Court sides with Tate in Balcones legal battle

As an internal battle at Texan distillery Balcones continues, a judge has ruled that the board’s decision to suspend founding president Chip Tate from the company was invalid.

A Texas judge has sided with Chip Tate in the latest legal battle between the Balcones founder and his board of directors

As reported by the Waco Tribune last week, Judge Jim Meyer sided with Tate in a recent hearing, ruling that the distiller must now be present at all Balcones board meetings and authorise the company’s on-going expansion plans.

The ruling comes as both the board and Tate requested the court to clarify the company’s operating agreement.

In August this year, the board of took out a restraining order against Tate, preventing him from entering the distillery or speaking with distillery workers and the media.

He was also found in contempt of court in early October for failing to return a computer and phone to the company as required.

Since the order was relaxed last month, Tate told The Spirits Business his predictions of the financial costs of the distillery’s on-going expansion and personal clashes with investors led to the board offering to buy his remaining stake in the firm, which he refused.

However, the board then accused Tate of trying to derail Balcones’ expansion through his “unconscionable and reprehensible” behaviour, a claim Tate strongly denies. Instead, he insists the board tried to make his work “extremely difficult” in a bid to acquire “universal control” over the distillery.

Jeff Armstrong, attorney for the Balcones board, said that Judge Meyer’s decision to side with Tate means that the company “cannot act and has no ability to fund its expansion”.

Balcones recently said its expansion – which will see the 1923 Texas Fireproof Storage building turned into a US$15 million distillery – was progressing.

At the same time, the board said it had now entered into mediation with Tate as part of an attempt to resolve the ongoing dispute.

One party “must leave”

Speaking to The Spirits Business last month, Tate said relation had become so strained that either himself or PE Investors – the main shareholder in Balcones and dominant presence of the board led by Greg Allen – would need to resign.

“The most immediate effect of the judge’s ruling means that all the board actions that have taken place in August, September and October are all invalid because Chip didn’t participate in any of them,” Tate’s attorney David Clouston told the Tribune.

“The long-term effect is we are still trying to figure this all out because, at the end of the day, it is becoming clear that one of these people (Tate or Allen) has to go.”

Tate and his second round investor Michael Rockafellow, initially brought Allen on board through his Oklahoma-based equity firm PE Investors LLC in February 2013 in a bid to increase capacity. Tate’s share in the business reduced to 27% and the equity group became the largest shareholder with 58%.