Internal conflict among the owners of Bike Rack Brewing Bentonville, a well-known brewery, has been brought to light through a lawsuit filed in Benton County Circuit Court.
Steven Outain, a co-owner and chief development officer of Bike Rack Brewing Co., initiated legal action on Friday, September 14th. The lawsuit names the company and its other co-owners as defendants, alleging a breach of fiduciary duty and violation of the company’s operating agreement. Outain is seeking $2 million in punitive damages. The co-owners listed in the lawsuit are CEO Jeff Charlson, Andy Neilsen, Joey Lange, Jeff Amerine, Phyl Amerine, and Ricky Draehn.
According to the court documents, Outain has been a key figure in Bike Rack Brewing since its inception in October 2014, when the first location opened. Bike Rack Brewing has since expanded to include multiple locations in Bentonville, including its main brewery and tasting room in the 8th Street Market, which opened last year. They also launched a new spot in downtown Springdale earlier this year. Adding another dimension to their business, Bike Rack Brewing also ventured into the music industry by launching its own record label focusing on local artists.
Despite his significant role as chief development officer and contributions to the growth of Bike Rack Brewing, Outain, who also holds a senior management position at Walmart Inc., has reportedly never drawn a salary from the brewery. He anticipated benefiting from his investment of “time and money” as Bike Rack Brewing became profitable, thereby increasing the value of his ownership stake. The lawsuit reveals that Bike Rack Brewing generated over $800,000 in sales in the most recent fiscal year.
However, the relationship between Outain and several other co-owners of Bike Rack Brewing Bentonville began to deteriorate in January. The lawsuit claims that the defendants started making unsubstantiated accusations against Outain, threatened him with legal action, and demanded he “voluntarily relinquish” his ownership stake in Bike Rack Brewing, cease contact with employees, and refrain from visiting any Bike Rack Brewing locations.
These demands, according to the lawsuit, arose after other co-owners accused Outain of breaching his fiduciary duty by assisting in the evaluation of a brewery business planned by another company in Fort Smith. Outain vehemently denied these claims in the filing, calling them “completely false.” He further pointed out that another defendant had also participated in the Fort Smith brewery evaluation but did not face similar “demands and threats.”
The lawsuit states that the defendants retreated from their demand for Outain to surrender his ownership after Outain cited the company’s operating agreement. This agreement, updated in December 2017, explicitly permits members to engage in other business ventures, even those competitive with Bike Rack Brewing.
Following this, the defendants allegedly offered Outain $33,500 to buy out his 17% ownership interest. Outain rejected this offer and requested access to Bike Rack Brewing’s financial records to accurately assess the value of his stake.
An independent valuation by a local CPA in August assessed Bike Rack Brewing’s total worth at just $105,900, valuing Outain’s 17% share at $18,003. Outain also rejected this valuation, arguing that the appraiser’s report was skewed by “false representations” from the defendants regarding Bike Rack Brewing’s operations and future plans, allegedly aimed at suppressing the company’s value.
Rogers attorney Marshall Ney, representing Outain from Friday, Eldridge & Clark, issued a statement: “As you can tell from the narrative in the lawsuit, internal strife has developed among the ownership group. Steve is willing to walk away from the business he helped to create, but only if he receives fair market value for his 17% ownership.” Ney added, “The other owners claim for purposes of redeeming Steve’s interests that the company is virtually worthless. That’s not the position the company takes publicly, though, nor does Steve believe the company will continue to claim financial woes after he has been redeemed.”
Little Rock attorney Jamie Fugitt of PPGMR Law is representing the defendants. As of the original report, Fugitt had not responded to requests for comment. This is a developing story and will be updated as more information becomes available.
