Hippocratic Growth Maryland Processing, LLC v. Pesce

CourtDistrict Court, D. Maryland
DecidedOctober 6, 2022
Docket1:22-cv-00090
StatusUnknown

This text of Hippocratic Growth Maryland Processing, LLC v. Pesce (Hippocratic Growth Maryland Processing, LLC v. Pesce) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hippocratic Growth Maryland Processing, LLC v. Pesce, (D. Md. 2022).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

) HIPPOCRATIC GROWTH ) MARYLAND PROCESSING, LLC, ) ) Civil Action No. 22-cv-00090-LKG Plaintiff, ) ) Dated: October 6, 2022 v. ) ) MICHAEL PESCE, ) ) Defendant. ) )

MEMORANDUM OPINION AND ORDER I. INTRODUCTION In this breach of contract action, plaintiff, Hippocratic Growth Maryland Processing, LLC (“Hippocratic”), alleges that defendant, Michael Pesce, breached a Stock Purchase Agreement that would have allowed Hippocratic to manage a Maryland medical cannabis processor. See generally Compl., ECF No. 6. Defendant has moved to dismiss this action, or alternatively, for summary judgment in his favor, pursuant to Fed. R. Civ. P. 12(b)(6) and 56. See generally Def. Mot, ECF No. 28. This motion is fully briefed. See id.; Pl. Resp., ECF No. 31; Def. Reply, ECF No. 32. No hearing is necessary to resolve the motion. See L.R. 105.6 (D. Md. 2021). For the reasons that follow, the Court DENIES Mr. Pesce’s motion. II. FACTUAL AND PROCEDURAL BACKGROUND1 A. Factual Background In this breach of contract action, Hippocratic alleges that Michael Pesce breached a Stock

1 The facts recited in this Memorandum Opinion and Order are taken from the complaint (“Compl.”), defendant’s motion to dismiss, or, in the alternative, for summary judgment (“Def. Mot.”) and memorandum in support thereof (“Def. Mem.”), and plaintiff’s response in opposition thereto (“Pl. Resp.”). Unless stated otherwise, the facts contained herein are undisputed. 1 Purchase Agreement (the “SPA”) pursuant to which Hippocratic acquired 90 percent of the shares of TC Maryland, Inc. (“TC Maryland”) and the ability to manage Pro Green Medical, LLC (“Pro Green”), a pre-approved Maryland medical cannabis processor. See Compl. at ¶¶ 8, 11; see also Compl. Ex. A (the SPA). Specifically, Hippocratic alleges that Mr. Pesce breached the SPA by refusing to communicate with the Maryland Medical Cannabis Commission (the “MMCC”) about an application to transfer the management of Pro Green to Hippocratic. See Compl. at ¶ 28. As relief, Hippocratic seeks certain injunctive relief, specific performance and to recover monetary damages from Mr. Pesce. See id. at ¶ 33. The SPA As background, Hippocratic is a Maryland limited liability company formed for the purpose of managing a medical cannabis processing facility. Id. at ¶ 6. Michael Pesce is the owner of TC Maryland, and he also serves as the LLC Manager of Pro Green. Id. at ¶ 7-8. On February 18, 2021, Hippocratic, Mr. Pesce, and TC Maryland executed the SPA, pursuant to which Hippocratic acquired 90 percent of the shares of TC Maryland. Id. at ¶ 7. At the time of this transaction, TC Maryland held an option to purchase 100 percent of the membership interests in Pro Green, an entity that had been awarded pre-approval to operate as a medical cannabis processor in Maryland.2 Def. Mem. at 2. Central to the parties’ agreement was their plan to transfer the management of Pro Green to Hippocratic. To that end, Hippocratic agreed to pay Mr. Pesce $5,400,000.00, to provide additional funding to build out Pro Green, and to provide a revolving line of credit for Pro Green’s operating expenses. See Compl. at ¶ 11; see also Compl. Ex. A at A.003, A.0013. Relevant to the pending dispositive motion, Article VIII of the SPA addresses termination of this agreement and Section 7.01 of the SPA provides that:

2 Medical cannabis processors extract active compounds of usable cannabis from cannabis plants and process manufactured products such as tinctures, oils, and concentrated THC products for sale to medical cannabis patients in Maryland. Compl. at ¶ 9. 2 ARTICLE VII TERMINATION Section 7.01 Notice of Default and Period to Cure. The Parties shall each devote all necessary time, attention and resources (financial or otherwise) to ensure that the Company obtains the MMCC Final Approval and Dispensary License by fulfilling their post-closing covenants and obligations. (a) If the Owner fails to satisfy (i) all post-closing covenants in Section 5.06 of this Agreement, or (ii) any other obligations under this Agreement and the Transaction Documents, Purchaser shall provide a written notice detailing the breach and requesting a meeting or conference call with the Owner for an explanation as to why the covenants and obligations have not been timely satisfied and how the Owner plans to fulfill his covenants and obligations within seven (7) Business Days after the meeting (“Owner Cure Period”). The meeting or conference call shall be scheduled within no more than two (2) business days after the notice. (b) If the Purchaser fails to satisfy all post-closing covenants in Sections 5.01, 5.02, 5.03, 5.04 and 5.05 and all other obligations under this Agreement and the Transaction Documents, the Owner shall provide written notice detailing the breach and requesting a meeting or conference call with the Purchaser for an explanation as to why the covenants and obligations have not been timely satisfied and how the Purchaser plans to fulfill all of its covenants and obligations within seven (7) Business Days after the meeting (“Purchaser Cure Period”). The meeting or conference call shall be scheduled within no more than two (2) Business Days after the notice. Id. at A.019-020 (emphasis in original). It is undisputed that Hippocratic did not provide the notice described in Section 7.01(a) before it commenced this litigation. See Def. Mem. at 7; Pl. Resp. at 3. Sections 7.02 and 7.03 of the SPA further provide that: Section 7.02 Termination of Agreement. At any time prior to the MMCC Final Approval and upon written notice to the other Party, this Agreement may be terminated as follows: (a) if, seven (7) Business Days after the expiration of the Owner Cure Period under 7.01(a), the Owner has not cured his breach of the post- 3 closing covenants in this Agreement, the Purchaser may terminate this Agreement; (b) if, seven (7) Business Days after the expiration of the Purchaser Cure Period under 7.01(b), Purchaser has not cured its breach of the post- closing covenants in this Agreement, Seller Representative may terminate this Agreement; (c) by the mutual written consent of the Owner and Purchaser; (d) by Owner and Purchaser if there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; and (e) by Owner or Purchaser if any Governmental Body shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Body shall have become final and non-appealable. Section 7.03 Effect of Termination. (a) The Parties’ termination rights under Section 7.02 are in addition to their rights under this Agreement or otherwise, and the exercise of any termination right will not be an election of remedies. (b) Nothing herein shall relieve any Party hereto from liability for any intentional breach of any provision hereof. Id. at A.020. Lastly, Section 8.13 of the SPA addresses specific performance and provides that: Section 8.13 Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof or were otherwise breached and that each party hereto shall be entitled to an injunction or injunctions, specific performance and other equitable relief to prevent breaches of the provisions hereof and to enforce specifically the terms and provisions hereof, without the proof of actual damages, in addition to any other remedy to which they are entitled at law or in equity.

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Hippocratic Growth Maryland Processing, LLC v. Pesce, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hippocratic-growth-maryland-processing-llc-v-pesce-mdd-2022.