Lawsuit: Deep Ellum founder alleges CANarchy sabotaged brewery sales

LONGMONT — The former owner of Deep Ellum Brewing Co. in Dallas alleges that the CANarchy collective of breweries is refusing to pay acquisition costs for the brewery and is sabotaging its growth plans to avoid paying him royalties.

In a complaint filed last week in the Chancery Court of Delaware, former owner John Reardon claims that CANarchy has failed to pay the full, undisclosed purchase prices for Deep Ellum after the sale was agreed upon in June 2018.

The complaint is heavily redacted, blacking out financial figures and portions of the cited sale agreement.

CANarchy is the collective founded in 2015 by Oskar Blues founder Dale Katechis with the financial backing of Boston-based private equity firm Fireman Capital Partners LLC. The firm’s head is Dan Fireman, whose father Paul Fireman was formerly owner of shoe brand Reebok before selling to Adidas in 2005.

Paul Fireman also invested $20 million into Boulder-based Newton Running Co. in 2011.

“During negotiations with Mr. Reardon, Dan Fireman traded heavily on his family name and father’s successful business history, working to earn Mr. Reardon’s confidence in deal terms that placed a significant chunk of the purchase price for the company in future commitments, like earnouts and deferred payments,” the suit said.

Reardon alleges that he and his fellow sellers were never paid and have sent CANarchy a default notice, but the Longmont-based collective and Fireman Capital have refused to pay.

The deal also includes an earn-out clause, or a certain amount of money payable based on future beer sales. 

Reardon alleges that CANarchy promised to grow Deep Ellum’s presence in other states and keep him on as CEO of the brewery. However, he said he was sidelined from the brewery’s operations and CANarchy didn’t give him the same marketing or operational resources it did for its other brands, which lowered sales to the point where the earn-out clause couldn’t be redeemed.

“… On numerous occasions, Deep Ellum Brewing could not satisfy vendor orders due to insufficient supply, resulting in numerous out-of-stock reports and lost sales. The inability to satisfy orders affects the immediate sale in question, and has the additional long-term impact of forcing distributors, vendors, and consumers to select competitive brands, resulting in additional lost sales,” the suit reads.

Reardon is asking the court to provide an undisclosed amount of financial damages, interest and attorney’s fees.

CANarchy counts Oskar Blues, Tampa Bay’s Cigar City Brewing, Salt Lake City’s Wasatch Brewing, Michigan’s Perrin Brewing Co., California’s Three Weavers Brewing Co., Squatters Pubs and Beers and Deep Ellum Brewing among its roster.

In a statement sent to BizWest, CANarchy CEO Anthony Short said the collective is working with Reardon to address what the company calls a debt instrument dispute.

“Importantly, it is business as usual and our operations are unaffected,” he said. “We will continue to work closely with our valued wholesaler, retailer and supplier partners as we always have to provide great products to consumers.”

Reardon and Fireman did not respond to requests for comment Monday.

on Facebook on LinkedIn