The Ontario Superior Court of Justice approved the proposed settlement of a securities class action against Auxly Cannabis Group Inc., alleging the company made misrepresentations about the status of a joint venture in its secondary market disclosure.

The $4-million settlement resolved the claim, which alleged that the company misrepresented the state of its work on a cannabis cultivation facility in Cobourg, Ont. along with FSD Pharma Inc.

Ultimately, the project stalled and the companies abandoned the joint venture.

Both companies faced class action lawsuits over their disclosure about the project between November 2018 and February 2019.

Both cases have both now been settled. The parallel class action against FSD was settled back in 2021 for $3.8 million.

Auxly denied the allegations and doesn’t admit any liability in the settlement.

“[T]he settlement represents a more than adequate advantage for the class in return for surrendering its rights in litigation,” the court ruled in its decision approving the proposed settlement.

The payouts to investors will be administered by the law firm that brought both class actions, Berger Montague (Canada) PC.

The court said that the “proposed distribution of settlement funds appears reasonable and in the best interests of the class.”

According to the court’s decision, the process of administering the FSD settlement was “a learning experience” for the firm, which has created a streamlined method for allocating the settlement funds to investors as a result.

The court approved a $1.2-million fee for the class action lawyers (approximately 30% of the settlement), plus $156,000 in taxes and $76,236.90 for disbursements it made to litigate the action. It also approved a $7,500 honorarium for the representative plaintiff in the case.

“In my view, the fee sought by class counsel appropriately reflects the level of risk that class counsel has assumed in carrying this case from inception to settlement,” the court said.