Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 1 of 19 PageID #: 1381
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
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`IN RE CURALEAF HOLDINGS, INC.
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`SECURITIES LITIGATION
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`MEMORANDUM DECISION
`AND ORDER
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`19-cv-4486 (BMC)
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`COGAN, District Judge.
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`This securities action is before me on defendants’ motion to dismiss. Plaintiffs allege
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`that defendants misled investors about the legality of their cannabidiol (“CBD”) products,
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`causing loss when the truth was revealed. Because plaintiffs’ claims are premised on the
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`nondisclosure of information that was actually disclosed and further amendment to the complaint
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`would be futile, the motion is granted and the case dismissed.
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`BACKGROUND1
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`I. Regulation of cannabis products
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`CBD is a chemical compound derived from plants in the cannabscae family. Both
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`marijuana and hemp contain CBD and can be used to make CBD products, such as oils.
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`Marijuana has a higher delta-9-tetrahydrocannabinol (“THC”) content (up to 30%) and can come
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`from both the cannabis indicia and cannabis sativa families of plants; hemp is derived only from
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`the latter family and has a lower THC content (less than 0.3%).
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`CBD has been incorporated into a variety of products – beverages, lotions, supplements,
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`vape pens, bath bombs, pet treats, and more. Retailers claim that it provides various health
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`benefits, ranging from treatment of pain and anxiety to cancer and Alzheimer’s disease, but the
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`1 Unless otherwise noted, the below facts are taken from plaintiffs’ Amended Complaint and assumed to be true for
`purposes of this motion. See Kolbasyuk v. Capital Mgmt. Servs., LP, 918 F.3d 236, 239 (2d Cir. 2019).
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`Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 2 of 19 PageID #: 1382
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`FDA has warned that there is little to no scientific evidence supporting such claims. Further, the
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`FDA has warned that CBD has the potential to cause liver injury, male reproductive toxicity, and
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`changes in alertness and mood, among other harm and side effects.
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`There is a conflict between state and federal regulation of cannabis and cannabis-based
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`products. Marijuana is listed in Schedule I of the Controlled Substances Act (“CSA”), meaning
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`it is categorized as a drug with no currently accepted medical use and a high potential for abuse.
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`But 33 states and Washington D.C. have legalized the use of medical marijuana, 11 of those
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`states and Washington D.C. have legalized recreational marijuana, and 17 states have legalized
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`the use and possession of CBD, although “legalization” means different things in different states.
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`Most states also regulate hemp.
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`On August 29, 2013, U.S. Attorney General James M. Cole issued a memorandum
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`advising the federal government to exercise prosecutorial discretion in enforcing federal
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`marijuana laws. This memorandum was rescinded on January 4, 2018 by the issuance of a new
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`memorandum from U.S. Attorney General Jeff Sessions, who similarly instructed prosecutors to
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`weigh relevant considerations in deciding whether to prosecute marijuana offenses. On
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`December 20, 2018, the Agriculture Improvement Act of 2018 (“Farm Act”) was enacted. The
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`Farm Act amended the CSA by removing hemp from the definition of marijuana and thus from
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`Schedule I of the CSA, allowing hemp to be grown under federal law in some circumstances.
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`That same day, the FDA issued a statement confirming that it retained the authority to
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`regulate cannabis or cannabis-derived compounds, including CBD products. The FDA explained
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`that such compounds are “subject to the same authorities and requirements as FDA-regulated
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`products containing any other substance.” The FDA further explained that it:
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`continue[s] to be concerned at the number of drug claims being made about
`products not approved by the FDA that claim to contain CBD . . . . [T]he FDA
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`2
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`Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 3 of 19 PageID #: 1383
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`requires a cannabis product (hemp-derived or otherwise) that is marketed with a
`claim of therapeutic benefit, or with any other disease claim, to be approved by
`the FDA for its intended use before it may be introduced into interstate
`commerce. . . . Cannabis and cannabis-derived products claiming in their
`marketing and promotional materials that they’re intended for use in the
`diagnosis, cure, mitigation, treatment, or prevention of diseases . . . are considered
`new drugs or new animal drugs and must go through the FDA drug approval
`process for human or animal use before they are marketed in the U.S.
