Source: https://westfaironline.com/
By Justin McGown
Stamford-headquartered Deutsch Family Wine & Spirits (DFSW) andits associated constellation of companies have collected an impressive portfolio of wine and liquor brands over the course of more than 40 years, including the popular Josh Cellars brand of Californian wines, the Yellow Tail label from Australia and several brands of whiskey, vodka and gin.
However, an ongoing lawsuit winding its way through the courts indicates the presence of friction between the company’s president, Tom Steffanci, and the father and son team of William and Peter Deutsch who founded the company. In the latest filings made on Feb. 24, Steffanci complained that the defendants have intentionally avoided handing over critical documents during discovery and argued that if the defendants successfully seal some previously submitted documents that some of his filings should also be sealed.
In the lawsuit, initially filed in March 2020, Steffanci claimed he was granted the opportunity to purchase a 20% ownership interest in the holding entity DFG Trademarks V LLC. Steffanci accepted and bought into the company, which holds the trademarks for Josh Cellars and Joseph Carr, two of the Deutsch Family Group’s most profitable brands. Steffanci claimed that as a shareholder he was entitled to royalty obligations, but that the Deutsches committed a breach of contract by withholding those royalties and subtracting their value from his end-of-year bonus.
Steffanci stated that in 2014 a principal from the company accounting firm informed him “in a perfunctory manner that, for estate planning purposes, Greene and Peter Deutsch were paying out certain distributions from the LLC to which Steffanci was not entitled.”
Allegedly, this was done to avoid tax consequences, and Steffanci initially agreed to the arrangement. After several years those payouts exceeded the worth of the performance bonus he typically received, at which point Steffanci claimed he reviewed the documents pertaining to his ownership stake and discovered that he was entitled to all previous distributions in full as a partial owner, as well as his compensation as an employee of the company.
Steffanci also sought damages in the amount of $255,646 in the initial filing alongside attorney’s fees and other expenses.
Steffanci obtained a series of depositions of individuals familiar with the workings of Deutsch Family Wines and Spirits.
Andrew Crisses, Shelly Stein and Jim Mello, members of the DFSW board, were subpoenaed to provide depositions because Steffanci insisted they have documents and knowledge vital to the case. Additionally, William Greene of William Greene & Co. was deposed – he is a member of the DFSW advisory board and the principal of the company’s accounting firm. Steffanci said Greene was the one who misled him about the terms of the royalty payments.
Outer Cape Holdings LLC was also part of the deposition process. Steffanci claimed to own half of this company through his ownership stake in DFG Trademarks V, which owns half of the LLC. Through Outer Cape Holdings, Steffanci said he is entitled to 10% of all royalties from the Joseph Carr and Josh Cellars wine brands. Juelsco LLC, an entity owned by Peter Deutsch that is alleged to own the other 50% of Outer Cape Holdings, was also subpoenaed for deposition.
Steffanci charged that some of these entities received royalty payments, which he had been misled into assuming would be offset by lowered payouts elsewhere.
A number of discovery disputes emerged shortly after the start of the suit and continued through most of 2021. A half-dozen documents were sealed by the end of January 2022, with adjudication of complex litigation ongoing for several other documents, most pertaining to the structure of the business.
Steffanci’s attorneys unsuccessfully claimed in replies to the motions to seal that all of these documents are necessary to establish the facts of the case while the Deutsch Family Group and other parties involved claim they contain privileged information about the operation of the company.
Despite the ongoing lawsuit, Steffanci had only good things to say about the state of the Deutsch Family Group’s business in a two-part interview with the spirits trade journal Shanken News published in late January. But between the publication of the first and second half of the interview, Steffanci filed a motion to seal documents submitted by his attorneys as evidence in the case.
The Deutsch Family Group did not respond to a request for comment.