The Free Press, Mankato, MN

Local News

April 1, 2013

Lawsuit over control of family-owned MICO ends with $21.8 M award

(Continued)

NORTH MANKATO —

“Two-thirds of family businesses don’t make it to the second generation,” Sorenson said. “The greatest amount of conflict occurs when the second generation of a family business is run by siblings. Men tend to be more competitive and less willing to cooperate.”

About a year after his father died, Dan was demoted in May 2005 and put on a performance-improvement plan. He was stripped of his direct reports and put under Gabriel’s supervision.

Dan wrote a September 2005 email saying “the demotion is the latest event in what I perceive to be an effort to drive me out of the company.”

But Dan’s circumstances would get worse.

He was placed on an involuntary leave of absence in December 2005. Later, in trial, Brent testified the board voted to place Dan on leave because of poor performance. But Westphal was not swayed. He called the testimony “evasive and deceptive.”

Dan returned to work in February 2006 with the assignment of setting up a European distribution network. But he was not allowed to work out of the MICO headquarters.

Westphal later determined that “Gabriel hindered Dan from communicating with other employees, removed him from email groups, kicked him out of meetings that he was invited to attend, prevented him from attending regular sales meetings, and reprimanded employees who did communicate with him, and publicly humiliated and insulted him,” the judge wrote.

Dan’s efforts to convene a board meeting to discuss his relationship with Gabriel and the sale of his stock were rebuffed. After one of those attempts, in August 2006, Dan received an email from Brent saying, “I have been trying to think of a good reason to attend. I couldn’t think of one. I won’t be attending.”

The lawsuit

Dan finally sued on Oct. 2, 2006. Four days later, the board voted to put Dan on administrative leave and cut off his executive bonus and profit-sharing.

The case went to trial and in February 2011, Westphal ruled that the company was to purchase Dan’s shares for $11.5 million. With compensatory and punitive damages, including $2.8 million in attorneys fees, the total award was $21.8 million. Higher courts upheld the award.

Dan McGrath so far has collected about $17.3 million, said his attorneys, Peterson and Daniel Oberdorfer of the Minneapolis-based law firm Leonard Street and Deinard.

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