Pioneering founder of Oregon dispensary wins major settlement against former partners
The former co-owner of Human Collective, one of Oregon’s first dispensaries, recently was victorious in a civil lawsuit against three of her former business partners. Sarah Bennett, one of the original founders of the pioneering dispensary, won a $300,000 jury verdict against Donald Morse, Carolyn Morse, and Lance Fillmore for refusing to honor their buyout agreement.
In addition to the unprofessional behavior towards Bennett and operation of a discriminatory workplace environment, a number of other facts relating to Don Morse’s unprofessional management of the dispensary, specifically, were exposed at trial. Testimony was given by former employees, managers and one of the former owners relating to the circumstances surrounding Bennett’s removal. We spoke to a number of those individuals to write this article, as well as both Sarah Bennett and Don Morse.
What we discovered was an unsettling situation in what was, at one time, one of Oregon’s shining examples of a well run dispensary. The business went from an example of how it should be done to an example of how it should never be done, and a story of how one business partner can take advantage of another.
Morse’s character, both personal and in business, became a relevant factor in the trial based on the circumstances surrounding the ouster of Bennett. He claimed the move was based on Bennett not fulfilling her responsibilities as a manager, creating chaos in the workplace, and that her family responsibilities were interfering with her ability to do her job. We found none of this to be the case. In fact, we found just the opposite to be true and that Morse was causing chaos, not Bennett.
What we detail are employees and managers that were unhappy and fearful around Morse, not Bennett. We also discovered a string of unethical behavior, unprofessional management practices, and repeated substance abuse that, in the end, appears to be what drove the Human Collective II into the ground.
The Human Collective: a legal gray area
Sarah Bennett started the original Human Collective in April 2010 with her fiance David Nicholson and business partner Albert Nehl. It was originally a non-profit business and operated in the era before legal dispensaries were established. There were only a few operating in the state in what many have called a legal “gray area” that existed at the time where patients would make “donations” to the dispensary in lieu of actual “sales”. Though risky, Bennett felt she had done enough homework and talked to enough industry leaders and attorneys to do it legally.
Early on, Don Morse had obtained cannabis from Human Collective for his wife Carolyn. His frequent visits blossomed into Morse volunteering at the dispensary. The Human Collective, at that time, ran its operations solely with volunteers.
“He offered to volunteer and provided information, some marketing materials, and some ideas that he had,” explained Bennett.
He worked as a volunteer steadily until 2012, including participating in lobbying efforts with others in the industry at the time trying to get progressive changes made to the cannabis laws. His lobbying efforts made Bennett believe he would be an asset to the business.
“At that time Don and I had lobbied Salem and tried everything, including an Oregon greener ‘better business bureau’ type of organization with people like Lee Berger, Paul Loney, Todd Dalotto, John Sajo and others,” Bennett explained. “We had met with Oregon attorney General Ellen Rosenblum, who came to our facility twice–once when she was on the campaign trail against Dwight Holton, and second time when she was in office.”
Bennett and Morse had legislators and several law enforcement officials come to see their facility, which was located in Tigard in Washington County. During the second meeting with Rosenblum, Rep. Andy Olson and members of the Republican caucus attended an event where they discussed possible solutions to cannabis access that could be done legislatively. They even hosted the City of Tigard police chief for a tour. None of them never expressed consternation about what they were doing or that they thought it was illegal or a problem in any way. That all changed in September.
“On Sept 27, 2012 we were raided by Westside Interagency Narcotics team, or the WIN team. It was a local raid, not federal, and my baby was 3 and a half weeks old at the time and my oldest son was about four,” said Bennett. “There were multiple raids, but that’s a whole other story for another day.”
No significant charges ever came from the raids, which included the dispensary and both Bennett and Morse’s homes. Although many of the original charges against Bennett were felonies, including child endangerment, everyone involved eventually pleaded to minor possession offenses, nothing more.
The Human Collective II is born
“After [the raids] some of us behind the scenes helped get Human Collective II up and going,” explained Bennett. “Leslie Miller stepped up to be the executive director and started HC II, which was in Multnomah County two or three miles up the road, and Multnomah County seemed to be more embracing of the Oregon Medical Marijuana Program at the time.”