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`The FDA’s website, referred to in the statement, states its position that “[s]elling unapproved
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`[CBD] products with unsubstantiated therapeutic claims is not only a violation of the law, but
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`also can put patients at risk, as these products have not been proven to be safe or effective.” It
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`also notes that the FDA has approved only one drug containing CBD (Epidiolex, for the
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`treatment of seizures). The website further explains that CBD products cannot be sold as dietary
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`supplements and that it is illegal to sell a food (including any animal food) to which CBD has
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`been added.
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`II. Defendants’ products and disclosures
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`Curaleaf Holdings, Inc. (“Curaleaf Holdings” or the “Company”) was created in a reverse
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`takeover between the Canadian company Lead Ventures, Inc. (renamed Curaleaf Holdings, Inc.)
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`and the Delaware corporation PalliaTech, Inc. (renamed Curaleaf, Inc. (“Curaleaf”)). This action
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`is brought on behalf of purchasers or acquirers of Curaleaf Holdings securities on the OTCQX, a
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`United States market for companies already listed on a qualified international stock exchange.
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`Curaleaf Holdings is listed on the Canadian Stock Exchange (“CSE”).
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`On October 26, 2018, the same day that the Company announced the completion of the
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`business combination, it filed its Listing Statement with the System for Electronic Document
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`Analysis and Retrieval (“SEDAR”). SEDAR is the Canadian equivalent of the Electronic Data
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`Gathering, Analysis, and Retrieval system (“EDGAR”) in the United States – it is the filing
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`system designed to facilitate the electronic filing of securities information and allow for the
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`3
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`public dissemination of Canadian securities information collected in the securities filing
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`process.2 The Listing Statement is a document that “must be used for all initial applications for
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`Listing and for Issuers resulting from a fundamental change” and “contains comprehensive
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`disclosure about the issuer.”3
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`A.
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`Disclosures and public statements
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`The October 26, 2018 Listing Statement – filed with SEDAR that day, with the CSE on
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`November 2, 2018, and with the OTCQX on January 15, 2019 – included the following
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`discussion about the cannabis industry:
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`Curaleaf Holdings, Inc. will derive a substantial portion of its revenues from the
`cannabis industry in certain states of the United States, which industry is illegal
`under United States federal law. Curaleaf Holdings, Inc. will be directly involved
`(through its licensed subsidiaries) in the cannabis industry in the United States
`where local state laws permit such activities. . . .
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`The United States federal government regulates drugs through the Controlled
`Substances Act (21 U.S.C. § 811), which places controlled substances, including
`cannabis, in a schedule. Cannabis is classified as a Schedule I drug. Under
`United States federal law, a Schedule I drug or substance has a high potential for
`abuse, no accepted medical use in the United States, and a lack of accepted safety
`for the use of the drug under medical supervision. The United States Food and
`Drug Administration has not approved marijuana as a safe and effective drug for
`any indication.
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`In the United States marijuana is largely regulated at the state level. State laws
`regulating cannabis are in direct conflict with the federal Controlled Substances
`Act, which makes cannabis use and possession federally illegal. Although certain
`states authorize medical or adult-use cannabis production and distribution by
`licensed or registered entities, under U.S. federal law, the possession, use,
`cultivation, and transfer of cannabis and any related drug paraphernalia is illegal
`and any such acts are criminal acts under federal law. The Supremacy Clause of
`the United States Constitution establishes that the United States Constitution and
`federal laws made pursuant to it are paramount and in case of conflict between
`federal and state law, the federal law shall apply. . . .
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`2 Available at: www.sedar.com.
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`3 Form 2A - Listing Statement, CSE (last visited Feb. 15, 2021), https://thecse.com/en/resources/form-2a-listing-
`statement#:~:text=The%20Listing%20Statement%20must%20be,comprehensive%20disclosure
`%20about%20the%20issuer.
