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Cousin wins minor damages in Mike's Carwash lawsuit

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A Hamilton County judge has ruled that a former co-owner of Mike’s Carwash Inc. receive just $140,000 in damages in a civil case that sought close to $30 million.

Judge William Hughes of Hamilton County Superior Court 3, in a decision released Thursday, ordered CEO Bill Dahm to pay $140,000 in punitive damages to his cousin Jerry Dahm. The judge ordered the payment because Bill Dahm had backdated two corporate documents. Hughes did not order the other defendant, Bill's brother Mike Dahm, to pay anything.

"Obviously, [the decision] is a complete success by Mike's Carwash and its owners, and the decision vindicates each of them from wrongdoing," attorney Michael Wukmer of Ice Miller, who represented Bill and Mike Dahm in the case, said in an email to IBJ.

Jerry, once a 35-percent owner and executive vice president of operations for Mike’s Carwash, had sued his cousins and business partners. He claimed his cousins fired him after 30 years in the business and forced him to sell his shares in the company in 2010 at an “unfairly low” value of $17.1 million.

Jerry Dahm was seeking an additional $3.3 million for his ownership in Mike’s, plus another $26.2 million from Bill and Mike Dahm for his share of Dahm Property,  which owned the car wash properties and leased them to Mike's Carwash.

Hughes, however, declined to order Bill and Mike to buy out Jerry's interest in the real estate, saying doing so "would be an unwarranted intrusion into Indiana's strongly pro-management business rule." In addition, he found most of Jerry's claims were unfounded. He said the brothers "had legitimate reasons for terminating Jerry Dahm."

Problems began in 2008, when Jerry sought an emergency distribution to cover back taxes, which Bill and Mike considered a sign of “out of control spending.”

Bill and Mike lost their trust in their cousin’s ability to help run the company, and in 2009 they began trying to buy out his shares. Negotiations broke down.

Jerry was fired in early 2010.

Per terms of a shareholder agreement, Bill and Mike acquired most of Jerry’s shares for $17.1 million, or 35 percent of the $49 million that the company was valued at as of 2008.

In his lawsuit filed in late 2010, Jerry sought an additional $3.3 million by arguing that his cousins pushed him out of the company and unfairly valued the shares they bought from him.

Jerry also disclosed in court documents that he wanted the court to force his cousins to buy out his stake in Dahm Property for $26.2 million.

Jerry’s attorney, Brent Taylor of Faegre Baker Daniels LLP, argued in written closing statements that Bill and Mike cut rent payments to Dahm Property, reducing the value of the company Jerry still partly owned.

“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.

Attempts to reach Taylor for comment Friday were unsuccessful.

While the court ruling did not force Bill and Mike to buy out Jerry’s shares in the real estate firm, Hughes did order Bill to pay punitive damages because he backdated two notices of nonrewal for car wash leases. The leases would automatically renew unless he provided the notification at least six months before the expiration date. The backdating made it appear he had complied with that requirement when he actually had not.

Hughes called Bill's action "at the very least reckless" and said he breached his fiduciary duty to Jerry Dahm, Mike Dahm and Dahm Property.

"The actual damages which resulted to [Dahm Property], and to Mike and Jerry Dahm were rectified shortly before trial, however, when the wrongfully terminated leases were reinstated and the lost rent was paid with interest.”

The trial, which Hughes heard without a jury, began March 12 and lasted nine days.
 

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