Lawsuit against founder/brewer after brewery’s failure provides lessons for founders dealing with investors.

Haplessness appears to have saved the founder/head brewer of a brewery that never got off the ground from having to stick with a debt after filing for personal bankruptcy and repay $140k that some investors claimed he should owe them.

The brewery, Bulk Head Brewing Co. – did not open after years of work by a young brewer. The brewery’s failure forced him into bankruptcy.

In bankruptcy, the investors looking for a return of the money they’d invested and the money they’d also been forced to pay as a result of being personal guarantors on a loan the business defaulted on sued arguing the debt was non-dischargeable because the young founder/head brewer had allegedly made misrepresentations about the financial state of affairs of the brewery at the time the investors put in money.

What were the representations you ask? Mostly oral statements to the investors about whether the state and local liquor licenses had been obtained and whether the monies being raised were sufficient to meet debts like the lease obligations and the brewery build-out costs.

The case went to trial, and the opinion details the long and twisted history and circumstances provide some specific bedrock for the Court’s determination that there was insufficient proof of fraudulent intent on the part of the founder/brewer. But most of that was based on a technicality about the statements being oral and not written.

That opinion is worth a read as the fact pattern will be familiar to many.

The Takeaway: Statements that may be half-truths or rosy but impractical or false forecasts could lead to liability in a similar situation with slightly different facts. Brewer/Founders should vet their statements and qualify them with conditions if necessary to bring the statements into compliance.

Ashley Brandt

Hi there! I’m happy you’re here. My name is Ashley Brandt and I’m an attorney in Chicago representing clients in the Food and Beverage, Advertising, Media, and Real Estate industries. A while back I kept getting calls and questions from industry professionals and attorneys looking for advice and information on a fun and unique area of law that I’m lucky enough to practice in. These calls represented a serious lack of, and need for, some answers, news, and information on the legal aspects of marketing and media. I've got this deep seeded belief that information should be readily available and that the greatest benefit from the information age is open access to knowledge... so ... this blog seemed like the best way to accomplish that. I enjoy being an attorney and it’s given me some amazing opportunities, wonderful experiences, and an appreciation and love for this work. I live in Chicago and work at an exceptional law firm, Goldstein & McClintock, with some truly brilliant people. Feel free to contact me at any time with any issues, comments, concerns… frankly, after reading this far, I hope you take the time to at least let me know what you think about the blog and how I can make it a better resource.

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