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Mike's Carwash ownership trial gets under way

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A trial to determine the proper value of Mike’s Carwash Inc. and how much a former co-owner should have been paid for his share in the local company started Monday morning in Hamilton Superior Court.

The privately held business and principals Bill and Mike Dahm, sons of company founder Joe Dahm, are defendants in the lawsuit brought by Jerry Dahm, a cousin who owned 35 percent of the company until May 2010.

Jerry claims Bill and Mike 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. Bill and Mike are now the only shareholders.

But an attorney for Bill and Mike painted Jerry as a free spender who owed more than $1 million in taxes and whose own behavior caused his firing.

The profitable and fast-growing business with 37 locations in Indiana and Ohio is valued at $49 million, according to company appraisals.

Jerry, who lives near Fort Wayne, where Mike’s was founded in 1948, is asking for an independent appraisal of the value, along with a lump-sum buyout offer, damages and attorney's fees.

Jerry Dahm’s attorney, Brent Taylor of Faegre Baker & Daniels LLP, likened Bill and Mike's strategy of removing Jerry from the company to a chess game that was played “secretly, dishonestly and unfairly.”

“The chess game started with some personal mistakes by Jerry,” he said “But Jerry’s big mistake was asking his cousins to cooperate as he dealt with this difficult business decision.”
 
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.

The suit alleges that Bill and Mike took advantage of Jerry’s financial difficulties to try to force a sale of his shares.

As it stands, Jerry is set to receive payments totaling $17.1 million for his stake in Mike’s. Of his 210 shares, 128 went to Bill, 80 went to Mike, and two went back to the company. Bill now owns 368 shares and Mike owns 230.

Michael Wukmer of Ice Miller LLP, attorney for Mike and Bill, argued that the valuation of the company is fair and that 2008, the year in which the valuation was based, was difficult on the company because of the souring economy.

“When the economy goes south,” he said, “people don’t need to wash their cars, or they don’t need to wash them as often.”

Wukmer also argued that Jerry’s behavior and spending habits made it impossible for him to remain with Mike’s. The brothers offered to buy Jerry’s shares to pay his $1.5 million Internal Revenue Service debt, and he declined, triggering his termination.

Negotiations toward a potential sale of Jerry’s shares broke down in late 2009. Jerry was fired from Mike’s in early 2010 after refusing to sign what the suit describes as an “overbroad unnecessary confidentiality agreement” relating to the potential sale of his shares.
 
“He’s a big spender,” Wukmer said of Jerry. “He loves to travel; he loves to gamble; he loves to drink fine wine.”

The termination triggered a clause in the shareholder agreement that allows remaining shareholders to buy out a fired shareholder at fair-market value. Jerry did not attend the purported closing, and Bill and Mike had to set up a bank account on his behalf to receive the funds, court documents said.

Jerry still owns a stake in Dahm Property LLC, which owns the real estate where the carwash chain conducts business.

The real estate holdings, which were appraised at $24 million, are part of the dispute as well. 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.

The suit calls the rent reductions proof of a “manifest and severe conflict of interest,” while the principals in Mike’s say the reductions are simply a function of declining real estate values.

The trial, which is being heard by Judge William Hughes without a jury, is expected to last seven days.




 

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  • On a scale from 1 to 10
    I don't really care how he spent his money nor how one owner acted towards employees versus another. This really comes down to business valuation. First, if it was a company valuation I would want an independent party to do it. Secondly, as an individual with some knowledge of their business and some valuation experence, I believe the $49 million is a low number. Should be more like $70-75 million. I'm interested to see how it ends up.
  • Family Business?
    If a man spends his life working hard and dedicated to a business, especially a family business, he deserves his fair share. Shame on a company that publicly accepts accolades for its commitment to community and employees, while privately appears to play shell games for the benefit of a few. After how the two are treating their cousin, Jerry, is Mike's really a "family business"? This kind of dirt doesn't wash away in an Express Wash.
  • taking advantage
    As a former employee also I agree with JH- Jerry was a great guy to work for and to me was "most real" and honest of the owners. The other two seemed to care about their image and their profits a lot more. Looks like from this story at least the part about caring about their own profits more was accurate. To me they all had more money than they needed, but at least Jerry seemed to care about us. It a shame people take advantage of others in this world just to make an extra dollar or two when you don't need it.
  • Gordon Gekko reborn?
    Ha ha good comment Gary. Reminds me of Gordon Gekko in Wall Street with his comment of "Greed is Good". Of course he went to jail for that but it looks like all Bill and Mike Dahm may do for their scheme is enrich themselves more. If they'll stick it to someone this close to them when they get the chance, I'd hate to be a customer in a dispute...especially with all the money they're making off the cost of a book! Hey guys now that your making even more money how about a break in the price of that wash??!!
  • Greed
    I think you're way off base on this. If you read the article and think about things it doesn't have anything to do with the fact that Jerry owed a lot of money to the IRS-that just means Mike's Car Wash made and makes a bunch. It's clear this is all about the greed of Bill and Mike Dahm. How about the fact that your relative and co-owner who for 30 years helped build the business value comes and asks you for "cooperation" and you react by saying I don't have to but thank you very much I'll take advantage of your problems. Sounds like "kick em while they're down" to me. If this is how they treat their cousins and business partners, I'm glad I don't work there. Did they give anyone pay raises for all that money they made for buying low?
    • Message to JH
      Jerry might be the out-going, "Everyone likes Jerry" individual, but he created his debt mess himself, not the employees or the owners of Mike's Carwash. When selling stock in a privately held family business, he has a real problem, in that the Seller & Buyers are limited by contractual obligations set forth long ago. Sadly, Jerry made a big mistake and his lawyers are getting a hug piece of the action after the court settlement. Valuation is not the issue, this is a contract law issue, with privately held stock and a family business based on two or three key employees.
    • Comes Down To Valuation
      The facts in this case are quite simple, when attempting to cover debt obligations with the sale of assets, the only people winning are those buying the assets in question. Forget about stock in a family held business and think about a house worth $10 Million Dollars. If Jerry owed the IRS well over $1 Million Dollars, the IRS would place a lean on the house in question, not the stock in a privately held business. A government sale of the property would be aimed at covering tax debt obligations, and in the down market of 2010, I am guessing that Jerry would have experienced a 30% depreciation of the asset. Stock in a privately held company creates a totally different scenario. The company records will clearly show a downturn in the economy, so the evaluation of the company's stock would be lower than peak times. Business valuations for a niche business such as Mike's Carwash are always low, based on external factors, such as we currently are experiencing. Jerry should take the offer on the table and walk away, because his attorney fees are going to take a large percentage of the final agreed price.
    • money
      all that money, and he still didn't have enough. Foolish!!!
    • so sad
      So Jerry was forced to sell his shares in the company at a time when the market was down because he was in debt to the IRS. Under those circumstances he should be expected to take a loss. I'm assuming he chose to sign off on the deal in 2010 because the penalty for not paying the IRS was worse than what his family offered in order to liquidate his shares.
    • Sounds like a Mess.
      Sounds like a mess.
    • Really?....
      We are talking about millions of dollars. I am sure they will get back whatever they need from their property company or by opening another carwash. I believe the 2 still with the company need to take etiquette classes. Jerry was always the nice, outgoing one concerned about the workers and not just the profit. Take it from a former carwasher...

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