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Litigation filed against shareholders of Rocky Mountain Chocolate Factory

Company seeks reimbursement for alleged fraudulent behavior
Rocky Mountain Chocolate Factory has filed a lawsuit against dissident shareholders, claiming the company was fraudulently induced into a cooperation agreement. (Tyler Brown/Durango Herald)

Rocky Mountain Chocolate Factory has filed a lawsuit accusing dissident shareholders of conspiring to fraudulently induce the company into a cooperation agreement.

The Durango-based chocolate company is seeking more than $1 million in reimbursement for expenses incurred during the period of alleged fraudulent activity. Rocky Mountain Chocolate Factory alleges that Bradley Radoff, who owns 9.9% of the company’s outstanding shares, AB Value’s Andrew Berger and Mary Bradley conspired to fraudulently induce the company into entering into a cooperation agreement on Aug. 13.

The agreement intended to settle the third contested proxy vote in four years between AB Value-Radoff Group and Rocky Mountain Chocolate Factory. The agreement specified that the company would expand its board of directors to seven members by appointing the AB Value-Radoff Group's nominee, Mary Bradley, following the annual stockholder meeting on Aug. 18.

The lawsuit alleges Mary Bradley had previously informed AB Value/Radoff Group that she did not want to serve on the board, making her ineligible for election. AB/Radoff failed to disclose this information to the stockholders and Rocky Mountain Chocolate Factory before reaching the cooperation agreement, the lawsuit says.

Suspicious of AB Value/Radoff Group’s conduct, Rocky Mountain Chocolate Factory repeatedly asked the group to confirm Mary Bradley’s nominee status.

“But the ABV-Radoff Group has dodged these straightforward inquiries. Likewise, the Company (through counsel) has asked (Mary) Bradley’s attorney if (Mary) Bradley would be willing to answer questions about her stated qualifications and her willingness to serve as a director, and her communications with the ABV-Radoff Group on these subjects. But she, too, has refused to answer Rocky Mountain’s questions,” the complaint said.

The complaint states that Rocky Mountain Chocolate Factory would have never entered the cooperation agreement with AB Value-Radoff Group knowing that Mary Bradley would not serve on the board.

Radoff released a statement on Sept. 29 denouncing the claims made against him in the lawsuit and accusing Rocky Mountain Chocolate Factory Board Chairman Jeff Geygan of trying to take control in substance of Rocky Mountain Chocolate Factory.

“I believe the Geygan-dominated Board’s decision to initiate what appears to be costly, desperate and baseless litigation against us is just the latest instance of Rocky Mountain’s directors abusing stockholders and disregarding the tenets of sound corporate governance,” Radoff said in a statement on Sept. 29.

Radoff later accused Geygan in the statement of using company funds to hire longtime advisers and consultants to surround himself with people who are favorable to him.

Jeff Geygan declined to comment on the accusations being made by Radoff. He said he wants to focus on ways the board can fix the business.

“I would say I think that the dissidents have made a number of false and misleading statements about every director on the board and they’ve also harmed the company’s reputation,” Geygan said.

tbrown@durangoherald.com



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