Sensoria, LLC v. Kaweske
| Decision Date | 07 July 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 a/k/a North Star Holdings, Inc. ; Manuel Welby Evangelista a/k/a Welby Evangelista; DJDW, LLC; JW Colorado, LLC; JW Ordway, LLC; JW Trinidad, LLC; Brian Tannenbaum; Tannenbaum & Trost, LLC, f/k/a Tannenbaum, Trost & Burk, LLC; and Does 1-100, Defendants. |
| Court | U.S. District Court — District of Colorado |
Stephen K. Christiansen, Christiansen Law, PLLC, Salt Lake City, UT, for Plaintiffs.
Thomas Austin Olsen, Tamera Dietrich Westerberg, Wheeler Trigg O'Donnell LLP, Denver, CO, for Defendants John D. Kaweske, AJC Industries, LLC, Durango Management, LLC, Sunlife AG, LLC, MMJ 95, LLC, TweedLeaf LLC, Lifestream Holdings LLC, Ordway Farms LLC, JW Colorado, LLC, JW Ordway, LLC, JW Trinidad, LLC.
Matthew A. Steward, Shaunda L. McNeill, Clyde Snow & Sessions, PC, Salt Lake City, UT, for Defendants North Star Holdings, Manuel Welby Evangelista, DJDW, LLC.
Jeffrey B. Klaus, Timothy F. Marion, Deisch Marion & Klaus, P.C., Denver, CO, for Defendants Brian Tannenbaum, Tannenbaum & Trost, LLC.
Christopher S. Peterson, Pro Se.
AMENDED ORDER
Before the Court are Defendants’ Motions to Dismiss (ECF 165, 168, 170). 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 Second Amended Complaint ("SAC"). ECF 155. See generally Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ().
Defendant John D. Kaweske ("Kaweske") is a citizen of Colorado. ECF 155 at ¶ 4. He was subject of four administrative proceedings and three lawsuits regarding inappropriate dealings with client funds or securities transactions. Id. at ¶ 44. Defendant Christopher S. Peterson ("Peterson") is a citizen of either Colorado or Arizona. Id. at ¶ 5.
At issue in this lawsuit is Clover Top Holdings, Inc. which Kaweske, Peterson, and Peterson's wife incorporated in September 2015. Id. at ¶¶ 6, 27. They were its majority owners and served as its officers. Id. at ¶¶ 27–29. Clover Top Holdings, Inc. is a Delaware corporation. Id. at ¶ 27. 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.
Kaweske, Peterson, and Peterson's wife formed Clover Top Holdings, Inc. "to engage in all aspects of the cannabis business, beginning in Colorado and expanding elsewhere as the business grew." Id. at ¶ 27. In October 2015, Clover Top Holdings, Inc. acquired TweedLeaf Delaware, which possessed the federal trademark and service mark registrations for the "TWEEDLEAF" word and drawing. Id. at ¶¶ 30–31.
On October 30, 2015, Clover Top Holdings, Inc. retained Brian Tannebaum, Esq. of Tannenbaum, Trost & Burk, LLC (the law firm's name at the time) to provide legal services "regarding the purchase and/or sale of certain marijuana licenses" as well as "any other services [that it] may request from time to time." Id. at ¶ 33. Clover Top Holdings, Inc. retained the Tannenbaum Defendants "for both cannabis and corporate law." Id. Kaweske oversaw all cultivation operations for Clover Top Holdings, Inc. as well as company finances, taxes, licenses, and legal matters in tandem with the Tannenbaum Defendants. Peterson managed dispensary operations, patient care, and online/offline marketing for the TweedLeaf business. Id. at ¶ 54.
In January 2016, Clover Top Holdings, Inc. bought "two real estate holdings in Colorado Springs, one a retail building and the other a warehouse." Id. at ¶ 35. On January 26, 2016, Durango Management, LLC ("Durango") was created to hold properties and leases for Clover Top Holdings, Inc. as its real estate management company. Id. at ¶ 36. On February 1, 2016, "Durango purchased the two real estate holdings that were subject of Clover Top [Holdings, Inc.’s] January 2016 contract." Id. at ¶ 37. On March 11, 2016, Durango leased one of the properties to AJC Industries, LLC d/b/a Front Range Alternative Medicines and d/b/a FRAM ("AJC"). Kaweske is AJC's sole member. Id. at ¶ 8. An appraiser did not regard it as an arms-length transaction. Id. at ¶ 39.
In March 2016, Clover Top Holdings, Inc. purchased two existing marijuana licenses from AJC. Id. at ¶ 38. The Tannenbaum Defendants assisted with the transaction. Id. At the time, Kaweske was the only Clover Top Holdings, Inc. principal who had Colorado residence required for a marijuana license. Id. at ¶ 52.
