The Sheehan family civil lawsuit continues to play out in Massachusetts’ Suffolk Superior Court.
In the latest development, the defendants, Gerald “Jerry” and Maureen Sheehan, along with several of the family businesses, have asked the court to dismiss all counts against them, according to a February 18 filing that hit the docket earlier this month.
The lawsuit — filed in December 2020 by Tim Sheehan and George L. Cushing, a trustee representing trusts for Tim and his brother John Sheehan (who is not personally a plaintiff in the case) — alleges Gerald and Maureen, the patriarch and matriarch of the Sheehan family, misappropriated company funds and violated their fiduciary duties.
The lawsuit names several defendants in addition to Gerald and Maureen Sheehan: Margaret Sheehan, one of the eight siblings, in her capacity as director of several Sheehan Family Companies; Charles E. Clapp III, in his capacity as trustee for Margaret and Susan Sheehan and sibling Anne Landers; and L. Knife & Son, Inc., the company’s flagship distributor.
As the court ponders dismissal of the case, Gerald and Maureen Sheehan and their co-defendants have asked the court to stay discovery proceedings. Additionally, they say a “Special Litigation Committee” was appointed on February 15 by Sheehan Family Companies’ (SFC) flagship distributorship, L. Knife & Son, as well as other distributorships to investigate some of the claims brought in the lawsuit. (SFC is made up of 19 beer wholesalers, serving 13 states and Washington, D.C.)
In court documents, the defendants argue that the “independent and autonomous” Special Litigation Committee has been given the power to investigate the claims and take appropriate action.
Additionally, Gerald Sheehan and the co-defendants argue that the plaintiffs don’t differentiate derivative claims from direct ones.
However, Tim Sheehan and the trustee have filed a motion in opposition to the stay and requested a hearing. They argue that Gerald Sheehan and the co-defendants “dragged out a mediation of this dispute for three years to avoid addressing” their claims and “now seek to stall the litigation indefinitely.” They add that the Special Litigation Committee’s investigation won’t “resolve a substantial portion” of their claims or narrow discovery.
Another filing on May 20 said the defendants conferred with Tim Sheehan’s counsel on April 27, via phone, in an attempt to resolve the case, however, they “were unable to narrow or resolve the issues.”
These are some of the latest developments in the case with neither side holding much back and echoing earlier filings and public statements.
In a 62-page motion to dismiss, Gerald Sheehan and his co-defendants recall being served the complaint “during Christmas week” and say “the plaintiff sons (Tim and John Sheehan) assert that the substantial fortunes that their parents have already gifted to them are insufficient and that they are entitled to more.”
The defendants push back on claims surrounding the parents’ salaries, artwork and charitable giving, as well as the so-called “60-40 companies,” in which Gerald Sheehan reallocated equity to Tim, John and Chris to twice the equity of the other five siblings because they took on active roles in company operations.
Five of Sheehan Family Companies’ largest subsidiaries by revenue are set up as 60/40 companies, including Liverpool, New York-based T.J. Sheehan Distributors, Inc. (TJSD); Westmoreland, New York-based Tri-Valley Beverage, Inc.; New Berlin, Wisconsin-based Beechwood Distributors, Inc.; New York City-based UB Distributors, LLC; and New Paltz, New York-based Craft Beer Guild Distributing of New York, LLC, all of which are named as nominal defendants in the case.
The Sheehan patriarch argues that the plaintiff sons want to shift value from the equally owned entities to themselves.
“Despite this favorable treatment, the plaintiff sons now complain not that they are being frozen out of the family business, for their allegations make clear their ownership interests remain intact, but that they should be given more,” the motion to dismiss reads. “Their 92-page complaint boils down to laments that their father used his control to have the companies donate to charitable causes, to pay himself for running the companies, and to centralize certain management functions so all the companies could save money through operating and purchasing synergies.”
In a 62-page response, Tim Sheehan and the trustee argue that the lawsuit was brought “to stop Gerald Sheehan and his enablers from abusing their control of Sheehan Family Companies and unjustly enrich themselves at the expense of Tim, John, and their other siblings who actually own the companies.”
“Gerald’s total control of the SFCs and the willingness of his cohorts to go along with his wrongdoing have rendered the governance of the SFCs fundamentally broken,” the response says. “Through this case, Plaintiffs seek to replace that broken system with one that serves the interests of the shareholders and the SFCs.”
The plaintiffs argue Gerald Sheehan has “abused his control to drain the 60/40 companies of tens of millions of dollars and deny them valuable corporate opportunities,” the response says. They go on to argue that the money funneled from the 60/40 companies has gone to “self-enrichment and partly to shift wealth from Tim and John (and Chris) to their other siblings, and thereby ‘level the stacks’ among them.”
As for mother Maureen Sheehan, the plaintiffs say she was paid “hundreds of thousands of dollars in a bogus salary and benefits each year even though she does no work for the companies at all.”
The lawsuit seeks a jury trial, along with 19 prayers for relief, including unspecified damages, the reinstatement of Tim Sheehan as equity agreement manager of L. Knife, and an extension of the 60/40 agreement to acquisitions made outside of Massachusetts, among other requests.