with the regulatory approval process in Florida. I accept that Mr. Weisser’s proposed evidence relates to a matter that is addressed by the parties in the existing evidentiary record and, to this extent, it is not directed to a matter that is immaterial.

[37] The third consideration identified in Peel is the likelihood of the moving party being able to make a useful contribution to the resolution of the proceeding before the court without causing injustice to the immediate parties.

[38] Mr. Weisser submits that the evidence he seeks to put before this court has a single focus: the likelihood that iAnthus will successfully obtain regulatory approval in the state of Florida which, he states, is the single most important state to iAnthus’ financial performance. The evidence which Mr. Weisser seeks to put before the Court in Ontario is, based on his statement of Florida law and his understanding of this law, that iAnthus and Gotham Green would be in violation of Florida law if the Recapitalization Transaction provided for in the RSA closed and, therefore, that the application for regulatory approval is unlikely to succeed. Mr. Weisser seeks to support his understanding by reference to communications from the Florida lawyer he has retained to the regulator and other Florida government officials advocating in support of his position and against the positions taken with the regulator by Gotham Green’s Florida lawyer.

[39] Mr. Weisser is not qualified to practice law in Florida and he has not tendered evidence to prove the law of Florida through a qualified Florida lawyer. Mr. Weisser’s understanding, opinion, or belief concerning whether Florida law, as it applies in the circumstances, is an insurmountable bar to regulatory approval is not relevant to or admissible in evidence on this application. iAnthus has provided considerable affidavit evidence concerning the status of regulatory proceedings in various states, including Florida. The communications from Mr. Weisser’s lawyer advocating in support of his position and against the position advanced by Gotham Green to the Florida regulator and other Florida government officials, and the fact that he has retained a government lobbyist to represent his interests and oppose the application, will not, in my view, meaningfully assist the Court to determine how or when the Florida regulator will decide on the application for regulatory approval. The merits of these arguments involve matters of Florida law, which Mr. Weisser has not proven, and are for the Florida regulator to evaluate.

[40] Mr. Weisser has failed to show that the evidence he seeks to put before the Court will make a useful contribution to the resolution of the application.

Disposition

[41] For these reasons, Mr. Weisser’s motion for leave to intervene in this application as an added party is dismissed.

[42] If the parties are unable to agree on costs, I may be spoken to.

Cavanagh J.

Date: September 20, 2021