Shareholders accuse majority owner of mismanaging Saranac Lake business
ALBANY — Three shareholders in a corporation that opened the North Country’s first retail cannabis store last fall in Saranac Lake have filed a petition in state Supreme Court accusing the shop’s majority owner and his general manager of mismanaging the business, failing to follow proper bookkeeping procedures and violating state regulations.
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The legal dispute centers on the operations of Elevate ADK, which in October became the state’s 27th retail cannabis storefront when it opened in a small shopping plaza on Lake Flower Avenue — Route 86 — about 1.5 miles south of the center of Saranac Lake village.
The business had been providing deliveries for about five months before the store opened.
A petition filed recently on behalf of Douglas Butdorf, Thomas Gosrich, and Eduardo Suarez, who are shareholders in the corporation that established the business — North Country Roots, Inc. — is seeking a court order dissolving the business and liquidating its assets. They allege that Adam Hainer, a North Country farmer who is a 51 percent shareholder in the business, and his general manager, Eli Emery, have misappropriated assets and monies, refused to pay shareholders dividends and removed them from their roles as directors of the corporation.
In a statement Monday, Emery characterized the legal filing as “a baseless lawsuit brought by three shareholders that have hurt feelings.”
“We are deeply disappointed by the unfounded and outrageous claims made in this lawsuit and are confident that the truth will prevail,” Emery said. “North Country Roots has operated completely aboveboard in all operations since the beginning and will continue to do so despite this nonsense.”
The petition, filed in Essex County, describes how those three shareholders, all Plattsburgh residents, formed North Country Roots in 2015 to enter New York’s medical cannabis industry. In 2022, they said, Hainer approached them about partnering in a retail cannabis business.
The involvement of Hainer, who has a felony conviction for cannabis distribution, allowed them to apply for a conditional retail cannabis license under the state Office of Cannabis Management’s “social equity” licensing system that has given priority for the state’s first retail licenses to those with past marijuana convictions.
The business’ license is up for renewal in January, and it’s unclear whether the allegations outlined in the court case may jeopardize their standing with state regulators.
The petition accuses Hainer of using vehicles he personally owns to make cannabis deliveries, which they said violates state regulations. The plaintiffs also accused Hainer and others of failing to present draft standard operating procedures to the board of directors for approval. In addition, they claim not to have received bookkeeping records they can audit or a “trusted” profit and loss statement, including copies of expense receipts, contracts and invoices.
The petition also questions Hainer’s decision to hire Emery as the “employee in charge” of the business while Emery has outstanding warrants in Utah for a drug charge and in Florida for an invasion of privacy charge, according to court and law enforcement records.
The petitioners allege Emery is in “a highly regulated role with significant discretion to handle the large amounts of cash coming into the store,” and “has treated customers and employees poorly, refuses to follow any reasonable accounting standards or security protocols, and fails to account for significant amounts of cash revenue.”
After the corporation’s board of directors learned of Emery’s warrants in Utah and Florida, the petition states, they directed Hainer to suspend Emery and retain independent corporation counsel to investigate the situation and provide legal advice. They said Hainer declined to take action and it led to the corporation’s longtime legal counsel resigning.
The lawsuit also alleges Hainer and Emery may have misappropriated assets and monies, intentionally refused to pay the shareholders dividends owed to them and removed the shareholders from their roles as directors of the corporation, causing “significant financial damages.”
The shareholders also accuse Hainer of indicating that “he will never allow the shareholders to recovery any return on their investment.”
They estimate the store is generating about $60,000 a week in revenue, an amount they peg at closer to $150,000 a week during holidays and the busier summer season.
In March, as the internal dispute boiled over and months after the shareholders said they believed Hainer had “unilaterally” decided to pay himself a salary, they said he shut them out of the corporation’s accounts, including disabling their corporate email domains and blocking them from viewing the Quickbooks account and the corporation’s point-of-sale system.
“Plaintiffs are unaware whether defendant Hainer has preserved documents and records, including their email inboxes, which included years of corporate correspondence and information,” the petition states. “Hainer then unilaterally removed plaintiffs from their positions on the board of directors, without cause, making himself the sole director and officer.”
In addition to seeking a court order dissolving the corporation, the petition also requests that the three shareholders be given immediate access to the corporation’s records.
They also accused Hainer of potentially violating federal labor laws by directing migrants working under an H-2A program at his personal farm “to complete projects and tasks for the state-licensed cannabis business, including designing and constructing cannabis storage equipment, construction projects, and vehicle maintenance.”
Butdorf, Gosrich and Suarez have shares in the corporation of 15, 13 and 13 percent, respectively. There are five other minority shareholders who each have shares of less than 1.5 percent of the business and are not named as parties in the litigation.
The lawsuit also accuses Emery of declining to ensure that hiring and employment practices adhere to state and federal laws, “including by ensuring that tips given by customers electronically were accounted for and made available to the proper employees.”
Hainer and Emery “have repeatedly claimed that tips belong to the corporation and not the employee,” the lawsuit alleges. “Additionally, plaintiffs believe that defendant Emery, as a manager, improperly shares in pooled tips, taking some share of cash tips given by customers in the store.”
The lawsuit also alleges that the corporation is not receiving bookkeeping details or revenue from an on-site ATM machine as well as merchandise being sold at the store.
Jon E. Crain and Viktoria Yudchits, who are Albany-based attorneys for the plaintiffs, did not respond to a request for comment.
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