Lucas Price, the minority shareholder and board member of Gravity Payments, testified today that he wasn’t informed, let alone involved, prior to his brother Dan Price’s high-stakes decision to raise the company’s minimum salary for employees to $70,000 a year.
“I knew before the public, but there were a lot of people who knew before me, as well,” said Lucas Price, under questioning from his lawyer in King County Superior Court.
He acknowledged that one of those people was Tyra Banks, the TV host and supermodel, whom Gravity CEO Dan Price emailed as part of the company’s publicity efforts. His lawyers presented evidence to show that Gravity Payments had also lined up the New York Times and NBC News to cover the $70,000 salary announcement before Lucas Price was informed.
The exchange in King County Superior Court on Wednesday was part of a broader effort by Lucas Price to show he has been “carved out” from key decisions at Gravity, despite serving with Dan Price on the two-member board and owning nearly a third of the Seattle-based credit card processing company.
Gravity Payments made international headlines last year with the announcement that it would raise its minimum salary to $70,000 over the course of three years. The announcement came the month after Lucas Price served his brother with the suit, alleging a pattern of excessive compensation.
As part of the announcement, Dan Price reduced his own salary to $70,000 to help fund the raises. Dan Price previously made more than $1 million a year as Gravity’s CEO.
In his first public comments on the company’s decision, Lucas Price testified that he wasn’t opposed to the $70,000 minimum salaries, necessarily, but felt that he should have been involved in the decision-making process as one of the company’s two board members.
“Absolutely. It’s a large expense that’s been taken on. It might be a wise expense to take on. It’s hard to say at this point in time,” Lucas Price testified. “What we’ve seen so far are a lot of PR benefits for costs that are going to be incurred in the future. We’ve seen a lot of benefits for the employees, which I think are good.”
At the same time, he said, it also creates risks for employees if they ultimately leave their jobs and have to take lower-paying roles elsewhere after they’ve adjusted their standard of living.
“There’s a lot of benefits and there are some potential downsides, as well,” Lucas Price said. “For me it’s something I would want to analyze very carefully.”
In advance of the trial between the brothers, Gravity Payments last week released early results from its move to $70,000 minimum wages, including significant increases in profits and customers, and a new sense of financial stability for employees.
Lucas Price filed the lawsuit against Dan Price last year, alleging that his brother used his majority control of the company to pay himself excessive compensation, manipulate valuations of the company to his financial benefit, and charge hundreds of thousands dollars in personal expenses to the company.
“This is an unfortunate and troubling story of ego, resentment and the unwillingness of the defendant Dan Price to live with the agreement he struck” with his brother, said Gregory Hollon, a lawyer for Lucas Price, in his opening statement on Tuesday.
Dan Price denies the allegations, and his lawyers say he has “scrupulously” complied with agreements between the business partners. They call the suit an effort by Lucas to “cash out” his interest in a business that his brother has been responsible for building.
Lawyers for Dan Price point to Gravity’s growth under the CEO’s leadership — from profits of $316,000 in 2008 to more than $6 million in 2015. They cite a valuation from Lucas Price’s expert witness putting the value of the company at more than $80 million. The value of Lucas Price’s interest in the company has risen from $800,000 to $26 million, they say.
Lucas Price originally served his brother with the lawsuit in March 2015, prior to Dan Price’s $70,000 salary announcement. The suit was formally filed with the court after the announcement of the $70,000 minimum salary, in April 2015.
Lucas Price’s lawyers cited public statements in which Dan Price suggested the suit was a response to the $70,000 salary decision. On the stand today, Lucas Price testified that he couldn’t have drafted the suit in response to the $70,000 minimum salary, because he didn’t know about the decision at the time.
The civil lawsuit is being tried in Seattle before King County Superior Court Judge Theresa B. Doyle. Upholding an objection from Dan Price’s lawyer, the judge declined to allow Lucas Price to testify about “hate mail” that he says he received as a result of the implication that the suit was a response to the $70,000 salary decision.
In a USA Today story last week, Dan Price pointed to his longtime interest in pay equity, and said the $70,000 minimum salary announcement wasn’t an effort to deflect the lawsuit. “I think the facts and sworn testimony flatly contradict that,” he told the newspaper.
Lawyers for Lucas Price presented evidence to show other decisions that Lucas Price wasn’t involved in as a board member, including deliberations over whether to offer credit-card processing services to legal marijuana shops in Washington state.
In addition, Lucas Price said his brother has “told me that he wants to run the company as a socialist organization … similar to a nonprofit but not a nonprofit.” Lucas Price said he has not agreed to change the mission of the company in that way.
Dan and Lucas Price founded their credit card processing company in 2004 as Price & Price LLC. Lucas Price, the older of the two brothers, was originally the majority owner of the company, with a 70 percent stake. Lucas Price testified that when Dan Price pushed for 40 percent ownership in 2004, Lucas Price initially objected but, after thinking about it, surprised his brother by offering him a 50 percent stake in the company.
In subsequent years, Lucas Price testified, Dan Price pushed for more control of the company. Lucas Price testified that he ultimately relented in 2008, shifting to a minority stake in exchange for a $400,000 payout.
“It was difficult … but it was a trade-off I was willing to make,” he said. “I would have loved to be able to get along with Dan and to be partners.”
PREVIOUSLY: Trial begins in Gravity Payments case as Price brothers dispute CEO pay and company control
Earlier in the day, Dan Price was questioned about a series of expenses charged to the company, including airfare to locations including Thailand and Hawaii, a Foo Fighters concert, and legal fees in the ongoing court case. Because Dan Price was sued personally in the suit, he testified that he has reimbursed the company for those legal fees.
Under questioning from his own lawyer, the Gravity Payments CEO outlined the company’s policies to reimburse the company for personal expenses charged to the company, referring to instances in which he had made reimbursements, including deducting them from his pay or making an electronic transfer back to the company.
Lawyers for Dan Price say the expenses at issue in the case were incurred from the CEO’s efforts to entertain clients and build the business, including patronizing restaurants and other Gravity customers, and team-building outings. Any personal charges that weren’t repaid to the company were inadvertent, they say.
Testifying later in the day, Lucas Price recalled believing that his brother was “moving into some gray areas in terms of charging things to the company that I believed were personal expenses” prior to the renegotiation of their agreement in 2008.
The testimony also detailed escalating tensions and disagreements over Dan Price’s compensation. Dan Price was paid $1.1 million in total compensation in 2014, the last full year before the company announced its move to a $70,000 minimum wage, according to financial records made public as part of the case. He received more than $2 million in compensation in 2012, with a bonus and stock award that are under dispute in the case.
According to testimony in the case, Dan Price had pushed unsuccessfully for compensation of $5 million in 2012, which would have been half the company’s revenues at the time.
Lawyers for Lucas Price say that he is not seeking the dissolution of the company, and wants to see the company continue and thrive. They assert that Lucas Price has made “an extremely strong case for a buyout” of his shares at fair value.
However, lawyers for Dan Price say the capital required to buy out Lucas Price’s stake would effectively force the dissolution of the company, which employs more than 100 people.
The trial is expected to last through mid-June.