Between January and March of 2016, Kaweske and Peterson solicited Plaintiff Gordon Morton ("Morton") to invest in Clover Top Holdings, Inc. Id. at ¶ 41. They portrayed it as "the holding company or the ‘mother ship’ for all cannabis-related entities, technologies, and brands in Colorado and expanding beyond Colorado as its success grew." Id. at ¶ 42. The greater enterprise would include "dispensaries, grow operations, extraction technologies, intellectual property, other future ancillary entities, and all similar services and businesses." Id. Clover Top Holdings, Inc.’s shareholders would receive the profits as well as "prompt repayment of initial investments and distributions." Id. at ¶¶ 42, 45.
Written materials explained that Clover Top Holdings, Inc. was "established to make investments and operate businesses in the burgeoning legal cannabis industry" and for creating "a national brand for medicinal dispensaries, online store and cannabis and hemp-based products." Id. at ¶ 43. Clover Top Holdings, Inc. was described as a Delaware corporation based in Colorado Springs. It owns "an existing medical marijuana commercial location as well as a cannabis cultivation facility and is integrating a second fully operational and licensed medicinal cannabis business into the newly purchased locations." Id. Its existing business "generates between $60,000–$80,000 per month in gross revenues." Id. It has an "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." Id. It owns a "medical marijuana dispensary located in a prime retail location" and will open "a new medical dispensary chain called TweedLeaf TM." Id. Lastly, Clover Top Holdings, Inc.’s assets include intellectual property as well as proprietary hemp- and CBD-based products "that are currently legal to sell nationwide." Id.
On April 4, 2016, Morton paid $100,000 for 100,000 shares. Kaweske told him that he was the first outside investor. The investment was made pursuant to a Subscription Agreement for Preferred Shares. Id. at ¶ 46.
Peterson's father-in-law also owned part of the Durango entity. On June 27, 2016, he exchanged his Durango shares for Clover Top Holdings, Inc. shares. The Tannenbaum Defendants facilitated the exchange (id. at ¶ 46) which presumably increased Clover Top Holdings, Inc.’s ownership of Durango. In a filing with the Colorado Secretary of State on July 6, 2016, Durango identified Clover Top Holdings, Inc. as its sole owner. Id. at ¶ 53.
On August 8, 2016, Clover Top Holdings, Inc. issued its first investor update. It reported increasing sales over the prior three months and plans to open a second TweedLeaf medical dispensary. Id. at ¶ 55.
In October 2016, Clover Top Holdings, Inc. bought additional marijuana licenses from MMJ 95, LLC ("MMJ"). Id. at ¶ 58. MMJ was formed in October 2015 as a cannabis-related business (id. at ¶ 32), and Kaweske was its sole member (id. at ¶¶ 11, 65). Contemporaneously, Kaweske stated that an MMJ license was being transferred to Tweedleaf, LLC (id. at ¶ 55), an entity that Kaweske owned separate and apart from the Clover Top Holdings, Inc. enterprise and the TweedLeaf Delaware entity (id. at ¶ 34).
Morton visited Colorado Springs and met with Kaweske in early November 2016. Kaweske told him that the business was making money and promised to pay him first. Id. at ¶ 60.
Morton formed Sensoria, LLC ("Sensoria") on November 17, 2016. Sensoria paid $125,000 for an additional 125,000 shares. Id. at ¶ 63. Clover Top Holdings, Inc. issued a stock certificate dated November 25, 2016 that Peterson and Kaweske signed. Id. at ¶ 64. All of Morton's investments in Clover Top Holdings, Inc. ultimately were made and accounted through Sensoria. Id. at ¶ 63.
On November 16, 2016, Kaweske incorporated Sunlife AG, LLC ("Sunlife") as a cannabis growing and cultivation business. Peterson stated in 2019 that Sunlife was intended to be Clover Top Holdings, Inc.’s "wholly owned real estate and property management company [for] holding properties and leases in Ordway, Colorado." Id. at ¶ 62. However, Kaweske was Sunlife's sole member. Id.
Clover Top Holdings, Inc. issued another investor update on January 20, 2017. Monthly sales from the TweedLeaf business were reported, and the construction of a second dispensary was announced....
To continue reading
Request your trial
-
Sensoria, LLC v. Kaweske
...this Court observed that marijuana "lies at the heart of the business" in which Plaintiffs had invested. Sensoria, LLC v. Kaweske , 548 F. Supp. 3d 1011, 1027 (D. Colo. 2021). That observation remains true for the TAC. Plaintiffs describe Clover Top Holdings, Inc. as a "mother ship" for mul......
-
Illegality Doctrine Rejected In Legal Cannabis Patent Case, Confirming Patent Enforceability
...6. See, e.g., S Shulman v. Kaplan, Civ. No. 2:19-cv-05413-AB(FFMx) (C.D. Cal. Oct. 29, 2010). 7. See, e.g., Sensoria, LLC v. Kaweske, 548 F. Supp. 3d 1011, 1026 (D. Colo. 2021) ("The mere fact of marijuana's involvement does not by itself automatically preclude ... redress."); Polk v. Gontm......