After a near three-year legal battle, a federal judge has ruled that the founder of a prominent craft beer distributorship in Kentucky owes her cousin, who helped build the business, more than $1 million from the sale of the company.
According to a report from Cincinnati.com, U.S. Magistrate Judge J. Gregory Wehrman ruled that Mary Kenney improperly sold the business, Beer House Distributors, to L. Knife & Son in 2011 without first consulting Charles Sisson, her cousin and the company’s only other shareholder.
“This case is primarily one of family members not following good business practices,” Wehrman wrote in his ruling, according to the article.
Kenney, who has filed for bankruptcy, is appealing the ruling.
Kenney founded the business in 1985 and, while struggling to turn a profit, accepted more than half a million dollars in loans from her cousin, an economist and real estate investor, between 1989 and 2004, according to the article. When the company started selling craft brands from the likes of Goose Island, however, business started to improve. As a result, Sisson forgave the balance of two loans in exchange for a 34 percent stake in the company.
When Sisson ran into financial trouble in early 2006, however, he asked for repayment on earlier loans. So Kenney sold off the Goose Island brand, netting Sisson $400,000 in the process. Whether that squared the earlier loans is unclear, but that’s at the root of the dispute.
When Kenney sold the company in 2011, she argued Sisson no longer had a stake in the business because she repaid him, the article adds. The judge ruled, however, that their agreement from 2001 was still in effect at the time of the sale.
When reached by Brewbound, a high-level executive with L. Knife & Son, who asked not to be quoted directly, said that at the time of the sale, the company was under the impression that Kenney owned 100 percent of the company.