Following weeks of testimony in a lawsuit against Promega Corp. and its CEO, a Dane County judge said she will likely find that minority shareholders had been oppressed.
Circuit Court Judge Valerie Bailey-Rihn on Aug. 1 told the Fitchburg-based company and its founder and CEO, Bill Linton, as well as the shareholders who filed the lawsuit, that they could file briefs within 60 days with their recommendations on how she could remedy the wrongdoing.
“I will let you brief whatever you want, but I am strongly leaning to find oppression here,” Bailey-Rihn said, according to a court transcript.
Shareholder oppression is not defined in Wisconsin law, but several state courts have defined it over the decades as “burdensome, harsh and wrongful conduct” or a lack of fair play or fair dealing to the detriment of some of the shareholders.
Bailey-Rihn also blasted Linton for his testimony, which she said was “the most evasive testimony that in approximately 30 years of being an attorney I have ever heard,” and called it “not credible.”
Longtime shareholders in the biotech firm — Nathan F. Brand, Nathan S. Brand and Ted Kellner — filed the lawsuit more than three years ago, claiming that Linton “bullied, lied, threatened and manipulated his way” to get majority control of the company, leaving the minority shareholders with no chance for “a fair return on their investment until at least 2078.”
Attorney Randall D. Crocker, who is part of the team representing Promega, said the company will “continue to review and vigorously pursue its options.”
“While the (judge) made certain preliminary observations, with which we disagree, the case is not over,” Crocker said in a statement.
Attorney James T. Southwick, a member of the team representing the shareholders, declined to comment. An attorney representing Linton did not respond to requests for comment.
Although it would be a drastic measure, Bailey-Rihn said she could dissolve the company, which employs nearly 1,700 people worldwide with about 1,000 in the Madison region. But, she said, there are other options too, which could include paying minority shareholders fair value for their stock or essentially rewinding the clock to the company ownership’s 2014 conditions reinstating an independent board and make Promega buy back stock obtained by Linton.
Bailey-Rihn said the parties can propose their own remedies to the solutions as well.
Linton testified at the trial, according to court transcripts, that he had previously considered taking the company public with an initial public stock offering in the 2000s, but that plan has changed to keep the company private at least to its 100th anniversary in 2078.
The lawsuit, filed in July 2016, claims Linton sought to obtain a controlling interest in Promega and transfer it to a nonprofit research institute, Usona, which was founded to research the possible therapeutic uses of psychedelic drugs for people with depression or anxiety. It alleges that Linton attempted to coerce shareholders into selling their shares at low prices.
Brand and Kellner tried to buy company stock for a higher price than shareholders were offered, saying the company’s buyback offer was too low. Their attempts were rebuffed by a new board of directors appointed by Linton, the lawsuit states.
Promega had countered by calling the Brand-Kellner buyout proposal a “hostile takeover offer.”