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`There is no guarantee that state laws legalizing and regulating the sale and use of
`cannabis will not be repealed or overturned, or that local governmental authorities
`will not limit the applicability of state laws within their respective jurisdictions.
`Unless and until the United States Congress amends the Controlled Substances
`Act with respect to medical and/or adult-use cannabis (and as to the timing or
`scope of any such potential amendments there can be no assurance), there is a risk
`that federal authorities may enforce current federal law. If the federal government
`begins to enforce federal laws relating to cannabis in states where the sale and use
`of cannabis is currently legal, or if existing applicable state laws are repealed or
`curtailed, Curaleaf Holdings, Inc.’s business, results of operations, financial
`condition and prospects would be materially adversely affected.
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`The Listing Statement further explained that “[v]iolations of any federal laws and
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`regulations could result in significant fines, penalties, administrative sanctions, convictions or
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`settlements arising from civil proceedings conducted by either the federal government or private
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`citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of
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`business activities or divestiture.” This could have a “material adverse effect” on the Company,
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`including to its “reputation and ability to conduct business,” its licenses, “the listing of its
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`securities on the CSE, its financial position, operating results, profitability or liquidity or the
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`market price of its publicly traded shares.”
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`The Listing Statement provided additional disclosures specific to the Company’s CBD
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`products. The Company’s products “are not approved by the [FDA] as ‘drugs’ or for the
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`diagnosis, cure, mitigation, treatment, or prevention of any disease. Accordingly, the FDA may
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`regard any promotion of the cannabis-based products as the promotion of an unapproved drug in
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`violation of the [FDCA].” The Listing Statement proceeded to explain that the FDA has issued
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`letters to a number of companies selling CBD products in recent years “warning them that the
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`marketing of their products violates the FDCA.” Any FDA enforcement against the company
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`“could result in a number of negative consequences, including fines, disgorgement of profits,
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`recalls or seizures of products, or a partial or total suspension of the [Company’s] production or
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`Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 6 of 19 PageID #: 1386
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`distribution of its products,” and “[a]ny such event could have a material adverse effect on the
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`Resulting Issuer’s business, prospects, financial condition, and operating results.”
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`On October 29, 2018, Curaleaf Holdings began trading on the CSE. A press release from
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`that date included comments from defendant Lusardi that the Company was committed to
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`aggressive organic growth, that the Curaleaf brand was “a premium mainstream cannabis brand”
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`and the products met the “highest standards for safety, effectiveness, [and] quality.”
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`On November 21, 2018 – the proposed beginning of the class period – Curaleaf Holdings
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`issued a press release announcing that the Company had launched “a line of premium hemp-
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`based CBD products,” described as “natural,” having undergone “strict laboratory testing,”
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`meeting “the strictest quality standards” and “supporting overall wellness.” The CBD products
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`were advertised and sold on the Company’s website, which stated that the products could treat
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`chronic pain, anxiety, depression, PTSD, Parkinson’s disease, and Alzheimer’s disease, reduce
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`opioid-related withdrawal, counteract the growth and spread of cancer, and deter heart disease.
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`The first press release did not discuss FDA approval, nor did another issued that same day, nor
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`did press releases issued on November 26 and 28 and December 4, 5, and 14 – all of which
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`contained similar language regarding “premium” products and “highest standard for safety,
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`effectiveness,” and quality.
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`On November 26, 2018, on a 2018 3Q earnings call, Lusardi discussed the new CBD
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`product line, explaining that “[t]he interstate regulations for CBD are vastly different than that of
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`our THC products, which will give us the opportunity to offer these products through
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`ecommerce, major third party retailers, pharmacy chains and grocery stores, in addition to vape
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`shops and dispensaries.” He discussed the Company’s plans for rapid growth and indicated that
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`the 2018 Farm Act would be “a catalyst for more and more retailers and more and more outlets
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`to take on” CBD products.
