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`IN THE UNITED STATES DISTRICT COURT FOR THE
`NORTHERN DISTRICT OF FLORIDA
`TALLAHASSEE DIVISION
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`MONICA ACERRA et al.,
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`v.
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`TRULIEVE CANNABIS CORP. et al.,
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`_____________________________/
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`CONSOLIDATED
`CASE NO. 4:20cv186-RH-MJF
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`Plaintiffs,
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`Defendants.
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`ORDER OF DISMISSAL
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`These are two consolidated proposed class actions for money damages under
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`the Private Securities Litigation Reform Act. The plaintiffs are individuals who
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`purchased Trulieve Cannabis Corp. securities. The defendants are Trulieve, its
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`chief executive officer Kim Rivers, and its former chief financial officer Mohan
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`Srinivasan.
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`The second amended complaint alleges the defendants made material
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`misstatements or omissions about the quality of Trulieve’s marijuana growing
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`facilities and about related-party transactions. The second amended complaint
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`further alleges that once these misstatements or omissions were revealed,
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`Trulieve’s stock price dropped. The defendants have moved to dismiss.
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`Case No. 4:20cv186-RH-MJF
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`Case 4:20-cv-00186-RH-MJF Document 50 Filed 12/30/21 Page 2 of 7
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`Page 2 of 7
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`I
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`Trulieve is a vertically integrated medical-marjuana company. It grows,
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`cultivates, processes, and distributes medical marijuana and marijuana products in
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`Florida. Trulieve’s common stock trades on the Canadian Securities Exchange and
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`on an over-the-counter market known as the OTCQX.
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`A prior order dismissed the first amended complaint but granted leave to
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`amend further. The order set out the governing standards. One ground for dismissal
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`was the failure to allege a sale on a domestic exchange or within the United States.
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`The second amended complaint cures that deficiency. Another ground for
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`dismissal was failure to adequately allege a material misstatement or omission and
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`scienter. For the most part, the second amended complaint is a reprisal of the first
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`amended complaint’s allegations, which remain deficient for the reasons set out in
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`the prior order.
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`The second amended complaint adds only three new allegations of a material
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`misstatement. Only one is sufficient, and for that one, the second amended
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`complaint fails to adequately allege scienter. This order grants the motion to
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`dismiss.
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`II
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`The second amended complaint’s new allegations of misstatements are the
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`following.
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`Case No. 4:20cv186-RH-MJF
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`Case 4:20-cv-00186-RH-MJF Document 50 Filed 12/30/21 Page 3 of 7
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`Page 3 of 7
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`First, the second amended complaint alleges that Trulieve’s website included
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`this statement: “Trulieve products are hand-grown and specially cultivated in a
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`state-approved, climate-controlled environment to ensure purity and safety. We
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`leave nothing to chance while letting nature do her work.” The second amended
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`complaint alleges that, in fact, most of Trulieve’s marijuana was grown in
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`structures the plaintiffs perjoratively call “hoop houses”—structures that are not
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`heated or air conditioned. The defendants note that the website did not say
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`Trulieve’s products were grown only in climate-controlled facilities, but that is the
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`import of the statement. At least as most people would understand the term
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`“climate controlled,” an outdoor facility in Florida with no heat or air-conditioning
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`does not measure up. One might well doubt that an investor would give much
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`weight to this statement on the website, but at the pleading stage, at least, this is a
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`sufficient allegation of a material misstatement.
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`Second, the second amended complaint alleges that a magazine article
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`quoted the chief executive officer, Ms. Rivers, as saying, “To get the highest
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`quality product in Florida’s climate, . . . we wanted to control the environmental
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`factors.” This is not a material misstatement. Every farmer who ever tilled the soil
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`wanted to control environmental factors to some extent. And a hoop house, even if
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`as poor a substitute for a greenhouse as the plaintiffs allege, controls the
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`environment to some extent.
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`Case 4:20-cv-00186-RH-MJF Document 50 Filed 12/30/21 Page 4 of 7
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`Page 4 of 7
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`Third, the second amended complaint alleges that Trulieve said in regulatory
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`filings: “Trulieve is working to rapidly and substantially increase its greenhouse
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`capacity.” The plaintiffs say this was misleading because Trulieve was working
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`only to increase its hoop-house capacity. But the challenged statement came later
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`in a paragraph that first said Trulieve “grows in enclosed structures operating both
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`indoor and greenhouse style grows.” In context, a reasonable investor would
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`understand the reference to “greenhouse capacity” to relate back to “greenhouse
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`style.” The second amended complaint, like the first, asserts it is misleading to
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`refer to hoop houses as “greenhouse style,” but as set out in the prior order, that is
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`not so. The plaintiffs do not deny that Trulieve was working rapidly and
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`substantially to increase its hoop-house capacity. The challenged statement was not
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`materially misleading.
