Feb 11, 2020

Cannabis industry 'bump' just 'normal growing pains,' says famed litigator Henein

'We're not asleep at the switch': Marie Henein firm part of class-action lawsuit against CannTrust


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Canadian litigator Marie Henein says the cannabis industry has hit a “bump” in the road amid lingering questions about regulatory issues stemming from CannTrust Holdings Inc.’s non-compliance order from Health Canada.

In an interview Tuesday on BNN Bloomberg, Henein, a partner at Henein Hutchison LLP,  said that the transition from being an illegal industry to a legitimate business played a role in the stumble seen across the sector. That sudden change required all sorts of obligations to be met and companies to be run like any other business.

“It’s just normal growing pains, I don’t think it’s anything extraordinary or unusual in terms of the outlook [for] the industry,” she said.

Henein has become well known across Canada after representing high-profile cases including former CBC radio host Jian Ghomeshi and former Ontario attorney general Michael Bryant. Her firm, along with three other groups, was tasked by an Ontario Superior Court judge to represent investors who lost money investing in CannTrust between June 2018 and Sept. 17, 2019, as well as during a prospectus offering conducted by the cannabis producer in May 2019.

The cannabis industry has faced pressure over the last year as a result of oversupply, disappointing sales and regulatory issues following CannTrust’s non-compliance order.

The Vaughan, Ont.-based company was deemed by Health Canada in July 2019 to be non-compliant with its regulations after an inspection uncovered CannTrust grew cannabis in unlicensed rooms. Subsequent to that disclosure, a former employee alleged that CannTrust hid cannabis behind false walls from Health Canada inspectors. As well, BNN Bloomberg reported that the company sourced cannabis seeds from the illicit market for some of its legal products.

After CannTrust received its non-compliance order from Health Canada, the company’s stock plunged more than 80 per cent on the Toronto Stock Exchange. The company’s CEO at the time, Peter Aceto, was terminated with cause, while its chairman and co-founder, Eric Paul, resigned from his position.

Last week, the Ontario Supreme Court of Justice gave a consortium of law firms that includes Henein Hutchison a green light to move forward with a class action lawsuit against the beleaguered licensed producer and its former executives.

“There are questions that need to be answered. There are things that jump off the financial statements that I would have expected questions to be asked about,” she said.

She added that, “This was a bit of a circumstance where you had a confluence of factors that set the stage for people, perhaps, who were not meeting the standards we expect to just come into the market.”

A CannTrust spokesperson declined to comment as the matter is before the court.

Henein said that her team is moving relatively quickly and hopes to get the class action certified in the next six to eight weeks.

“The best outcome is the greatest amount of recovery for the investors to put them back in their original position. That’s our concern and we’re going to do our best to make sure the investors are protected and remediated,” she said.

- with files from BNN Bloomberg's David George-Cosh

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new — and controversial — Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.