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Law360 (June 16, 2020, 10:19 PM EDT) -- Four firms, including Pomerantz LLP and Glancy Prongay & Murray LLP, have placed bids to represent iAnthus Capital Holdings Inc. investors over claims the cannabis company tried to use the coronavirus pandemic to explain away a missed $4.4 million interest payment.
The firms, which also include The Rosen Law Firm PA and Robbins LLP, said in filings Monday that their respective clients have the largest financial interest in the stock-drop suit.
The proposed class action says that iAnthus made false and misleading statements about its expanding business operations without disclosing to stockholders that it did not use escrowed funds to make necessary interest payments. On April 6, iAnthus announced it had defaulted on $4.4 million in interest payments to the private equity firm Gotham Green Partners because of the coronavirus pandemic, as well as a decline in cannabis markets overall.
The shareholders said shares of the company's stock fell $0.29 per share to close at $0.179 per share that day, according to court documents.
The investors said iAnthus entered into a $50 million debenture agreement with Gotham in May 2018, which provided for the withholding and escrow of more than $5.7 million to pay one year's interest on the 2018 debentures in the event of an iAnthus default. That agreement was amended in September 2019 to provide an additional $20 million to iAnthus, according to court documents.
Neither company disclosed why the escrowed money wasn't used to satisfy iAnthus' interest obligations, shareholders said. And if the funds were unavailable for the interest payments to Gotham, iAnthus "intentionally, or recklessly, failed to disclose such information rendering the earlier statements concerning the availability of the escrowed funds materially false and misleading," they said.
Jose Antonio Silva, represented by Pomerantz, said he incurred losses of more than $2.2 million. Melvin Fussell, represented by Robbins LLP, said he incurred losses of about $150,000. Robert Dankner, represented by Rosen, said he incurred losses of about $280,000. And Robert and Sherri Newblatt, represented by Glancy Prongay, indicated in their filings that they incurred a combined loss of more than $1 million.
Shareholder Donald W. Finch filed his proposed class action on April 20, and a related proposed class action brought by Peter L. Cedeno was filed on May 5, according to court documents. The plaintiffs are also asking the court to consolidate the cases.
A separate case brought by Finch's counsel against the companies was voluntarily dismissed the same day his suit was filed.
Counsel for the parties did not immediately respond to requests for comment Tuesday.
Finch is represented by Timothy J. MacFall of Rigrodsky & Long PA.
Silva is represented by Jeremy A. Lieberman, J. Alexander Hood II and Patrick V. Dahlstrom of Pomerantz LLP, and Peretz Bronstein of Bronstein Gewirtz & Grossman LLC.
Fussell is represented by Brian J. Robbins and Gregory E. Del Gaizo of Robbins LLP, and Thomas G. Amon.
Dankner is represented by Laurence M. Rosen and Phillip Kim of The Rosen Law Firm, and Frank R. Cruz.
The Newblatts are represented by Robert V. Prongay, Gregory B. Linkh, Charles H. Linehan and Pavithra Rajesh of Glancy Prongay & Murray LLP.
iAnthus is represented by Seth L. Levine, Chad Albert and Katie G. Crane of Levine Lee LLP.
Gotham is represented by Ian M. Turetsky of Reed Smith LLP.
The case is Finch v. iAnthus Capital Holdings Inc. et al., case number 1:20-cv-03135, in the U.S. District Court for the Southern District of New York.
--Editing by Adam LoBelia.
For a reprint of this article, please contact reprints@law360.com.