In 2014, Bennett was expecting her third child. Things began to change when Bennett’s maternity leave neared.
Morse, who was at that point a member of the Human Collective II (HC II) board of directors with Sarah Bennett and Anita Rego, requested that they increase the board to five members. Bennett believes, now looking back, that it was an early play by Morse to gain more control of the business. She felt Morse masked it as a necessity due to the dispensary’s rapid growth.
“The first nomination was Lance Fillmore who had been an integral part of our operations,” Bennett told Oregon Cannabis Connection (OCC). “Not only was he a medical farmer and provided product, but he also did our IT work and helped with our security and surveillance systems and everything, so that was a no-brainer.”
The second nomination was Don Morse’s wife Carolyn, which was quite controversial to Bennett. She opposed her inclusion strongly.
“That’s a conflict of interest and I am not comfortable with your spouse being on the board,” Bennett said to Morse at the time. “We nominated somebody else, but that person ultimately did not want to be on the board, so the other three–Lance, Anita and Don–nominated Carolyn and accepted her on the board.”
An early decision was made by the newly expanded BOD to change the Person Responsible for the Facility (PRF) to Don Morse. They made the changed based on Morse’s claim that a woman on maternity leave could not serve as the PRF. Bennett, herself, could find no legal requirement that a PRF be on the premises daily, but just that a PRF must be responsible for day to day activities. Bennett felt it was discriminatory based on her upcoming maternity leave.
A change in attitude
Though Bennett and Morse had many arguments over the years, they had previously been able to work through them. One day, not long after the change in the BOD, Morse and Bennett became engrossed in a heated discussion when Morse’s attitude became dismissive and angry.
“I don’t remember what we were arguing about, but Don said to me ‘just go sit in your office and be pregnant’. He didn’t want me talking to anybody or participating in anything and I was pissed, quite frankly” Bennett recalled. “So, I went so far as having my OB-GYN write a letter stating that I can work and there was nothing preventing me from doing my job because I was pregnant.”
Morse denied making the comment, telling OCC, “No, I didn’t say that.”
But, Bennett had become concerned enough that she sought legal advice due to Morse’s behavior and eventually retained Jeffrey S. Frasier of Chenoweth Law Group. Bennett’s father, who passed away from cancer in 2007, was an attorney so she understood the importance of having a capable lawyer for legal representation.
In late November Bennett went on maternity leave when her son was born. During her absence, she kept participating with the business, and also attended board meetings, before she returned to HC II on January 16th, 2015. They made the switch to a for profit company near this time and it was then that Morse’s attitude permanently changed, according to Bennett.
“We were starting to have more arguments over directional decisions of the company,” Bennett said. “It got to the point that at most of the board meeting’s I felt there was four against one…that if I brought something up I would get pounced on.”
Morse didn’t see it the same way. He told OCC that her performance had declined and that she was no up to the job. He blamed her family responsibilities for the change.
“In the course of two years, or whatever, [Bennett] had two lengthy maternity leaves, then she took a leave of absence on top of that,” Morse explained. “There’s a certain level of responsibility for showing up when you’re a manager … She wasn’t always able to meet the demands of work and that’s where we started to quarrel.”
Morse went on and mentioned the maternity leave she took and her family responsibilities as being problematic.
“After her third child, things just started going south,” Morse went on. “She had a lot of responsibility with two kids and a husband and a third child on the way and then trying to run a business … She gave her attention to her family, but it came at the expense of the business.”
The OCBC connection
It was in the Summer of 2015 at a board meeting that Don disclosed the amounts of a number of “loans” he had made to launch his start-up cannabis business association, the Oregon Cannabis Business Council (OCBC). Morse claimed it was a smart investment for HC II and Blue Elephant Holdings, LLC (BEH) since OCBC would be lobbying in Salem for legislation that would be beneficial to the dispensary.
The loan made Bennett suspicious and she eventually requested to see the company’s financials, which Morse refused to hand over.
“I owned 45% of the company and Don owned 45% of the company and the other three had a 10% divided interest, so I am an equal in that sense,” explained Bennett. “When I was denied the financials, I was in shock. You can’t deny that of your business partner…so what if I want to look at the books.”
