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by Cyril Penn | August 27, 2014 | 7:00 PM

It’s not a he-said-she-said situation,” Thornhill said. “I haven’t said anything to you that I can’t show you on a contract or a document, or on the operating agreement or in an email.”

--Tom Thornhill

Tom Thornhill III, CEO, and owner of Mendocino Wine Company, contacted me late today about my post on Mendocino Wine Company settling its litigation with Paul Dolan. The post was based on a conversation with Dolan, one of the leading figures in the California wine industry.

Thornhill said I wrote a one-sided piece.

Dolan filed suit over the value of his stake in the Mendocino Wine Company in March 2012 before the company filed a cross-complaint.

Thornhill asked rhetorically why Dolan received no compensation and walked away from the Paul Dolan brand if he had such a great case before getting into some details, adding, “We agreed to drop our case against him for breach of fiduciary duty and fraud.”

Then he addressed some of the details in the post:

It inaccurately reported that Dolan “left the company four years ago” while Thornhill pointed out: Dolan “was terminated for cause on January 20, 2012.”

It said Dolan entered into a partnership with MWC in 2004, though Thornhill clarified details: Dolan was an employee of an LLC and owned units, initially a 10 percent stake, later 30 percent when some capital retired. He said the company tendered units as required after the termination and that Dolan didn’t like the valuation.

Thornhill recounted how Dolan’s termination arose:

“We discovered Paul was sending by email, our financials, cost structure and marketing plans to his other business associates who we did not know he was actively involved with. He was out buying fruit for Truett Hurst, when he should have been buying fruit for us. He was working on designs for Truett Hurst. He had meetings with Safeway and Whole Foods for Truett Hurst when he was supposed to be president of Mendocino Wine Group. That is a gross breach of fiduciary duty.”

Thornhill took issue with a sentence in my post that read, “Dolan, a 40-year veteran, said it was well known that he was involved in other businesses,” calling it half true, because two businesses Dolan had been involved in were carved out in his employment contract: Sauvignon Republic, which later dissolved, and Premium Wine Storage, managed by Heath Dolan, Paul’s son.

“He went off and did Truett Hurst without telling us and never disclosed it until it showed up in 2011 in a Press Democrat report,” Thornhill said. “Then he lied to us and told us he was a passive investor – that he wasn’t really involved, that it was Heath’s company.”

Thornhill said during the holiday season of 2011-2012, the company accidentally discovered Dolan was emailing financial reports, marketing and sales numbers and inventory to other partners in Truett Hurst and to others. He said the company later determined Dolan was buying fruit for Truett Hurst, introducing them to customers, meeting with customers and was offering to meet with customers to sell their product.

“That’s the cause. That’s not a question,” Thornhill said. “He never fought that issue. He never contested the termination.

Another issue: My post mentions vineyards, including Lover’s Lane. Thornhill said that when the vineyard was offered for sale, Dolan as president advised against MWC buying it but at the same time pursued it privately for his son and brother, and that they bought it.

“We never would have gotten into any of this if he hadn’t sued us,” Thornhill said. “We never would have done discovery to go back through his email. It never would have happened. We didn’t know about most of this until he sued us and we had to go figure out what was really going on.”

“We have 90,000 documents and emails of what he was doing back to 2005 and 2006,” Thornhill said. This was not a joke, and it was not a small deal. We agreed to settle this, because, I agree, it was time to move on.”

“I think what happened was he really began to realize his liability for breach of fiduciary duty and fraud, which were real, were something he didn’t want to face,” Thornhill continued. “He offered to us he would walk away from all his units and quit fighting about the brand name if we would drop our counter claims against him, which we agreed to do. But we didn’t pick this fight.”

“It’s not a he-said-she-said situation,” Thornhill said. “I haven’t said anything to you that I can’t show you on a contract or a document, or on the operating agreement or in an email.”

 

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