Lawsuit filed against Wyoming Whiskey

In a case filed on Nov. 16 in the Circuit Court of Cook County, Ill., plaintiff Frank Sacca alleged that Wyoming Whiskey, as well as Brad Mead, Katherine Mead and David DeFazio breached a National Sales Director Employment Agreement.

Though a Wyoming company, the business has had multiple sales staff in Illinois, directed considerable efforts to market its product in the state and has had significant communication with its employees and other residents in Illinois.

Documents further state Illinois is Wyoming Whiskey’s second-largest market, with over 1,800 cases sold there in 2016. Additionally the defendants are accused of knowingly and intentionally directing numerous calls and communications into Illinois concerning Sacca, his employment, his compensation and the termination of his employment, and making decisions regarding Sacca’s compensation and employment that would affect his job in Illinois.

Therefore the Circuit Court of Cook County was initially determined to have jurisdiction in the matter, though the case was transferred to Wyoming U.S. District Court on Feb. 7. The defendants were served wth Sacca’s summons and complaint as early as Oct. 14, 2017.

According to allegations in the complaint, Wyoming Whiskey and the individual defendants recruited Sacca from another company in spring 2015, to be the national sales director. Sacca previously had 27 years experience in distilled spirits working for other companies, and joined Wyoming Whiskey in April 2015.

Upon information and belief, the reason Wyoming Whiskey was recruiting for the position was to make it more attractive to a potential buyer, as the defendants had decided to sell the company. During discussions with Sacca, through Brad and DeFazio, promises were made of stock ownership in the business while offering Sacca to accept lower base compensation than he had at his previous job. The defendants did not disclose the company had been “suffering from significant management and production problems and liquor licensing issues despite having full knowledge of these facts.”

In negotiations over Sacca’s joining the company, DeFazio provided Sacca with a report showing 2014 case sales to show they had already built some sales pipeline, though Sacca alleges they failed to disclose the company had millions of dollars in debt purportedly owed to the Meads.

Under a negotiated agreement, Sacca had an initial three-year term with an annual salary subject to annual review with Brad, and an annual sales budget to cover his out-of-pocket expenses and sales staff salaries. There was also an equity bonus provision for Sacca to receive ownership shares if certain sales goals were met. This bonus was a two-percent undiluted share of the company upon sale of 12,000 bottled cases in calendar 2015, an additional two-percent share of the company upon sale of 20,000 bottled cases in calendar 2016 and an additional two-percent undiluted share of the company upon sale of 30,000 bottled cases in calendar 2017.

Half of any of the earned shares were to be vested on Dec. 31, 2016. The other half were “escrowed,” but would vest if Sacca were fired without cause. However, the shares would not vest if he were fired for cause prior to Dec. 31, 2017.

If Sacca were fired without cause in 2016, the agreement provided he was to receive $150,000 severance pay and any of his earned or vested shares “shall be purchased by the company.” If fired without cause in 2017, the company would not owe severance, but would be required to purchase Sacca’s shares following a protocol giving Sacca 30 days to appraise the shares using an ASA-certified appraiser at his own expense.

Sacca also alleges the company and defendants did not disclose the Meads had leveraged the company by saddling it with debt in the millions of dollars owed to them personally. Brad Mead and his wife, Katherine, each own 32.5 percent of the company stock, and COO DeFazio owns 15 percent, according to the suit.

At the end of 2015, Sacca states, he sold enough cases to meet his sales targets so he was awarded his two percent share of the company as well as a $30,000 bonus in salary. In late 2015, Sacca learned of delays in securing licensing registration for the company, with detrimental impacts to 2016 sales. In 2016, he managed to increase sales.

Though budgeted to sell a set number of cases of the Private Stock whiskey initially set to launch in May 2016, delays kept the product from launching until August 2016. Sacca also budgeted to sell a set number of Outryder whiskey, scheduled for launch in Aug. 2016, though again due to delays it did not launch until October. Further delays also kept Double Cask whiskey from shipping in 2016 as scheduled.

Sacca’s lawsuit further alleges the company, under direction of Brad and DeFazio, imposed a commission sales structure on two members of Sacca’s sales team in violation of the original agreement. One team member quit in Nov. 2016, while the other’s sales significantly dropped after the decision was made. Brad and DeFazio also imposed a moratorium on travel and entertainment spending by Sacca, in violation of the agreement. The suit alleges these impediments reduced sales, and without the delays and agreement violation Sacca would have sold enough cases to earn his 2016 two-percent equity bonus.

Regarding a potential sale of the company, the lawsuit alleges in late 2016 and early 2017 the individual defendants agreed to explore potentially selling the company, but knew they needed Sacca gone before they got an offer or else they would owe him six percent of the company stock. It was demanded Sacca and his sales team go to a commission-based structure, as an effort to trigger Sacca to quit and keep him from receiving his escrowed shares. Further, Sacca was sent a memo indicating changes to his title, responsibilities and compensation.

In the early months of 2017, Sacca alleges the defendants practically stopped communicating with him. On information and belief, the lawsuit states, the company and defendants received an offer from a potential buyer they refused to disclose to Sacca.

On March 21, 2017, Sacca was offered a severance requesting that he, after his termination and without compensation, assist the company with the mediation of an Equal Employment Opportunity Commission (EEOC) discrimination charge by another employee and proposed that “the company will pay you in exchange for your stock in the company.” At around the same time, Brad informed Sacca that Sacca had stock in the company.

Two days later, Sacca proposed he would assist in the mediation if he were still employed by the company at the time of the mediation, and further requested copies of any valuations of, or offers for, the company in the previous two years.

Sacca also noted “It now seems that you are trying to squeeze me out of the business to avoid any further equity vesting. So the potential of six percent will not be reached unless there is an immediate liquidity event. Has the company been in discussions with potential buyers? If so, what is the status of those discussions.”

According to the lawsuit, nobody responded to Sacca’s inquiries, but instead sent him a letter, signed by Brad, the next day, March 24, 2017, terminating him on only three hours notice. The letter did not set forth grounds for firing Sacca for “cause” under the terms of the agreement. As he was not terminated for cause, he was entitled, at minimum, to have his full two-percent of the company stock vest he earned in 2015. The defendants, however, did not acknowledge this entitlement and told him they would only recognize a one percent stock interest.

The lawsuit alleges the defendants had an ulterior motive in firing Sacca on a specific day, and knew they were to receive a written offer to purchase the company from a buyer on March 27, 2017. By firing Sacca one business day before receiving the offer, they were attempting to keep him from receiving the core benefit of the agreement, specifically six percent of the company stock, while preserving their equity position in the company. The lawsuit further states the company and defendants benefitted from Sacca’s industry contacts, knowledge and expertise.

Also alleged in the lawsuit is the company’s deliberately preventing Sacca from completing valuation of his ownership by knowingly providing incomplete and false information and refusing to acknowledge and confirm Sacca’s ownership interest.

In his claims for relief, Sacca’s lawsuit alleges breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, negligent misrepresentation, concealment, interference with contractual relations, promissory estoppel, unjust enrichment, violation of the Wyoming Wage Act and Illinois Wage Payment and Collection Act, and civil conspiracy.