Bennett then decided to hire a financial investigator to look at the books. The investigator discovered that the OCBC loan wasn’t $10,000 but actually around $20,000. Bennett was taken back by the findings, but the others on the BEH board were convinced by Morse that the small “loans” individually fell under the $5,000 threshold of approval in the BEH operating agreement. The board eventually overruled Bennett’s concerns and voted retroactively to approve the full $20,000 in loans to Morse.
“She was making a mountain out of a mole hill with respect to the support that Human Collective had given to OCBC,” Morse explained about the loans. “They were just a series of small loans, usually about $1,000 or $2,000 each, and they were carried on the books.”
At this point Bennett realized the business had been effectively taken out of her hands and her relationship with Morse was so bad that she did not want the stress involved with working at HC II. She began looking for investors that might buy her share of the company and, while doing so, found employment elsewhere.
The demise of the dispensary
By March of 2016 things at HC II started to fall apart. The dispensary had a female employee, Cheryl Aichele, who filed a sexual harassment and hostile work environment complaint with BEH and the dispensary. Morse promptly fired her after consulting with an attorney. This resulted in a lawsuit by Aichele against the company for an adverse employment environment.
“We had an opportunity to settle that case for around $25,000,” Bennett explained. “We knew that if we hired an attorney the retainer would be between $50,000 and $75,000 and we took a vote and four against one wanted to continue pursuing the lawsuit.”
The reason they continued with the lawsuit, according to Morse, was because the employee who filed it had been awarded a large settlement by the city of Los Angeles a few years before. Morse believed they could win and that Achiele was a “professional plaintiff”.
BEH eventually lost the case in March, 2018, when the former employee was awarded $170,000 in court, essentially by default, since BEH did not have legal representation on the day of the trial.
“We had an attorney represent us for over a year or so … but Human Collective ran out of money to pay her,” Morse said about the lack of representation. “It was one of the factors to the Human Collective closing.”
The removal of the founder
On April 9, 2016, a BEH board meeting was held at Anita Rego’s residence and all five board members attended. At that meeting Bennett was intending to assert her rights as the founder and try to re-establish herself as the manager of the dispensary. Not surprisingly, they refused to even second her motion and instead moved to force Sarah out of the business completely.
“They proceeded to remove me as a day-to-day manager [of the business] based on all these things that happened before it was Blue Elephant Holdings when we were a non-profit,” Bennett explained to OCC. “And, they threatened to arrest me if I even set foot in that place. At the end of the meeting they removed me completely as a manager of the company.”
Her removal was done in violation of the BEH operating agreement. Under that agreement they were to provide actual “cause” for her removal and also provide a “cure period” to effectively address and correct any reasons stipulated in their “cause”. That was never done.
Morse told OCC that the decision was made because Bennett had a proxy attend the board meetings in her place, which was allowed under the BEH operating agreement. But, since it was her lawyers that served as her proxy, Morse felt like it was somehow improper.
“She was removed from the board of directors because she wasn’t attending meetings,” Morse claimed. “She was sending her lawyer to the meetings and at the same time she was suing us. We had to remove her from the board, we didn’t have much of a choice.”
But, Bennett’s lawsuit was not filed until after she had been removed from the board. Having her attorneys attend those meetings was an effort to protect her stake in the business. She was simply looking out for herself, and did it within the scope of the operating agreement.
“I had signed a proxy because the operating agreement allows me to have a proxy attend board meetings,” explained Bennett. “I was simply looking out for my best interests.”
The disputed contract
In December 2015, Adam Gamboa was hired by Don Morse and the other owners to handle the negotiations with Bennett over the varied disputes while Morse was in control of the company. It was in the June that a buyout of Bennett’s shares in BEH was negotiated, and approved, between Gamboa and Bennett’s attorney, Jeffrey Frasier. The very next day, however, Morse and the others indicated they would not honor the buyout contract.
After the deadline of July 13th to fulfill the contract came and went without performance, Bennett filed her lawsuit in Multnomah County against the four owners.
“They did not fulfill [the contract] so I filed a lawsuit against them to ask the court to verify that it was a contract and to have them perform on that contract,” Bennett explained. “I had also filed a lawsuit [claiming] they wrongfully removed me as day-to-day manager and wrongfully removed me as a manager of the company.”
