A former co-owner of Mike’s Carwash who claims his two cousins unfairly ousted him from the family business wants to sell them his stake in the chain’s real estate arm for more than $26 million.
The disclosure in a court filing is the latest revelation in a messy lawsuit brought by Jerry Dahm, a cousin of principals Bill and Mike Dahm. Jerry owned 35 percent of the company until May 2010.
Jerry is suing Bill and Mike in Hamilton Superior Court, claiming they fired him after 30 years with the company and forced him to sell his shares at an “unfairly low” valuation after Jerry sought to take out a bank loan using his stake in Mike’s as collateral.
As it stands, Jerry is set to receive payments totaling $17.1 million for his stake in the company.
But according to court documents, Jerry is seeking an additional $3.3 million for his ownership in Mike’s and another $26.2 million from Bill and Mike for his share of the company’s real estate.
Jerry still has a stake in Dahm Property LLC, which owns the real estate where the carwash chain conducts business. But he is seeking to sever ties with Bill and Mike altogether by asking Judge William Hughes to force the two to buy him out of the real estate arm.
The trial, which Hughes heard without a jury, began March 12 and lasted nine days. Attorneys for both sides submitted closing arguments to the judge in writing last Thursday. Hughes is not expected to rule on the case for several weeks.
Jerry Dahm’s lawyer, Brent Taylor of Faegre Baker Daniels LLP, declined to comment on his client’s buyout claim. He argued in his closing statement that the judge should force Bill and Mike Dahm to buy Jerry’s share of the real estate holdings because the two conspired to undervalue them by reducing the rents the carwashes paid.
“The rents were set above market level for a reason, and they were being reduced to market level for a sinister reason—to send Jerry a message that Bill and Mike could strip value from [Dahm] Property LLC and Jerry was powerless to stop it,” Taylor wrote.
The property arm has been reducing the rent it charges Mike’s as leases come up for renewal, effectively boosting the business value and depressing the property value.
Jerry’s suit against his two cousins called the rent reductions proof of a “manifest and severe conflict of interest,” while the principals in Mike’s said the reductions are simply a function of declining real estate values.
Mike’s has 37 locations in Indiana and Ohio.
“The proper remedy is one that awards Jerry the value of [Dahm] Property LLC undiminished by the effects of the tortuous plan to reduce the rents,” Taylor wrote.
Bill and Mike Dahm's attorney, Michael Wukmer of Ice Miller LLP, declined to comment on Jerry Dahm's request to force the two to buy his share of the real estate business. But in Wukmer's final court filing, he argued that there is no justification for his clients to buy him out, and that the value Jerry placed on the real estate is too high.
During the trial, Wukmer painted Jerry as a free spender who owed more than $1 million in taxes and whose own behavior caused his firing.
The trouble started in February 2009 when Jerry tried to take out a loan to cover “personal financial obligations” and sought permission from Bill and Mike to pledge his shares in the carwash chain as collateral. They said no, citing a ban on such encumbrances in a 1993 shareholder agreement.
Jerry’s suit alleges that Bill and Mike took advantage of Jerry’s financial difficulties to try to force a sale of his shares.
But Wukmer argued in his closing statement that Jerry produced little or no evidence to support his claim and that his clients followed the correct procedures in valuing the shares of the company.
“He wants to vilify Bill Dahm and Mike Dahm for his plight,” Wukmer wrote, “but the simple truth is that had it not been for Jerry Dahm’s high-lifestyle choices involving undisciplined spending, bad judgment, and ultimately illegal acts involving taxes, he would still be a shareholder in Mike’s Carwash.”