Sensoria, LLC v. Kaweske
| Decision Date | 12 January 2021 |
| Docket Number | Civil Action No. 20-cv-00942-MEH |
| Parties | SENSORIA, LLC, directly on its own behalf and derivatively on behalf of CLOVER TOP HOLDINGS, INC., a Delaware corporation; and GORDON MORTON, Plaintiffs, v. JOHN D. KAWESKE; CHRISTOPHER S. PETERSON; CLOVER TOP HOLDINGS, INC., a Delaware corporation; CLOVER TOP HOLDINGS, a Colorado corporation; AJC INDUSTRIES, LLC; DURANGO MANAGEMENT, LLC; SUNLIFE AG, LLC; MMJ 95, LLC; TWEEDLEAF LLC, a Colorado limited liability company; TWEEDLEAF, LLC, a Delaware limited liability company; LIFESTREAM HOLDINGS LLC; ORDWAY FARMS LLC; NORTH STAR HOLDINGS aka NORTH STAR HOLDINGS, INC.; MANUEL WELBY EVANGELISTA aka WELBY EVANGELISTA; DJDW, LLC; JW COLORADO, LLC; JW ORDWAY, LLC; JW TRINIDAD, LLC; BRIAN TANNENBAUM; TANNENBAUM & TROST, LLC; and DOES 1-100, Defendants. |
| Court | U.S. District Court — District of Colorado |
Before the Court are Defendants' Motions to Dismiss (ECF 107, 109, 110). The Motions are fully briefed, and the Court finds that oral argument will not materially assist in their adjudication. For the reasons that follow, the Motions are granted in part and denied in part.
For purposes of this ruling, the Court accepts as true the factual allegations—but not any legal conclusions, bare assertions, or conclusory allegations—that Plaintiffs raise in their Amended Complaint. ECF 95. See generally Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ().
Defendant John D. Kaweske ("Kaweske") is a citizen of Colorado. ECF 95 at ¶ 3. Defendant Christopher S. Peterson ("Peterson") is citizen of either Colorado or Arizona. Id. at ¶ 5. Peterson incorporated Clover Top Holdings in Colorado ("Clover Top Colorado"). Id. at ¶ 98.
At issue in this lawsuit is the separate entity, Clover Top Holdings, Inc., that Kaweske, Peterson, and Peterson's wife incorporated in September 2015. Id. at ¶¶ 2, 27. Clover Top Holdings, Inc. is a Delaware corporation. Its principal place of business was in Colorado (id. at ¶ 6), although it was not registered to do business in Colorado until September 22, 2017 (id. at ¶¶ 45(a), 76). It no longer is an active corporation. Id. at ¶ 92.
Clover Top Holdings, Inc. was created as a vehicle for investing in "the Colorado cannabis" or "cannabis-related" business. Id. at ¶ 2. In their solicitations, Kaweske and Peterson described the investment opportunity as being "in the 'legal cannabis industry.'" Id. at ¶ 120. Kaweske oversaw cultivation operations as well as finances, taxes, licenses, and legal matters. Peterson oversaw dispensary operations, patient care, and marketing. Id. at ¶ 54. Clover Top Holdings, Inc. retained Defendants Brian Tannenbaum, Esq., and the law firm, Tannenbaum & Trost LLC ("Tannenbaum Defendants") for both cannabis and corporate law matters. Id. at ¶¶ 23, 33. The Tannenbaum Defendants simultaneously provided legal services for Kaweske, the corporate entities associated with Clover Top Holdings, Inc., and the corporate entities that later competedwith it. Id. at ¶¶ 33, 52. The Tannenbaum Defendants served as the escrow agent for a transaction in which Clover Top Holdings, Inc. gave Peterson's in-laws Series A shares in exchange for $300,000 and ownership of Durango Management, LLC. Id. at ¶ 51.
In January 2016, Clover Top Holdings, Inc. purchased two parcels of real property in Colorado Springs to operate as a marijuana dispensary facility and a grow warehouse. Id. at ¶ 35. Clover Top Holdings, Inc. owned the business entity, TweedLeaf LLC (incorporated in Delaware) ("TweedLeaf Delaware"), which in turn held the trademark for the "TWEEDLEAF" word and drawing mark. Id. at ¶¶ 30, 31. The "TweedLeaf" brand was meant for the business venture (id. at ¶ 43), but in September 2018, TweedLeaf Delaware abandoned the mark (id. at ¶ 87).
Several additional corporate entities were either created or acquired to be part of the greater cannabis-related business venture. MMJ 95, LLC was created in October 21, 2015. Id. at ¶ 32. TweedLeaf LLC was created in Colorado ("TweedLeaf Colorado") on November 19, 2015. Id. at ¶¶ 12, 34. Durango Management, LLC was formed on January 26, 2016 to operate as a real estate management company for TweedLeaf dispensaries and cultivation centers. Id. at ¶ 36. It also leased property from an affiliated entity, AJC dba Front Range Alternative Medicine dba FRAM. Id. at ¶ 39. Peterson stated that Clover Top Holdings, Inc. had bought AJC for its medical marijuana licenses (both dispensary and cultivation). However, some corporate entities and assets were falsely represented to be owned by Clover Top Industries, Inc. Kaweske was AJC's actual owner. Id. at ¶ 52. Kaweske misrepresented that Clover Top Holdings, Inc. owned property and licenses in Ordway, Colorado. Id. at ¶¶ 72-73. Ordway Farms was formed on October 12, 2017 and was intended to be a Clover Top Holdings, Inc. subsidiary. Id. at ¶ 77.
