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Former Mike's Carwash partner seeking $30M

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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.”
 

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  • In other words...
    "This is great! We can overpay rents when we need the operating company to be worth less, then we can reduce rents when we need the real estate company to be worth less. So we have really short arms around here..."

    Sincerely,
    Mike's
  • In other words...
    "Yes. We exploited our cousin, son of the the co-founder that made us wealthy beyond our dreams, and 30 year employee - but that's not a crime and it's his own fault. Why should we simply hand him his fair share if we don't have to?"

    Sincerely,
    The always clean, dry, and shiny top 25 places to work employer
    • Contract Law Issue
      It seems that the Shareholder Agreement that stockholders could not pledge stockholdings for collateral when seeking personal loans, set the tone for where this lawsuit is heading. I look forward to reading the court's decision, and to the appeal of the court's decision. This story is not going away any time soon.

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    1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

    2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

    3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

    4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

    5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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