A lawsuit filed against Promega Corp. and founder Bill Linton four years ago by a few shareholders, alleging Linton “bullied” his way to majority control and blocked a return on their investment until 2078, was dismissed Tuesday following a settlement.
The parties said in late June they had agreed to settle the case by having a third party buy the shareholders’ stock. Once the third-party investment and settlement terms were satisfied, the parties said they would submit an order for dismissal, which they signed in Dane County Circuit Court Tuesday.
It’s not known how much money the shareholders got for their stock in a case involving one of the Madison-area’s most prominent biotech companies and Linton’s establishment of a nonprofit to explore the use of hallucinogenic drugs to treat depression and anxiety.
Promega, together with Eppendorf AG, a life science instrument manufacturer based in Hamburg, Germany, have acquired the ownership interest of the plaintiffs, Promega spokeswoman Karen Burkhartzmeyer said in a statement. “While the terms of the settlement are confidential, the outcome is beneficial to all parties, reaffirming Promega’s long-term commitment to all constituencies and to the future of the company, remaining private and independent,” she said.
Attorneys for the plaintiffs didn’t respond to a request for comment.
Longtime shareholders Nathan F. Brand, Nathan S. Brand and Ted Kellner in 2016 sued Fitchburg-based Promega and Linton, who started the company in 1978, saying Linton “bullied, lied, threatened, and manipulated his way” to get majority control. Promega appeared to be on a path to going public, but the plan was scrapped and Linton said in 2014 he had planned to “celebrate its 100-year anniversary as a private company,” they said.
They alleged Linton sought to transfer his controlling interest in the company to the Usona Institute, which Linton founded in 2014 to research therapeutic uses of psychedelic drugs.
Linton’s counterclaims of conspiracy, fraud and racketeering accused the shareholders of trying to take over the company, which has about 1,730 employees, including nearly 1,090 at its Fitchburg headquarters. The company makes more than 4,000 life sciences and diagnostic products, including new tests for COVID-19.
After a three-week trial in July 2019, Dane County Circuit Judge Valerie Bailey-Rihn said she would likely find the minority shareholders had been oppressed.
“I am strongly leaning to find oppression here,” Bailey-Rihn said, according to a court transcript.
Although it would be a drastic measure, Bailey-Rihn said she could dissolve the company. Other options, she said, 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.
In January, the judge said she likely wouldn’t dissolve Promega if she determined the company was liable for shareholder oppression, but hadn’t decided what remedy she would use.
At a hearing that month, attorneys for the shareholders, Promega and Linton presented arguments about how to determine the value of the shareholders’ stock, should a stock buyback be part of the remedy.
During the hearing, both sides agreed that Promega had grown in the years since the lawsuit was filed, which would bump up the value of the shares. The shareholders’ attorneys argued the buyback price should be set at a more current value, but Promega’s attorneys argued that the price should be set at the share value the day the lawsuit was filed.
A June 29 letter to the judge from Beth Kushner, an attorney representing Promega, discusses the third-party investment and settlement agreement but provides no details of the terms. The letter, which Kushner said Linton and the shareholders reviewed and agreed to, is the last document filed in the court record before Tuesday’s dismissal.