Morse believes they had no contract agreement, and claimed the attorneys acted too hastily, not giving Morse and the other owners a chance to approve the deal.
“Before [any approval] had happened, Sarah’s lawyer claimed that a deal had been struck and it was binding,” Morse said. “It kind of broadsided us because that was never our intent.”
Later in 2017, the BEH owner’s attorney Adam Gamboa came to the realization that he had a possible conflict of interest in the case and decided to resign from defending the remaining owners of BEH.
Deception, power and control.
As it turns out, Morse apparently had kept Rego and Fillmore in the dark on the legal issues being addressed by the company, and his efforts to remedy them. Rego testified in court that she did not even know Gamboa’s name until almost a year after he had been retained. Rego explained that Morse continually said it was not a big deal and that he was “handling it”.
“I think Sarah kinda got railroaded off of the board,” Anita Rego told OCC in an interview. “We gave some of our votes to Don when we shouldn’t have.”
Anita Rego was not included in the final lawsuit. She and Bennett came to a settlement agreement in January 2018.
“Carolyn, in the beginning, kind of had a voice of her own, but in the end I don’t think she did,” Rego explained about electing Carolyn Morse to the BOD years earlier. “Granted, she wasn’t the perfect person for it but looking around there was no one else there.”
In fact, Morse had even kept his wife in the dark on the negotiations he was spearheading.
“Carolyn told me quite a while ago that she didn’t realize how far Don had negotiated all these things [with Sarah],” explained Rego. “It was truly Don that was the ringmaster of the show.”
Morse’s deception, according to Rego, was easy since the other business owners were seldom at the dispensary or involved in the operations.
We asked Morse about keeping the others in the dark, including Carolyn, and he explained by using a Real Estate analogy, believing we might not understand what had transpired.
“Let me put it in a way that you can comprehend what really went on,” Morse said condescendingly during our phone interview. “Say you are interested in buying a house, so you hire a real estate agent and you point to the house and you say ‘I want to buy that house, go find out what they want.’ The real estate agent comes back to you maybe twice or three times and says ‘well they want this and they want that.’ And you say no, that’s out of the question, or the price is too high, or whatever. You haven’t said anything to your wife about this house yet because you want all the facts to bring to her before you make the decision to buy … well that’s what happened to us.”
Rego didn’t see it in that way. She indicated they had not agreed to start negotiations or draft an actual deal.
“Nobody knew that Don was doing all these negotiations with Sarah and Sarah’s attorney to buy her out of the company,” Rego said. “Apparently Don, on his own and with an attorney, negotiated with Sarah’s attorney, the terms of the contract to buy her out of the company. Unfortunately, no one had the money to buy her out.”
Morse claimed Rego either lied or suffered selective amnesia.
“Anita just developed amnesia at some point and didn’t remember meetings that we had that others do remember. Some of the meetings were in her own living room,” Morse said, laughingly. “She wanted out from this whole situation and settled out of court with Sarah. To be blunt, I don’t believe she was truthful at trial.”
More problems brought to light
In September 2016, a manager at HC II resigned from his position with the dispensary. Ric Leonetti had submitted his resignation in a damning letter that described the reasons for his departure. He had serious problems with Morse’s operation of the dispensary. Some of the things Morse had done, and asked him to do, Leonetti believed were not allowed in the tightly regulated Oregon cannabis industry.
Leonetti explained in his letter that Morse had given away product, on several occasions, by improperly and illegally removing it from inventory. He claimed that Morse even asked him to violate Oregon’s strict cannabis laws regarding handling of product, adjusting inventory, and price manipulation.
Morse denied Leonetti’s claims. He blamed Leonetti’s frustration with the changing rules that spurred him to write the resignation letter.
“He was pissed off when he left,” Morse said. “He couldn’t handle the pressure of the rules and regulations that were coming out from OLCC. He was frustrated … when he wrote that letter he was in that state of mind. He told me later that he regretted it.”
We spoke to Leonetti, and he does not recall saying he regretted writing the letter and told us everything he wrote in it was accurate.
“I don’t specifically remember that conversation,” Leonetti told OCC. “Any regret that I feel is just because I don’t like to hurt people … What I wrote is definitely factual.”
