Those retractable leashes are scary. I have had the same thing happen - dropped the leash & it scares these little guys to death. Maybe you could try using a traditional leash and first showing the 2 to Jesse and let him see that you are using something different. He's afraid of getting hit by that big plastic thing. Poor baby.
Thank you so much for giving him his forever home! With time he will learn to totally trust & love you.