Tate Wins Key Battle In Balcones Distilling Dispute

November 14, 2014 – Balcones Distilling founder Chip Tate has won a key battle in his fight with the majority investors who now control 73% of the Waco distillery’s ownership. In a ruling issued earlier this week, Texas 170th District Court Judge Meyer ruled that the majority owners violated company bylaws by making decisions in board meetings that Tate had boycotted. The bylaws require Tate to be present at a board meeting in order for action taken at that meeting to be binding.

Tate last attended a board meeting in July, making all board actions since August invalid according to Judge Meyer’s ruling according to the Waco Tribune. That would include the decision to suspend Tate for 90 days August 22 and seek the restraining order barring Tate from the distillery’s premises and contacting Balcones employees. In addition, it invalidates the distillery’s plan to raise an additional $15 million dollars in financing from the majority owners with debt that could be converted into equity in Balcones, which would have reduced Tate’s ownership stake from 23% to 9% and limited his control of the company. It is not clear whether the restraining order remains in effect. Judge Meyer’s contempt of court citation against Tate for failing to promptly return a company-owned computer, hard drive, and mobile phone is on hold while the two sides are in mediation.

As Tate told WhiskyCast last month after the restraining order was modified to allow him to speak publicly about the case, the Oklahoma City-based investor group led by Balcones Chairman Greg Allen started holding board meetings and making decisions that violated the management agreement giving Tate final authority over Balcones operations. The two sides are discussing a settlement expected to lead to one side buying the other out, but a previously scheduled board meeting set for this past Tuesday was cancelled after Tate refused to attend. 

In a statement provided to WhiskyCast by Balcones attorney Jeffrey Armstrong, Greg Allen said the judge’s ruling jeopardizes the distillery’s immediate future:

“We were surprised and naturally disappointed by the court’s ruling.  But given this ruling, it does make sense for Chip to either buy us out, or be bought out, because the court essentially has declared that the current owners can’t put any more of their money into the Company.  Staying in a holding pattern is also not the best thing for the employees, customers and our loyal consumers because at some point we will run out of money.  There are many people who depend on their paychecks coming each week from Balcones, and our decisions need to continue to have these people and their families in mind.  So, our hope is that we will have something good to announce with Chip within the next few weeks.  In the meantime, and most importantly, the Company is doing great.  Our production is improving in quality and quantity over 2013, and our customers and loyal consumers remain thrilled.  Bottom line is that Balcones will continue to do great things regardless who is in charge in the board room.”

We have reached out to Chip Tate and his attorney, David Clouston, for their response to the ruling. This story will be updated as more information becomes available.

Editor’s note: This story was updated with a response from Balcones Distilling Chairman Greg Allen. 

Links: Balcones Distilling