A lawyer for Lucas Price, the minority shareholder in Gravity Payments, asked a King County Superior Court Judge on Thursday to mandate a buyout of his stake in the company, based on the alleged actions of Gravity CEO Dan Price, his brother and business partner.
“There’s no reason Lucas should be forced to stay in a company where he has been misled, mistreated and carved out over the years,” said Gregory Hollon, a lawyer for Lucas Price, in his closing statement this morning in a trial that spanned three weeks in downtown Seattle.
However, a lawyer for Dan Price pointed out in his closing arguments that the shareholders’ agreement between them specifically doesn’t include a buyout provision — arguing that Lucas Price hasn’t met the resulting legal requirement to show that Dan Price acted in bad faith.
“In every instance, from start to finish, Dan Price did his best to act in good faith and protect the interest of all shareholders,” said Paul Dayton, a lawyer for the Gravity CEO, in his closing argument before King County Superior Court Judge Theresa Doyle.
Dan Price testified in the case that the cost of a buyout, potentially as much as $26 million (at a company valuation of more than $80 million), could force him to give up control of the company to his brother. Lucas Price, who started the Seattle-based credit card processing company with his brother in 2004, currently owns about one-third of the company.
However, Lucas Price’s lawyer Hollon cited expert testimony saying that the buyout could be accomplished over the course of seven to 10 years, with a down payment and “modest” interest that the company would be able to afford. Hollon asked for the appointment of a special master to work out the details based on a ruling by the judge.
The outcome of the case could determine the fate of a company that has made international headlines for instituting a minimum $70,000 wage for employees, in phases over three years. Gravity employs more than 100 people, and a group of them helped to pack the courthouse for a portion of Thursday morning’s closing arguments.
The lawsuit by Lucas Price — alleging in part that Dan Price paid himself excessive compensation — was signed and served on Dan Price in March 2015, the month prior to the $70,000 salary announcement, although it wasn’t formally filed with the court until two weeks after the announcement. At the time of the $70,000 salary announcement, Dan Price lowered his salary to the same amount, saying he wanted to free up resources to fund the raises.
PREVIOUSLY: Gravity Payments co-owner testifies that he should have been involved in $70k salary decision
Although the complaint didn’t cite the $70,000 salaries, Lucas Price’s attorneys have since pointed to the decision as an example of Dan Price cutting his brother out of key decisions at the company. During his closing argument, Hollon played video of a public appearance in which Dan Price made it seem as if the suit was in response to the $70,000 agreement.
“All of a sudden, I have this crazy moment and all this excitement, and two weeks later I’m getting sued for it,” says Dan Price in the video, as played in court.
Hollon said, “He lied publicly about this lawsuit, framing it as Dan getting sued for the minimum wage.”
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.
In the suit, Lucas Price alleges that Dan Price 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.
PREVIOUSLY: Gravity Payments CEO Dan Price: Brother’s buyout demands could force him to give up company
Those personal expenses have allegedly totaled more than $600,000, according to a chart presented in court by Lucas Price’s lawyers — including meals, counseling services, and trips, among other expenses.
However, to make his case, Lucas Price would need to “demonstrate that there is an instance in which Dan did that and knew it wasn’t reimbursed” by Dan Price to the company, and Lucas Price “utterly failed to do that,” said Dayton, Dan Price’s lawyer, during his closing argument.
Dayton pointed to the steady growth of the company under Dan Price since the brothers renegotiated their agreement in 2008 to reduce Lucas Price’s stake and end his day-to-day role in the company. Gravity Payments recently said annual profits have nearly doubled over the past year, to more than $6 million.
On the stand this week, Lucas Price recalled a conversation in which Dan Price told him that he wanted to run the company as a “socialist organization” but then asked for compensation of more than $2.1 million in the course of the same meeting.
“Most people wouldn’t say that and then ask for more than $2.1 million in pay,” said Lucas Price on the stand, adding that it “was just sort of dumbfounding and shocking to me.”
Hollon also cited instances of company resources allegedly being used to further Dan Price’s interests, not the interests of the company’s shareholders more broadly, such as a statement in which Gravity’s marketing leader told a reporter that an earlier ruling in the case was vindication for Dan Price. The company is not a named party in the suit.
The brothers are expected to engage in a final round of private mediation after closing arguments, with the judge issuing her ruling after that if they can’t reach a settlement.
