Battles at LG Brewing Co. coming to a head in court
By Nathan R. Huff
A lawsuit set to begin on Oct. 4 in Superior Court marks the beginning of a fresh round of litigation involving the Los Gatos Brewing Company. The brewery has been beset with lawsuits over its ownership and management since before it ever opened, but things have snowballed over the past several years; new suits have been filed, defendants have filed countersuits and lawyers have been sued, and the matter doesn't end there.
The Oct. 4 trial involves Los Gatos resident and original brewery partner Theodore Wallace and fellow Los Gatan and current Brewery Corporation president Andrew Pavicich Jr. Wallace is seeking repayment for costs from a 1992 lawsuit filed against him while he was a co-owner of the brewery.
Furthermore, Wallace alleges--as part of a larger lawsuit expected to come to trial next summer, in which both he and former co-owner Robert Keller of Los Gatos are plaintiffs--that Pavicich committed fraud and conspiracy and, among other things, intentionally inflicted emotional distress. The 12 separate charges are all part of Wallace's and Keller's accusation that Pavi-cich unlawfully and purposefully took control of the Los Gatos Brewing Company.
Pavicich, in response, filed a countersuit against Keller, Wallace and their then-lawyer Anthony Santucci, who represented Wallace in the lawsuit for which he is seeking indemnification. According to court records, Pavicich claims Santucci, Wallace and Keller conspired to hide the 1992 lawsuit pending against Wallace when they were soliciting investment funds from Pavicich for the financially troubled brewery project. Confused?
To get a clearer picture of the entire story, one has to go all the way back to 1991. At that time Keller, with help from the late Thomas Earle, obtained the option to lease the building which had housed the Old Noodle Place. Attorneys Thomas Ferrito and Martin Feldman also expressed interest in the business venture and soon thereafter invested $50,000 each into a partnership in exchange for an equal share of interest and profits.
By July 1991, according to court records, internal problems led to the termination of the agreement. The release from the agreement gave each partner the right to pursue the lease, with the successor getting rights to the business. On Aug. 12, 1991, Wallace signed a new agreement to form Los Gatos Brewing Co. Inc. with Keller and Earle.
Ferrito and Feldman, according to court documents, then threatened a suit charging Wallace with being a "straw man," accusing him of conspiring all along to take control of the brewery with Keller and Earle. The threatened suit named both Keller as an individual and the Los Gatos Brewing Co. Inc. Attorney Anthony Santucci then entered the picture as the company's counsel.
Meanwhile, as the potential lawsuit hung over their collective head, court records indicate the brewery continued to face funding problems. In September 1991 Wallace and Keller began soliciting investors in the form of "limited partnership units." Two months later Earle had a reoccurrence of cancer, which took his life in January 1992.
According to the court's records, as financial woes continued, Wallace and Keller approached Pavicich. In February 1992 Pavicich purchased two limited partnership shares for $100,000 and bought a one-third interest in the corporation, replacing Earle and becoming a director and an officer. It was during this time, in early 1992, Pavicich would later claim in his countersuit, that information regarding the pending lawsuit against the corporation by Ferrito and Feldman was deliberately withheld from him. Court documents have both Wallace and Keller denying this charge,
Then, according to court records, as construction of the brewery-restaurant continued into April 1992, Pavicich told Wallace and Keller there would be a $600,000 shortfall in the amount of funds needed to complete the project. Options, including small business loans, were explored, but, according to the suit filed by Wallace and Keller, Pavicich insisted on making the added investment himself.
Court records state that, after lengthy discussion, Wallace and Keller agreed in July 1992 to allow Pavicich to loan the limited partnership the money. Now, depending on who's telling the story, one of two things occurred. According to Wallace and Keller's suit, based on the shortfall indicated by Pavicich, they agreed to give up 51 percent of the stock to Pavicich in exchange for his investing the needed funds. Soon after, Wallace and Keller claim, Pavicich unilaterally increased his share of the corporation to 70 percent, reducing Wallace's and Keller's share to 15 percent each.
Pavicich's countersuit, filed earlier this year, describes events as transpiring slightly differently. In his suit against Wallace, Keller, and Santucci, which the courts have combined with the original suit against Pavicich, he claims Wallace voted with the brewery board of directors on Jan. 11, 1993, to approve the transfer of shares.
Ferrito and Feldman filing their long-threatened lawsuit against the brewery corporation and Wallace further clouded the events of late 1992 and early 1993. Pavicich, according to Wallace's current indemnification suit, paid himself and his attorneys with brewery partnership money to defend the corporation while leaving Wallace to defend himself. Wallace, court records show, was forced to borrow money from the brewery's limited partnership, which he has since repaid. The suit brought by Ferrito and Feldman was eventually settled out of court, with Wallace paying $250,000 and the limited partnership picking up an additional $500,000.
Wallace is attempting to use the indemnification clause in the bylaws of the Los Gatos Brewery Co. to seek reimbursement for the costs of the Ferrito/Feldman lawsuit and settlement. Regardless of the outcome of the Oct. 4 indemnification trial, the larger and most likely far more dramatic trial will be held sometime next summer over Wallace and Keller's charge that Pavicich not only committed fraud through exaggerating the funding shortfall, but also embarked on a campaign of defamation and harassment. Harassment, according to Wallace and Keller's suit, included threatening phone calls, forcing brewery employees to refuse to serve them, and making defamatory remarks to employees about the two. Keller also claims Pavicich, through physical threats and intimidation, forced him out of the brewery in the summer of 1993, buying his shares for a fraction of their worth.
This second suit against Pavicich also holds that he encouraged Ferrito and Feldman to take legal action against the brewery in an attempt to get a higher percentage of company shares, while Pavicich's countersuit says he never would have entered into the partnership had he known of the pending Ferrito/Feldman lawsuit.
Pavicich, Santucci, their lawyers, and lawyers for Wallace and Keller did not return phone calls for this story.
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Los Gatos, California Since 1881
