ASHEKIAN v. CRESCO LABS LLC (2024)

Order, Supreme Court, New York County (Melissa A. Crane, J.), entered January 10, 2023, which, to the extent appealed from as limited by the briefs, granted defendants' motion for summary judgment dismissing the first and third causes of action in the complaint and declared that defendants had no current obligation to release the dispensary shares to plaintiff or to instruct the escrow agent to do so, unanimously affirmed, with costs.  Order, same court and Justice, entered April 26, 2023, which, to the extent appealed from as limited by the briefs, granted defendants' motion to dismiss the fifth cause of action of the first amended complaint with prejudice and ordered that the operative pleading will be the October 22, 2021 complaint, unanimously affirmed, with costs.

Defendants established their prima facie entitlement to summary judgment dismissing the cause of action seeking a declaratory judgment for release of dispensary shares under § 3.3 of the parties' escrow agreement (first cause of action of the complaint), the cause of action for breach of § 3.1 of the escrow agreement (third cause of action of the complaint), and the cause of action seeking reformation of the agreement (fifth cause of action of the first amended complaint).  The passage of legislation authorizing the sale of cannabis for adult recreational use by registered organizations before the deadline date was insufficient to satisfy the terms of the escrow agreement mandating release of the dispensary shares.  The triggering event set forth in § 3.1.1 expressly referred to the award of “dispensary licenses,” which was to be effected by a regulatory body, not by the legislature.  The parties are sophisticated businesspeople who were represented by counsel when the escrow agreement was drafted;  had they intended that the passage of legislation authorizing the sale of cannabis by registered organizations for adult use would be sufficient to trigger the release of the escrowed shares, the agreement could have stated as much (see Chimart Assoc. v. Paul, 66 N.Y.2d 570, 574, 498 N.Y.S.2d 344, 489 N.E.2d 231 [1986]).  Moreover, plaintiff did not present evidence that the parties agreed among themselves that § 3.1 meant what plaintiff now asserts it means (see Stonebridge Capital, LLC v. Nomura Intl. PLC, 68 A.D.3d 546, 548, 891 N.Y.S.2d 56 [1st Dept. 2009]).

We reject plaintiff's argument that the use of the term “license” in the escrow agreement was a mutual mistake regarding the eventual parameters of the cannabis regulatory scheme and that the parties' agreement should be reformed on that basis.  Reformation based on mutual mistake is not available where, as here, the parties purposely contracted based on uncertain or contingent events — namely, the hoped-for future passage of legislation permitting cannabis sales for adult recreational use by registered organizations (see Chimart Assoc., 66 N.Y.2d at 574, 498 N.Y.S.2d 344, 489 N.E.2d 231).

We further reject plaintiff's assertion that the agreement should be reformed because the use of the word “license” in § 3.1 of the escrow agreement was a scrivener's error.  Plaintiff presented no evidence that the parties intended that the contract mandate release of the escrowed shares upon the passage of legislation authorizing adult recreational use of marijuana (see 34–06 73, LLC v. Seneca Ins Co, 39 N.Y.3d 44, 52, 178 N.Y.S.3d 1, 198 N.E.3d 1282 [2022]).

We have considered plaintiff's remaining arguments and find them unavailing.