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`On November 29, 2018, Curaleaf Holdings filed its Management Discussion and
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`Analysis (“MD&A”) for the nine months ending September 30, 2018 with the CSE
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`(subsequently filed with OTCQX on January 15, 2019). This document only addressed the risk
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`factors that applied to the Company’s business before the completion of the reverse takeover and
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`thus only addressed risks within the mining industry.4 “For details of the risks and uncertainties
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`relating to the Company subsequent to completion of the Business Combination,” it referred
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`readers to “the Company’s Listing Statement, dated October 26, 2018, which is available under
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`the Company’s SEDAR profile.”
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`On December 20, 2018, the Farm Act was enacted. A slew of press releases followed,
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`each of which referred to the safety, effectiveness, and quality of the Company’s cannabis
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`products and none of which disclosed that the products were not FDA-approved.
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`On March 20, 2019, Curaleaf Holdings held a 2019 4Q call in which its Executive
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`Director discussed the Company’s successful rapid growth but also acknowledged the quickly
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`changing legal regime around cannabis in the United States, referring to an “evolving landscape
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`in the hemp industry,” legal “conflict between the federal government and the states,” and the
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`expectation that “numerous pieces of legislation will be introduced over the next quarter.”
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`4 Although not annexed to the Amended Complaint, I may take judicial notice of this document and the statements
`contained within because it is referenced in the complaint and plainly relevant and there is no apparent dispute as to
`its authenticity or accuracy. See Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006). Further, “[i]n securities fraud
`cases, . . . a court may consider ‘public disclosure documents required by law to be, and that have been, filed with
`the SEC . . . ., and documents that plaintiffs either possessed or knew about and upon which they relied in bringing
`the suit.’” In re Keyspan Corp. Sec. Litig., 383 F. Supp. 2d 358, 372 (E.D.N.Y. 2003) (quoting Rothman v. Gregor,
`220 F.3d 81, 88 (2d Cir. 2000)). This reasoning extends to public disclosure documents filed with foreign
`exchanges like the CSE.
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`On April 23, 2019, Curaleaf Holdings filed its Management’s Discussion and Analysis of
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`Financial Condition and Results of Operations for the Year Ended December 31, 2018 with
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`SEDAR (subsequently filed with OTCQX on May 14, 2019 and CSE on December 13, 2019).
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`Its disclosures contained a section titled “Regulatory Action and Approvals from the Food and
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`Drug Administration” detailing the possible risks to the Company from the FDA regulatory
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`regime. It noted that the Company’s products are not approved by the FDA and “the FDA may
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`regard any promotion of the cannabis-based products as the promotion of an unapproved drug in
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`violation of the” FDCA. It further disclosed that the “FDA has asserted that CBD is not a lawful
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`ingredient in foods and beverages, supplements and pharmaceuticals (unless FDA-approved),
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`although FDA has generally refrained from taking enforcement action against those products.”
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`Explaining that the FDA has issued warning letters to companies selling CBD products, the
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`disclosure noted that any enforcement action could result in a variety of negative consequences.
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`“The Company sells and distributes certain products containing CBD. There is a risk that the
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`FDA or state or local Departments of Health will seek to stop the Company from selling its CBD
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`products or seek to have the claims made for those products revised.”
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`On May 10, 2019, the Company announced a new hemp-based CBD product for pets,
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`called “Bido,” claiming that the product supports a pet’s overall wellness, is natural and safe, and
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`has the potential to manage pain and anxiety. Many more press releases followed, each of which
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`referred to the safety, effectiveness, and quality of its cannabis-based products and none of which
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`disclosed that the products were not FDA-approved.
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`B.
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`The warning letter
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`On July 22, 2019, the FDA issued a warning letter to Curaleaf regarding several CBD
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`products sold on its website. The FDA determined that these products are unapproved new drugs
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`and misbranded drugs sold in violation of the FDCA. The letter detailed dozens of the
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`Company’s claims about the products demonstrating that they are intended for use in the
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`diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the
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`structure or any function of the body and thus constituted unapproved new and misbranded
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`drugs. Further, to the extent that the Company intended to market its CBD products as dietary
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`supplements, the FDA explained that is impermissible because the “FDA has concluded . . . that
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`CBD products are excluded from the dietary supplement definition” under the Act, subject to an
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`exception that does not apply here. Further, the letter explained that the Bido products are
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`unapproved new animal drugs that are considered unsafe and adulterated under the FDCA, and
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`detailed dozens of the Company’s claims about these products demonstrating that they are
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`intended to mitigate, treat, or prevent disease in animals. Accordingly, the FDA concluded that
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`“introducing or delivering [any of the listed] products for introduction into interstate commerce
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`for such uses violates” the FDCA.
