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Spotted Cow beer security fraud allegations dismissed by Court of Appeals

By: Steve Schuster, [email protected]//February 27, 2024//

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Spotted Cow beer security fraud allegations dismissed by Court of Appeals

By: Steve Schuster, [email protected]//February 27, 2024//

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Allegations of securities fraud against New Glarus Brewery – makers of Wisconsin’s famed Spotted Cow beer — have been dismissed by the Wisconsin Court of Appeals.

The original lawsuit claimed improper control over the business where profits were funneled via side projects, impeding gains from the brewery’s growth.

Affirming a Green County Circuit Court decision, the appellate court ruled the original court was correct in determining plaintiffs failed to state a claim in which relief could be granted.

“We conclude that the Circuit Court properly dismissed the complaint alleging claims of minority shareholder oppression and securities fraud for failure to state a claim for which relief may be granted,” The Wisconsin Court of Appeals wrote in a 40-page decision released Thursday.

According to court documents obtained by the Wisconsin Law Journal, Karin Eichhoff, Steven Speer and Roderick Runyan (collectively, “the plaintiff shareholders”) sued Deborah Carey and New Glarus Brewing Co. (“the Brewery”) alleging claims of minority shareholder oppression and securities fraud.

After the Circuit Court dismissed the plaintiff shareholders’ complaint, the plaintiff shareholders appealed, arguing that the complaint states claims for both minority shareholder oppression and securities fraud.

“We reject their arguments and, therefore, affirm,” the Court of Appeals said.

During an interview with the Wisconsin Law Journal on Tuesday, Carey, the co-founder and president of New Glarus Brewing Co., praised the appellate court and said she was relieved.

“I think this is exactly correct and what should have occurred. In my opinion, the lawsuit is harassment and has no merit. A lot of their accusations were false when they made them,” Carey said.

Carey said her relief is in good company.

“It’s a huge relief to the other investors, employee owners and myself,” Carey noted.

“We had a sale of the company looming or an extraordinary settlement just hanging over our heads until now,” she added.

According to Carey, for nearly three years, “Plaintiffs did not follow proper civil procedures of Wisconsin. They did not file a complaint with brewery, and they still have not shown any damages.”

“There is a lot of gaslighting,” Carey said.

“This has been a real education for me in how law works in Wisconsin,” Carey added.

According to court documents, in March 2022, the plaintiff shareholders commenced the action, alleging minority shareholder oppression under Wis. Stat. § 180.1430(2) (2021-22) and securities fraud claims under Wis. Stat. § 551.501(2) against Carey and the brewery.

The plaintiff shareholders sought an order requiring that:

Carey and the Brewery purchase the plaintiff shareholders’ shares at “fair value,” independent directors be appointed for the Brewery, all non-voting shares be reclassified as voting shares and Carey and the Brewery pay damages and attorney fees.

Ultimately, the appellate court denied said order.

Reply brief

In the plaintiff shareholders’ reply brief, it was argued that, by filing a separate brief and joining the other’s brief, Carey and the Brewery have each violated Wis. Stat. Rule 809.19(5)(b), which provides, “In appeals involving more than one respondent … each respondent may file a separate brief or a joint brief with another respondent.”

Rule violation?

The plaintiff shareholders further argued Carey and the Brewery have, by incorporating each other’s brief, violated this rule and improperly exceeded the word limits in Rule 809.19(8)(c).

The Court of Appeals acknowledged Carey and the Brewery’s dividing up the issues “may present a challenge to fully addressing all issues in the reply brief while staying within the word limit. However, the plaintiff shareholders could have moved but did not move for an enlargement of that limit.”

Oppressive Action?

The appellate court said, “To show that the director(s) acted oppressively, a shareholder must show injury resulting from the complained-of action that was primarily inflicted on the shareholder, not the corporation.”

The Court of Appeals further said, “As we explain, these allegations fail to state a minority shareholder oppression claim because the plaintiff shareholders were put on notice when they first invested in the Brewery that no dividends would be paid to any shareholder except as authorized by the Board of Directors, and that the Brewery would, at most, try to make distributions to all shareholders sufficient to satisfy their tax obligations.”


According to court documents, plaintiffs’ complaint alleges “Carey and the Brewery withheld and misrepresented information,” regarding the Brewery and Defendants’ intent with respect to Brewery matters.

The Appeals Court said, “the complaint’s allegations about Carey’s autocratic control fail to state a claim of minority shareholder oppression.”

Bonuses and hiring

Plaintiffs’ complaint also alleged the Brewery paid bonuses to Carey and her husband, and in 2008 Carey authorized a $170,000 loan to herself and her husband that was subsequently paid back. The complaint also noted Carey has employed her daughter as the Brewery’s staff architect.

In response the Court of Appeals said, “Not only does the complaint fail to allege excessive compensation to Carey and her family employees, but the plaintiff shareholders fail to cite legal authority supporting the proposition that such conduct, even if alleged, states a minority shareholder oppression claim.”


According to court documents, the complaint also alleges “Carey unilaterally established the Sugar River Distillery, used Brewery assets and resources for the benefit of the distillery, and allowed Carey and her family to take ownership of the distillery when Carey had a conflict of interest.”

In response, the appellate court said, “these allegations fail to state a claim of minority shareholder oppression.”

Non-profit foundation

Regarding plaintiffs’ allegations “Carey unilaterally caused the Brewery to use its staff and other resources to pursue her own personal interest in forming a charitable nonprofit foundation,” the Court of Appels noted. “… The complaint does not allege that the plaintiff shareholders are required to donate shares to the foundation. Nor does the complaint allege that the Brewery’s donations have prevented or will prevent the Brewery from making distributions sufficient to cover the plaintiff shareholders’ tax payments. That the donations complicate any shareholder’s personal taxes is not oppression as defined in the case law cited above.”

The Wisconsin Law Journal also reached out of plaintiffs on Tuesday. Comments were not available prior to publication.


When asked by the Wisconsin Law Journal why Spotted Cow doesn’t expand sales into Minnesota or Illinois, Carey explained it would actually be a losing proposition from a profit perspective.

During an interview with the Wisconsin Law Journal, Carey said she is proud that Spotted Cow beer is only available for legal sale in Wisconsin.

“Distribution is vanity and profit is sanity,” Carey said, noting when companies like hers focus on profit, “it becomes clear and simple.”

According to Carey, taking on more states increases costs and lowers profits.

“Size is a guy thing, everyone want to be the biggest,” Carey said, noting “you can brag you sold X amount of beer in every state, but the fact of the matter is I know you’re now paying employees and suppliers much more. It becomes a game of ego,” she said.

“I have a very profitable business with small footprint and I have direct relationships with customers. I think the real question is why is everyone else trying to be so big?” she asked.


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