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The agreement also contained a phantom equity clause, according to the suit, that meant "in the event the Colt 45 brand were sold before January 2016, Mr. Broadus would be entitled to 10 percent of the price realized by the stockholders of Pabst in connection with the sale. The only exception to this is if the Colt 45 brand were sold to a subsidiary or affiliate of Pabst, or were sold in connection with a stock purchase/exchange among existing stockholders."
In the fall of 2014, Pabst was sold to Blue Ribbon Intermediate Holdings, a joint venture of Eugene Kashper and a private equity firm, for a reported $700 million, according to the complaint. Weingarten argues that triggered the phantom equity clause, but Snoop was never paid his share of the sale.
Pabst's attorney Richard B. Kendall in July filed a demurrer to the complaint, arguing that Pabst didn’t sell anything.
“The result of the Transaction was merely that the stock ownership in Holdings (PBC's parent company) changed hands, but the stock ownership in PBC was unaffected and PBC's brands were unaffected,” Kendall wrote.
Wednesday Judge Malcom H. Mackey overruled the demurrer and also denied Kendall's motion to stay or dismiss that would have allowed proceedings to move to Illinois.
“Plaintiffs have alleged all of the elements necessary to sustain a cause of action for breach of contract regarding the Consulting Agreement. Under Illinois law, the sale of an entire company necessarily includes a sale of its assets,” Mackey wrote in his tentative opinion. “Pabst takes the self-serving position that a sale of the entire Pabst company is not a sale of the Colt 45 brand family, and therefore Broadus is not owed anything.”
“We are thrilled that the Court saw through PBR’s rhetoric and followed the law," Weingarten said. "PBR desperately wants to keep this case away from a Los Angeles jury, presumably because they know that they are going to be held accountable for their conduct."
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Kendall said he isn't discouraged by Mackey's decision.
“The Court decided that since Snoop’s counsel did not attach to their complaint the written agreement that absolutely disproves Snoop’s allegations, the court would await the expected summary judgment hearing before taking notice of that agreement," he said. "We are confident that once that agreement – which proves that Pabst still owns the Colt 45 brands and thus owes no payment to Snoop – is received in evidence, the case will be over.”
In addition to the issues in the lawsuit, Weingarten said Pabst has another problem. Kendall Brill & Kelly LLP partner Bert Deixler, who is on this case, used to represent Snoop.
“There is a clear and unequivocal conflict of interest here," Weingarten said. "Lawyers owe a duty of fidelity to their clients. That means that you cannot represent a client one day and they represent his adversary the next."
Weingarten in January sent a letter to the firm demanding it recuse itself.
“As part of his representation of Mr. Broadus, Mr. Deixler presumptively gained insight into Mr. Broadus’s negotiation tactics in entering into an entertainment industry contract and strategy for litigating the breach of such a contract,” Weingarten wrote in the letter. “All of these confidences are substantially related to Mr. Broadus’s position in this litigation, also involving the breach of an entertainment industry contract.”
Kendall said Deixler's past work isn't a conflict.
“Bert Deixler represented Snoop years ago when Snoop was under different management and Bert worked at his previous law firm," he said. "Bert’s prior representation of Snoop had nothing whatsoever to do with the current dispute or anything even remotely related to it. We are well satisfied that no conflict exists.”
To add more drama to the case, Weingarten says an email from Pabst General Counsel Jim Vieceli to Thomas P. Conaghan of McDermott Will & Emery, who represented Kashper in the alleged purchase of Pabst, is "the definition of a smoking gun."
In the email dated Oct. 1, 2014 Vieceli writes: "In our final negotiations of the SPA, I'm sure you'll recall that we have 2 indemnities related to the Snoop contract and Colt 45. One of those relates to a potential brand sale of Colt 45. If possible, we would like to amend the SPA to provide that the Colt 45 brand or brand family would not be sold by the buyer prior to March 31, 2016. This would get us outside the window of time in which a brand sale could trigger a payment to Snoop. It was an oversight on our part to not request this at the time."
This email "proves that PBR intentionally sought to structure its deal so as to avoid having to pay Mr. Broadus," Weingarten said. "This is not some innocent mistake, it is a willful and malicious act.”
Kendall could not immediately be reached for comment on Vieceli's email.
The trial is scheduled to begin Oct. 31 in Los Angeles.
This article originally appeared in THR.com.