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`The letter instructed the Company to “take prompt action to correct the violations cited in
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`this letter” and noted that “[f]ailure to promptly correct these violations may result in legal action
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`without further notice, including, without limitation, seizure and injunction.”
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`The Company’s share price fell in the days following the issuance of the warning letter.
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`On July 26, 2019, Curaleaf Holdings issued a press release reporting that it had responded to the
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`FDA, removed the statements highlighted in the warning letter, and discontinued many of the
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`products referred to within it.
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`DISCUSSION
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`In deciding a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
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`Procedure, the Court must “constru[e] the complaint liberally, accept[] all factual allegations in
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`the complaint as true, and draw[] all reasonable inferences in the plaintiff’s favor.” Elias v.
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`Rolling Stone LLC, 872 F.3d 97, 104 (2d Cir. 2017) (quoting Chase Grp. All. LLC v. City of
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`New York Dep’t of Fin., 620 F.3d 146, 150 (2d Cir. 2010)). To survive a motion to dismiss, a
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`complaint must plead “enough facts to state a claim to relief that is plausible on its face,” Bell
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`Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), and to “allow[] the court to draw the
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`reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
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`556 U.S. 662, 678 (2009).
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`I.
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`Section 10(b) and Rule 10b-5 of the Exchange Act
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`“To state a cause of action under section 10(b) and Rule 10b-5, a plaintiff must plead that
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`the defendant made a false statement or omitted a material fact, with scienter, and that plaintiff’s
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`reliance on defendant’s action caused plaintiff injury.” San Leandro Emergency Med. Grp.
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`Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 808 (2d Cir. 1996). Under the Private
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`Securities Litigation Reform Act (“PSLRA”), the complaint must specify each statement alleged
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`to have been misleading and the reasons why the statement is misleading. 15 U.S.C. § 78u-
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`4(b)(1). “Specificity is also required by the Federal Rules of Civil Procedure, which provide that
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`‘[i]n all averments of fraud . . . the circumstances constituting fraud . . . shall be stated with
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`particularity.’” In re Scholastic Corp. Sec. Litig., 252 F.3d 63, 69 (2d Cir. 2001) (quoting Fed.
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`R. Civ. P. 9(b)).
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`A.
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`Failure to disclose
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`Plaintiffs allege that throughout the class period, public statements made by the Company
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`were false and misleading because defendants failed to fully disclose the illegality of the sale of
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`CBD products under federal law due to the lack of FDA approval. Defendants contend that the
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`Company repeatedly disclosed that its cannabis-based products are not approved by the FDA as
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`drugs, that the FDA may regard their promotion as the promotion of an unapproved drug in
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`violation of federal law, and the risk that the Company could be subject to an FDA enforcement
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`action with significant negative consequences. Defendants argue that these disclosures are fatal
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`to plaintiffs’ allegations that defendants deliberately withheld material information from
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`investors. I agree.
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`“Even at the pleading stage, dismissal is appropriate where the complaint is premised on
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`the nondisclosure of information that was actually disclosed.” In re Keyspan Corp. Sec. Litig.,
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`383 F. Supp. 2d 358, 377 (E.D.N.Y. 2003) (citing Debora v. WPP Group, P.L.C., No. 91 Civ.
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`1775, 1994 WL 177291, at *5 (S.D.N.Y. May 5, 1994) (“A complaint fails to state a § 10(b)
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`claim when the alleged omission has actually been disclosed.”); Sable v. Southmark/Envicon
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`Capital Corp., 819 F. Supp. 324, 333 (S.D.N.Y. 1993) (“The naked assertion of concealment of
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`material facts which is contradicted by published documents which expressly set forth the very
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`facts allegedly concealed is insufficient to constitute actionable fraud.”) (citation and quotation
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`marks omitted)).
