Investor lawsuit against New Glarus Brewing Co. has been dismissed

A Green County judge dismissed an investors lawsuit claiming New Glarus Brewing Co. CEO Deb Carey and the brewery underpaid them when they sold a portion of their ownership in the company in 2019.

Karen Eichhoff, Steven Speer and Roderick Runyan, all early investors in the brewery, claimed the valuation of their stock was fraudulently undervalued at the time of the sale.

Green County Circuit Court Judge Faun Marie Phillipson dismissed those claims, ruling Thursday the plaintiffs willingly accepted the offer, which was based on a discount of the brewery's 2017 employee stock ownership plan valuation. Eichoff and Runyon claimed the valuation was not shared with them prior to the sale and the offer was well below fair market value.

Phillipson ruled the company was under no obligation to explain how it arrived at its per-share offer.

Unlike the other plaintiffs, Runyan's sale was to the company's ESOP and that agreement did include a reference to the fair market value of the stock. However, it said that the value would be "determined by an appraisal of New Glarus by Capital Valuation Group Inc."

Phillipson pointed out that the original stock purchase agreement warned that there is "no recognized market" for the shares of New Glarus and that the company's board of directors is charged with setting the stock's value.

The judge wrote that "no material misrepresentations or omissions could have been made — nor, once the legal conclusions are peeled away, do any appear to have been alleged — because New Glarus Brewing Co. essentially set the market for Plaintiffs' shares in the transactions at issue based upon nothing more than a dollar figure known to both seller and purchaser."

Phillipson also dismissed a second claim, seeking relief for acts to "oppress the plaintiffs, including frustrating plaintiffs' reasonable expectations regarding receiving value from their investment."

That relief could have resulted in an order to sell the company or dissolve it.

Carey called the lawsuit "a simple case of greed and overreach."

"The important point here is that the brewery will not be forced to sell or be taken over by anyone else," she said, though she also acknowledged that the fight isn't over.

The Green County case stemmed from a 2021 lawsuit against Carey filed by the same investors in Dane County that is scheduled to go to trial in December. A Dane County judge split that case to allow claims that could have led to New Glarus' sale to be heard in the brewery's home county.

In that case, Eichhoff, Speer and Runyan claim Carey changed bylaws without notice, didn't disclose other companies' offers to buy the brewery, told them she'd never pay out profits beyond tax distributions and has misused company funds to set up a charity.

The suit contends New Glarus has built up $100 million in retained earnings and $40 million in cash on annual profits of $15 million to $20 million and has no debt.