Plaintiff Gordon Morton ("Morton") is a citizen of Utah. Id. at ¶ 3. In January 2016, Morton met Kaweske and Peterson about investing in Clover Top Holdings, Inc., and their discussionscontinued into March 2016. Id. at ¶ 41. Kaweske and Peterson described Clover Top Holdings, Inc. as the "'mother ship' for all cannabis-related entities, technologies, and brands in Colorado." Id. at ¶ 42. The plan was to expand "beyond Colorado as its success grew—including dispensaries, grow operations, extraction technologies, intellectual property, other future ancillary entities, and all similar services and businesses—whose profits would all inure to the benefit of Clover Top's shareholders." Id. Morton received written solicitations that described Clover Top Holdings, Inc. as "a Delaware Corporation established to make investments and operate businesses in the burgeoning legal cannabis industry" as "a national brand for medicinal dispensaries, online store and cannabis and hemp-based products." The materials touted the size of the operation, with a "11,000 square foot cultivation facility, which is capable of growing over 4,000 plants and producing in excess of $400,000 a month of wholesale cannabis" and "a 1,500 square foot medical marijuana dispensary." Id. at ¶ 43.
The business venture was not limited to marijuana. The website, Tweedleaf.com, would carry CBD and other products "that are currently legal to sell nationwide." Id. at ¶ 43. The dispensaries also would sell various paraphernalia, accessories, clothing, and even fertilizer. Id. at ¶ 54.
Kaweske and Peterson allegedly promised that as a Clover Top Holdings, Inc. shareholder, Morton would receive the benefit of the operation's "cannabis-related activities" in the form of "prompt payment of initial investments and distributions as [it] started achieving success." Id. at ¶ 45. Morton signed a Subscription Agreement for Preferred Shares on April 4, 2016, buying 100,000 shares for $100,000. Id. at ¶ 46. In 2016, Morton received statements showing increasing sales and expansion plans. Id. at ¶¶ 55, 57. In November 2016, Kaweske told Morton that he had a Series A investment because he was the first outside investor. Id. On November 17, 2016, Mortonincorporated Sensoria, LLC ("Sensoria") to hold the shares, and at some point, Sensoria paid $125,000 for an additional 125,000 shares. Id. at ¶ 63. In total, Sensoria invested $225,000 in Clover Top Holdings, Inc. Id. at ¶ 134.
Kaweske and Peterson introduced Welby Evangelista to Morton as a new team member and business director. Evangelista owned DJDW, LLC. Evangelista himself invested in Clover Top Holdings, Inc. and raised $950,000 in additional investment money by September 2017. Id. at ¶¶ 67-69.
On January 20, 2017, Kaweske and Peterson issued a statement showing revenue history and expansion plans. Id. at ¶ 66. No more written statements would be issued to investors thereafter. Instead, Morton and Sensoria received updates informally by telephone. Id. at ¶ 68.
Plaintiffs allege Kaweske and Peterson misrepresented the investment opportunity in several respects. Kaweske did not disclose past legal proceedings against him that concerned securities law violations and fraud (id. at ¶ 44), and he took efforts to hide his identity (id. at ¶¶ 49-50). Kaweske and Peterson mispresented the business registration and ownership of Clover Top Holdings, Inc. and what assets it actually owned. Id. at ¶¶ 45, 56. They understated how much salary they would draw from the business venture. Id. at ¶ 45(c).
Kaweske hid the existence of a separate set of entities that competed with Clover Top Holdings, Inc. Id. at ¶¶ 45(d), 60. Kaweske bought AJC Industries dba FRAM/Tweedleaf which he held separate from Clover Top Holdings, Inc. Id. at ¶ 52. The TweedLeaf trademarks were transferred to AJC. Id. at ¶ 61. Kaweske formed Sunlife AG LLC. Id. at ¶¶ 10, 62. Kaweske hid from Plaintiffs that he actually owned the entities that Plaintiffs believed Clover Top Holdings, Inc. owned or was intended for Clover Top Holdings, Inc. to own. Id. at ¶¶ 52, 56, 65, 73, 74, 82, 86. Plaintiffs complain that the assets, holdings, and subsidiaries of Clover Top Holdings, Inc.were transferred to other entities. Id. at ¶ 103.
Kaweske and Evangelista hid business dealings from Peterson as well. Id. at ¶ 70. In December 2017, Kaweske began excluding Peterson and his wife from Clover Top Holdings, Inc.'s operations. Kaweske blamed them for its financial distress. Id. at ¶ 80. There are several lawsuits between them. Id. at ¶ 115.
Kaweske and Evangelista formed JW Colorado LLC and JW Ordway LLC in January 2018 (id. at ¶ 81), JW Trinidad LLC in July 2018 (id. at ¶ 84), and North Star Holdings (originally Ordway Farms) in August 2018 (id. at ¶¶ 85, 90). On September 10, 2019, JW Colorado registered the "TWEEDLEAF" mark. Id. at ¶ 112.
On November 3, 2018, Evangelista sent Morton threatening text messages. Evangelista also told...
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