Another employee who worked at the dispensary indicated that he did not trust Morse and didn’t believe he was a good business manager. Steve Allen, who worked at the dispensary for over a year, indicated that when Morse arrived at the store the employee attitudes would change and they would become tense and worried about being berated or screamed at. The behavior was apparent in the turn-over rate of employees.
“I just never saw any effective management style from Don, ever,” Allen said of Morse. “He never displayed any kind of business savvy or any kind of understanding of what staff can do for you … If someone creates a semi-awful work environment, it’s hard, day after day, to work under those conditions … Don would berate staff in front of customers and other staff for no apparent reason than just to do it. It happened frequently.”
Allen said Bennett was a much better manager and much more suited to be in charge of the business. He indicated that she was engaged and effective at dealing with employees.
“She would always clue me in to what was happening behind the scenes,” explained Allen. “I would ask her about certain aspects of the business, like pricing schemes, what we would do to help the customers more and things like that. She was always helpful. I always saw Sarah doing what I would call damage control”
After Leonetti left, Allen was eventually placed in charge of the inventory in the apothecary area. Allen said he knew it was eventually going to be a problem.
“I knew without Rick it was just a matter of time that Don would come back there ask me to do something unethical. I think it was only one day when he came back and asked me to do something unethical and I told him no.”
Intoxicated at work
Leonetti indicated in his resignation letter that Morse was visibly intoxicated, on a consistent basis, while working at the dispensary. It made him uncomfortable and explained in his letter, “[it] is not in keeping with ethical business and leadership standards.”
Morse flatly denied the allegation telling OCC, “That’s just an outright lie. I mean, it’s not true.”
But, his behavior was also confirmed by Anita Rego, who was well aware of his fondness for alcohol, and others that worked at the dispensary.
“He does like his alcohol,” Rego explained. “There was a bar next door and I was aware that he would go over there quite a bit and sit and drink…”
Leonetti and Allen both confirmed that Morse regularly drank during business hours at the bar next door, as Rego had said. Allen said his attitude and behavior changed and it became apparent he had been drinking.
We asked Morse if he drank on the job.
“I would go next door, sometimes by myself, and most often with people that I was discussing business with,” Morse explained about his drinking. “More often than not I would return to work, but I didn’t drink at work … I didn’t drink on the job.”
Morse was also commonly seen at the dispensary with a beer on his desk. Bennett asked him a number of times to put it away because some people had complained.
“I had spoken to a lot of the staff … and he would actually drink alcohol while conducting business operations,” Bennett said. “Sometimes his attitude would change … he’s happy one moment and then he is irate the next and it was an uncomfortable environment.”
“Oh, that was years ago,” Morse told OCC when we asked. “In the last three years, or more, the answer to that would be no.”
Morse charged with lying to OLCC
Morse was in the process of transferring what was left of the assets of The Human Collective II over to a new company in late 2017 and early 2018 when a charge letter was issued by the OLCC indicating multiple regulations were violated. Morse, and unfortunately Bennett, were still listed with the OLCC as the dispensaries responsible persons, even though Bennett was no longer involved with the company or operations in any way.
The letter detailed at least five separate violations in reporting, including lying to the OLCC about cannabis inventory that was removed from the dispensary and stored in Morse’s private residence. Nearly 100 edibles were taken to his residence in violation of the rules, according to the letter. The OLCC’s proposal was full cancellation of their retail license.
The OLCC letter stated, in part:
On or about March 1, 2018, Licensee Donald Morse made an intentional false statement or representation to the Commission in order to induce or prevent action or investigation by the Commission when he falsely represented to an OLCC inspector that he had destroyed approximately 97 marijuana items on January 1, 2018. Donald Morse subsequently stated to an OLCC inspector that he had moved the items to his residence (an unlicensed location). This is a violation of OAR 845-025-8540(1)(a) and OAR 845025-1300(1)(d).
We asked Morse about the violations. He indicated that he would be challenging the OLCC charges made in the letter and refused to answer questions based on his upcoming appeal.
“I can’t get into the details,” Morse explained when we questioned him. “I would be happy to give you another interview six months from now.”