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`Here, starting on its first day in existence, the Company publicly and repeatedly
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`acknowledged the very information that plaintiffs contend it concealed: its cannabis-based
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`products are not approved by the FDA and thus the FDA may regard their promotion as violating
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`established law. After describing the complex and contradictory nature of cannabis regulation in
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`the United States and the risks attendant to operating a company that derives its revenues from
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`the cannabis industry, the Listing Statement – the key disclosure document filed in connection
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`with the Company going public – expressly disclosed that:
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`(cid:120)
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`(cid:120)
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`the Company’s cannabis-based products “are not approved by the [FDA] as ‘drugs’”
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`the FDA may regard their promotion “as the promotion of an unapproved drug in
`violation of the [FDCA]”
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`Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 12 of 19 PageID #: 1392
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`(cid:120)
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`the “FDA has issued letters to a number of companies selling products that contain
`CBD . . . warning them that the marketing of their products violates the FDCA”
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`(cid:120) an “FDA enforcement action against the [Company] could result in a number of
`negative consequences, including fines, disgorgement of profits, recalls or seizures of
`products, or a partial or total suspension of the [Company’s] production or
`distribution of its products,” and
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`(cid:120) “[a]ny such event could have a material adverse effect on the [Company’s] business,
`prospects, financial condition, and operating results.”
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`What more need the Company disclose about this risk? The Listing Statement says it all.
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`Plaintiffs argue that the Listing Statement does not disclose that selling a CBD-based
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`product is “illegal” under federal law. But “illegal” and in “violation” of federal law mean the
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`same thing. The information that plaintiffs contend was not disclosed was clearly disclosed from
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`the Company’s inception. There is no requirement that a Company disclose its risk in any magic
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`words preferred by plaintiffs.
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`The Company disclosed the relevant information regularly and repeatedly. The Listing
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`Statement was filed in October 2018. In November 2018, the Company’s MD&A referred to the
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`Listing Statement for details of its risks and uncertainties. About a month before the Company
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`was listed on the OTCQX market (which occurred on February 19, 2019), the Company filed
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`these same disclosures with OTC Markets, including the Listing Statement and its specific
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`warnings about the Company’s cannabis-based products. On April 23, 2019, the Company filed
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`another MD&A with SEDAR containing the same warnings about CBD products from the
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`Listing Statement, an additional explanation about the effect of the new Farm Act on the hemp
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`industry, and underscoring that “[t]here is a risk that the FDA or state or local Departments of
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`Health will seek to stop the Company from selling its CBD products or seek to have the claims
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`made for those products revised.”
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`Plaintiffs further argue that the Company only disclosed the risk that the FDA “could
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`potentially” take regulatory action against it for its unapproved cannabis-derived products,
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`ignoring “unambiguous” guidance from the FDA that CBD products were illegal. But “a
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`defendant that makes specific cautionary statements, such that no reasonable investor would
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`have been misled about the nature of the risk, is not liable when that risk materializes, contrary to
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`the defendant’s optimistic statements.” In re Delcath Sys., Inc. Sec. Litig., 36 F. Supp. 3d 320,
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`334 (S.D.N.Y. 2014). Here, the Company clearly disclosed the risk that the FDA could act
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`against it and that the FDA had done so to other companies selling similar products. Describing
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`this risk in terms of potentiality rather than certainty – when certainty of enforcement could not
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`be known anyway – does not violate securities law.
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`Perhaps recognizing the weakness of their claim that the Listing Statement did not
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`adequately disclose this information, plaintiffs focus primarily on various press releases that they
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`contend should also have noted that the Company’s products were “illegal” under federal law.