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`In sum, for the reasons set out in the prior order and this order, the only
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`adequate allegation of a material misstatement is the website statement that
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`Trulieve products were grown in a “state-approved, climate-controlled
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`environment.”
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`III
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`Under the Private Securities Litigation Reform Act, a complaint in a private
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`securities-fraud class action seeking money damages—this includes the cases at
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`bar—must adequately allege scienter. This means the complaint must, “with
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`Case 4:20-cv-00186-RH-MJF Document 50 Filed 12/30/21 Page 5 of 7
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`respect to each act or omission” giving rise to a claim, “state with particularity
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`facts giving rise to a strong inference that the defendant acted with the required
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`state of mind.” 15 U.S.C. § 78u–4(b)(2). The required “strong inference” must be
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`“cogent and at least as compelling as any opposing inference one could draw from
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`the facts alleged.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 325
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`(2007).
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`Here the required state of mind is “an intent to deceive, manipulate, or
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`defraud, or severe recklessness.” Brophy v. Jiangbo Pharms., Inc., 781 F.3d 1296,
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`1302 (11th Cir. 2015) (internal citation and quotation marks omitted). The
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`plaintiffs thus were required to plead “with particularity” facts giving rise to a
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`“strong inference” that the defendants “either intended to defraud investors or were
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`severely reckless when they made the allegedly materially false or incomplete
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`statements.” Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1238 (11th Cir. 2008).
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`As set out above, the second amended complaint adequately alleges only a
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`single material misstatement: the website’s statement that Trulieve’s marijuana
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`was grown in a “climate-controlled environment.” The second amended complaint
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`does not allege with particularity—or even generally—facts suggesting the
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`individual defendants had any role in drafting or approving the website’s “climate-
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`controlled” language or even knew about it. One might reasonably expect a
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`website statement of this kind—barely more than puffery—to be drafted and
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`Case 4:20-cv-00186-RH-MJF Document 50 Filed 12/30/21 Page 6 of 7
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`maintained at a lower level. Considering the aggregated facts in relation to each
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`defendant and with respect to each violation, there is simply not enough to
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`establish a strong inference of scienter.
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`Trulieve could of course be held liable based on acts or omissions not just of
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`the named individual defendants but also based on acts or omissions of another
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`officer or employee, so long as the officer or employee acted with the requisite
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`state of mind. But here, as in Mizzaro, the plaintiffs have not alleged scienter of the
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`corporate defendant based on the knowledge or intent of any other officer or
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`employee. The second amended complaint does not allege the existence of any
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`individual, whether known or unknown, who both drafted or approved the
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`website’s “climate-controlled” statement and acted recklessly or with intent to
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`defraud. And it is by no means obvious—there is no “strong inference”—that any
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`such person exists. The second amended complaint gives no reason to believe any
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`single person must both have been aware of the website’s precise language, on the
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`one hand, and aware of precisely what kind of facilities were out in the field.
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`In sum, the second amended complaint does not adequately allege scienter
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`for the only material misstatement it adequately alleges.
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`IV
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`Two facts that have not affected this decision perhaps bear noting. First, the
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`second amended complaint does not allege the individual defendants sold any
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`Case 4:20-cv-00186-RH-MJF Document 50 Filed 12/30/21 Page 7 of 7
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`stock while the price was allegedly inflated by the alleged misstatements at issue.
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`Second, while the second amended complaint alleges the stock price decreased as a
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`result of the alleged misstatements, the price has since increased substantially. The
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`second amended complaint alleges no facts suggesting the individual defendants
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`believed the stock was overvalued—or that it was.
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`V
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`The second amended complaint, like the first, fails to state a claim on which
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`relief can be granted. The plaintiffs have been given two opportunities to amend
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`and have not suggested they could allege anything more. They surely included in
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`the second amended complaint all pertinent facts they could properly allege. In the
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`absence of additional facts—the plaintiffs have suggested none—any further
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`amendment would be futile. This order thus does not grant leave to amend yet
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`again.
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`IT IS ORDERED:
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`1. The motion to dismiss, ECF No. 41, is granted.
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`2. The clerk must enter judgment in each of the consolidated cases and close
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`the files.
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`SO ORDERED on December 30, 2021.
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`s/Robert L. Hinkle
`United States District Judge
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`Case No. 4:20cv186-RH-MJF
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