Karl EbertMilwaukee Journal Sentinel
A Wisconsin appeals court has upheld a lower courts rejection of an investor lawsuit against New Glarus Brewing Co. and its majority shareholder, founder and CEO Deb Carey, that could have forced a sale of the brewery.
The lawsuit by early investors Karen Eichhoff, Steven Speer and Roderick Runyan stemmed from a 2019 sale of some of their stock that they claimed was fraudulently undervalued at the time.
The lawsuit, filed in 2022, also claimed that Carey “oppressed” them as investors by not paying a dividend as the company’s profits and available cash grew, and by refusing their requests to maximize the return on their investment.
The oppression claim, if upheld by a court, could have resulted in an order to sell the company or dissolve it.
Carey, in a statement, called the lawsuit “baseless harassment.”
More: Green County judge dismisses investor lawsuit against New Glarus Brewing Co.
According to court documents:
The investors bought into the fledgling company in 1993 for $10 per share. At the same time Carey was issued 25,000 shares to ensure she had majority ownership and control of the board of directors as she invested $40,000 in the brewery and guaranteed a loan to buy brewing equipment.
The investors agreed to sell some of their ownership in New Glarus to the brewery and its employee stock ownership planin 2019 for $2,071 a share. Eichoff received $2.6 million, Speer was paid $1.3 million, and Runyan got $82,840.
The following year, Carey as the controlling director, changed the preamble to the brewery’s bylaws to assert that “the Brewery intends to remain independent and locally owned and that it would be operated (in part) for the benefit of the community.”
The investors claimed that Carey had become increasingly focused on keeping the brewery locally owned, operating it to benefit the community and funding a foundation she established in 2021 with brewery funds to be New Glarus’ marketing arm. In addition, they claimed, Carey would not provide information about the “fair value” of their shares, denying them an opportunity to obtain that value from an outside sale of their stock.
In rejecting those claims, the appeals court on Feb. 22 upheld a Green County judge’s determination that the investors freely agreed to sell their stock at a price set by Carey and the brewery, and that the original investors agreement clearly stated that there was not and would not be a market for their stock.
“Thus, any misrepresentation or omission regarding fair market value was not material because there was no alleged or demonstrated representation that the purchase price was based on fair market value,” the judges wrote.
They also supported the lower courts finding that, under the initial stock agreement, investors were only entitled to dividends or payments "sufficient to cover their tax obligations."
Carey in a statement said she, the brewery’s employee-owners and other shareholders are relieved to no longer be “under threat of a forced sale to some huge corporation that might not have the future of the New Glarus Brewing Company at heart.”
“These three people were, ultimately, resentful that New Glarus Brewing was, is, and always will be dedicated to brewing world class beer for our friends in Wisconsin, who have made us the success that we are,” she said.