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`But not every public statement made by the Company need contain the full roster of disclosures
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`detailed in the Company’s securities filings. See In re Keyspan, 383 F. Supp. 2d at 378-79
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`(securities laws require disclosure only of information that is not otherwise in the public domain,
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`and there can be no liability for failure to disclose where securities filings adequately disclose the
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`relevant information); see also Emerson v. Mut. Fund Series Tr., 393 F. Supp. 3d 220, 247-49
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`(E.D.N.Y. 2019) (plaintiffs could not have lacked the necessary information to adequately
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`understand the Company’s risks where the risks were disclosed in securities filings); La Pietra v.
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`RREEF America, LLC., 738 F. Supp. 2d 432, 441-42 (S.D.N.Y. 2010) (no basis for plaintiffs to
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`claim that defendants failed to disclose riskiness when the prospectus described the business
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`strategy and possible negative consequence); In re Cross Media Mktg. Corp. Sec. Litig., 314 F.
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`
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`13
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`Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 14 of 19 PageID #: 1394
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`Supp. 2d 256, 268 (S.D.N.Y. 2004) (reasonable investor would have reviewed securities filings
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`and not been misled by forward-looking, optimistic statements in press releases). The issue can
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`be described in terms of materiality because additional disclosure would not alter the “total mix”
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`of information available to a reasonable investor, Halperin v. eBanker USA.com, Inc., 295 F.3d
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`352, 357 (2d Cir. 2002); or as the lack of a duty to disclose matters of public record, In re
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`Keyspan, 383 F. Supp. 2d at 378-79. Either way, the Company’s on-point public disclosures are
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`fatal to plaintiffs’ claims, and those claims cannot be revived merely because the disclosures
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`were not repeated in every press release issued by the Company.
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`B.
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`Representations regarding health and wellness
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`In opposition to defendants’ motion to dismiss, plaintiffs appear to assert a new, slightly
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`different theory. In the Amended Complaint, plaintiff had described the suggestion that the
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`Company’s CBD products were “safe” or “effective” as misleading in terms of FDA approval;
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`plaintiffs alleged only that defendants “created the misleading impression that the CBD products
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`were safe, effective, had the health and medical benefits advertised and met medical/scientific
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`standards when, in fact, the products had not be approved by the federal agency responsible for
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`certifying the safety, effectiveness and quality of food and medical products sold in the U.S.”
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`Every allegedly misleading statement regarding safety, effectiveness, or quality featured in the
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`Amended Complaint’s Addendum similarly focused on the lack of FDA approval. However, in
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`their opposition brief, plaintiffs also argue that some of defendants’ statements were false and
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`misleading because “Curaleaf’s products did not have the health benefits touted” and were “not
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`beneficial for human and animal health.”
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`Defendants argue that the Court should not consider this claim but, if the Court is
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`inclined to do so, the claim should be dismissed because it cannot satisfy loss causation. I will
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`
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`14
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`

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`Case 1:19-cv-04486-BMC Document 49 Filed 02/16/21 Page 15 of 19 PageID #: 1395
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`consider the claim because it was set out in plaintiffs’ opposition motion and thus afforded
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`defendants the opportunity to address it on reply, and defendants identify no prejudice.
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`“Loss causation is ‘the causal link between the alleged misconduct and the economic
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`harm ultimately suffered by the plaintiff.’” Lentell v. Merrill Lynch & Co., 396 F.3d 161, 172
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`(2d Cir. 2005) (quoting Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189,
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`197 (2d Cir. 2003)). To plead loss causation, plaintiffs must “allege facts sufficient to show that
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`the ‘relevant truth’ that had been concealed by [d]efendants’ purportedly false statements was
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`disclosed to the market, which in turn caused [the Company’s] stock price to decline.” Janbay v.
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`Canadian Solar, Inc., No. 10 CIV. 4430, 2012 WL 1080306, at *14 (S.D.N.Y. Mar. 30, 2012)
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`(citing Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 342-43, 347 (2005)). “An alleged corrective
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`disclosure that does not reveal the falsity of [d]efendants’ challenged public statements cannot
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`establish loss causation, a pleading failure that ‘is fatal under Second Circuit precedent.’” Id.
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`(quoting Lentell, 396 F.3d at 175). The requirement to plead and prove loss causation exists
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`because “private securities fraud actions are ‘a