Former members of the Burnett Dairy Cooperative have filed a civil lawsuit against the co-op, citing violation of due process when terminating their membership.
The suit was filed in Burnett County with the clerk of courts office in December. The 89-page complaint outlines alleged violations and other acts by cooperative chief executive officer (CEO) Dan Dowling and the co-op’s board of directors. Dowling, along with the Burnett Dairy Cooperative and all seven members of the co-op’s board were named as defendants in the case.
Four Cubs Farm, LLC, along with Four Cubs CEO Gary Peterson and Nicki Peterson, who is married to Four Cubs chief operating officer (COO) Ben Peterson, are named as plaintiffs in the case.
The plaintiffs are seeking damages of at least $50,000 and a judgement saying the Four Cubs termination from the cooperative is invalid.
The suit alleges Four Cubs Farm had their memberships terminated without evidence and without due process.
It outlines nine counts including: Breach of contract, breach of implied duty of good faith and fair dealing and breach of fiduciary duties. The other counts involve an alleged agreement between Dowling and Nicki Peterson.
In October, Four Cubs and other cooperative members sent a notice to review the cooperative’s financial records.
Four Cubs and other co-op members learned about a potential purchase of a bankrupt brewery in New York state after an article was published outlining the proposed sale in September.
Dowling owned a beef farm, “located directly across the street” from Empire Farmstead and allegedly did not inform the board he owned the beef farm and planned to spend a majority of his time in New York.
The complaint also alleges there was a deal in place where the brewery’s spent grain went to the beef farm and in return 95% of the farm’s beef went to the brewery.
The article continued to spread on social media and later that month the co-op sent a letter to its members saying the co-op had entered into a preliminary Asset Purchase Agreement (APA) with the brewery, however, the letter did not disclose the amount the co-op was set to purchase the brewery for, which was $3.25 million.
According to an article on Syracuse.com, the co-op was outbid for the brewery by Feldmeier Equipment Co., a company based in Dewitt, N.Y., at a bankruptcy auction in October 2019. Their bid was for $3.44 million.
The complaint alleges, “Cooperative members were shocked and concerned that the Cooperative planned to invest $3.25 million in a bankrupt New York brewery.”
“Four Cubs, along with 12 other Cooperative members, sent the Cooperative a notice and Demand to Inspect Financial Books and Records, pursuant to Wis. Stat. § 185.47,” the complaint states. It goes on to outline five reasons for inspecting the records.
Four Cubs wanted to ensure the cooperative’s board of directors and officers were complying with their fiduciary and statutory duties owed to the cooperative and its members.
Very little information was disclosed about purchasing the bankrupt brewery.
The cooperative did not seek adequate input from cooperative members before entering the $3.25 million APA.
Dowling did not advise the cooperative members or the board he had a material conflict of interest and the potential for improper personal benefit due to his ownership of the wagyu beef farm, directly across the street from Empire; and
Dowling was wasting cooperative assets by using cooperative money to fund his improper workplace relationships.
In response to the Dairy Cooperative severing memberships of cooperative members, the dairy stated three reasons why the memberships were terminated, in an email exchange between the two party’s lawyers from November 2019.
“The Terminated Members have engaged in the following conduct detrimental to the Coop:
Maliciously defaming to Coop members and non-members the Coop, its board, and officers by making false statements about them that resulted in reputational damages;
Intentionally interfering with the bidding process of New York acquisition by contacting the Seller and disclosing the Coop’s bid strategy and threatening to enjoin the Coop from completing the acquisition; and
Disclosing confidential information about the Coop’s executive compensation program.”
The plaintiffs argue against all three points and allege the members were terminated without a “reasonable basis, based on personal animus held by the Board and Dowling, and in retaliation for Four Cubs exercising its statutory right, as a member of the Cooperative, to inspect the Cooperative’s records to ensure that the Board, Dowling and others were complying with fiduciary and statutory obligations owed to the Cooperative and its members.”
Since the termination of their membership Four Cubs has been forced to ship its milk to an alternative facility located about 65 miles farther than the cooperative.
“The additional shipping costs and expenses incurred by Four Cubs as a result of the Defendants’ improper and illegal actions have cause, and will continue to cause, damages in excess of $180,000 per year.”
Of the nine counts against the defendants, a number revolve around an alleged deal between Dowling and Nicki Peterson after she quit her job working for the cooperative’s marketing department. She quit in November 2016, but would continue to receive work for a new marketing company she recently started.
Other allegations in the complaint involve relationships Dowling had with female employees, including Nicki Peterson.
Bill Haase, who is named as a defendant in the lawsuit, is chairman on the Burnett Dairy Cooperative board of directors. He released a statement regarding the lawsuit filed in circuit court.
“The lawsuit in question was filed by a former cooperative member who was terminated in early November for conduct that interfered with the business. Unfortunately, this former member has chosen to not only pursue unfounded legal actions relating to their terminated membership, but they also have chosen to make additional, sensational and unsubstantiated allegations. These efforts are meant to discredit the Board of Directors and management of the Cooperative and to distract people away from the facts of what ultimately lead to the membership termination in the first place. Due to this, the cooperative has already filed a legal motion to dismiss the lawsuit. We will present an aggressive and forceful defense based on both the facts and law, and we are optimistic that the court will rule in our favor after all the evidenced is presented.”
According to online court records, plaintiffs in the case before the new year filed a jury demand for a six person jury and paid the fee that comes with the demand. There is no timetable set for when a jury trial may begin.