One of the most traumatic events in the life of any corporation or limited liability company is the departure of the CEO, especially if the separation is not mutually agreeable to all parties. The departure of the CEO can be even more traumatic if the CEO happens to be one of the founders of the entity. The recent firing of the CEO of Deep Ellum Brewing Company seems to have all of the elements that can prevent a peaceful transfer of authority.

The dispute

Deep Ellum Brewing Company was founded by John Reardon and then purchased from him in 2018 by Canarchy, a firm that describes itself as a “craft brewery collective.” When Reardon sold Deep Ellum in 2018, Canarchy allegedly agreed to make several sizeable deferred compensation to Reardon. Reardon commenced a lawsuit on July 16, 2020 claiming that Canarchy had failed to make several of the payments.

The complaint in the case also alleges that Canarchy deliberately sabotaged the success of Deep Ellum to obviate the need to make payments to Reardon based upon the amount of revenue eared by the company. The complaint specifically alleges that Canarchy failed to maintain a sufficient inventory of Deep Ellum’s products, thereby causing a number of “out-of-stock” reports and lost sales.

The road ahead

Reardon is planning on concentrating his efforts on a distillery that he owns. Among the new products expected from this venture is an Irish style whiskey to be named after blues legend Huddie “Lead Belly” Ledbetter.

As this case demonstrates, even a transaction that the parties believe has been well documented can run aground as expectations change over time. Before resorting to litigation, an aggrieved party may wish to consult an experienced business litigator for an evaluation of the evidence and an estimate of the likelihood of recovering damages.