On September 10, 2018, the appeal hearing took place and both Morse and Bennett appeared. Morse, BEH and HC II were represented by Josh DeCristo of Emerge Law. In the final judgement, Bennett faces a possible letter of reprimand in the case, but Morse possibly faces a greater punishment. He may be subjected to revocation of his marijuana workers permit, which will make it difficult to operate effectively in the Oregon cannabis industry since he will not be allowed to handle cannabis for licensed businesses. The decision is expected in early October.
Validation in court
Finally, in May 2018, Sarah Bennett achieved victory in her civil lawsuit against Lance Fillmore and Don and Carolyn Morse. Bennett had solid representation from Chenoweth Law Group’s Andrea Meyer at trial, but the defendants had none at all. Bennett was able to get a bit more than the $292,500 original buyout amount she sought, with a final judgment for $300,000 awarded by the jury.
“Litigation was really the only choice. I could have walked away, but I felt I needed to stand up to a bully, and I did,” Bennett explained. “It was a hard decision, but I am glad that I did it.”
“When the jury came out after deliberation … and [the judge] reads the first question about whether there was a contract between the plaintiff and defendants to resolve the disputes, and the judge said yes, I just burst into loud hysterical tears because I felt so validated.” Bennett emotionally told OCC. “That was so much more than any compensation, you know? Knowing that you are right, and that other people heard your story and understand what you had gone through … it was a remarkable moment.”
“There were a lot of things that were not put forth properly in the trial and we are working on that now,” Morse told OCC regarding the verdict. “It’s not a done deal … We’re objecting to the jury’s judgment.”
We asked Morse if he had representation now and he said, “We have an attorney advising us. He is working pro-bono.”
Lance Fillmore and Anita Rego, who had both had been kept in the dark by Morse regarding the negotiations with Bennett, contacted her in late 2017 about giving her back the dispensary “on a silver platter.” Bennett indicated she was willing to work with both and smartly advised them to get an attorney, which Rego did, but not Fillmore. In the end, Bennett was able to reach a settlement only with Rego.
Anita Rego, in hind sight, said she realizes that Don Morse was a liar and a bully to Sarah and to the entire board of directors, including his own wife. Though she originally trusted and respected him when she became involved with Human Collective II, that trust and respect is completely gone.
“I wouldn’t ever trust him again, because I’ll never believe what he says,” Rego reasoned. “I feel that I would never have had to settle with Sarah at all if he had just told the truth in the first place.”
The assets of Human Collective II were sold to Today’s Herbal Choice, owned by Merle Thomas. HC II ceased operations on December 31, 2017. Bennett was not aware of the asset sale until after January, 2018.
The future looks bright
Bennett did not sit on her laurels while the case progressed over the past couple of years. She successfully started a cannabis distribution company, Sweet Life Distribution. The company became a licensed wholesaler with the OLCC in 2016. She eventually sold the company to American Patriot Brands.
With her fiance David, She is co-owner of Forever Dank Farms, an OLCC licensed cannabis producer in Newberg, Oregon. When she is not helping David with the farming, Bennett wears a number of other hats from cannabis industry consultant and medical cannabis advocate to hemp commodities, she keeps very busy.
She is a Senior Production Partner at LVE Trusts where she works aligning buyers and sellers of hemp commodities. “We align the client with the right farm, plant material or commodity they need for their finished goods,” she explained about the company.
Bennett also serves on the Oregon Cannabis Commission Patient Access Subcommittee, continuing her advocacy for medical cannabis patients in Oregon. She is hopeful that they can make a positive change for the states medical marijuana program which is struggling to survive.
Our medical program in the state of Oregon has taken the biggest hit,” Bennett said in a concerned manner. “It’s unfortunate that these patients, that have paid millions into the Oregon medical marijuana program, have seen their funds go to support other programs in the state. Now that recreational has hit, with opt-in, opt-out, and with over regulation, it has really pushed the medical program almost to the brink.”
She also provides her expertise by consulting and uses her expansive knowledge and experience to mentor clients all over the country. She has experience in all aspects of the industry and knows how to handle diversity, which is common in cannabis.
“Right now I am working with a woman in Missouri,” explained Bennett. “ I was recently on a phone call with people in Michigan where they have a very large medical program and are looking at legalization on their ballot in November.”
© 2018 Oregon Cannabis Connection. All rights reserved. Unauthorized use or reproduction prohibited.