Baltimore Judge Allows Tessemae’s Racketeering and Fraud Claims to Proceed in Lawsuit
A federal judge in Baltimore has denied a motion to dismiss fraud and racketeering counts in a lawsuit filed by dressing and condiment maker Tessemae’s against a group of former advisors and board members.
The lawsuit, filed last June, alleges the defendants had attempted to steal the Tessemae’s business. United States District Court Judge George L. Russell, III threw out charges of unjust enrichment, civil conspiracy and tortious interference as well as a request to remove several of the defendants as members of the company, but the core counts of racketeering and fraud remain.
Tessemae’s CEO Greg Vetter said in a press release today that the company is “pleased with the court’s decision to deny the defendants’ Motion to Dismiss.”
Defendants in the case are Washington, D.C.-based Tandem Legal Group and the Tandem Growth Group, and Michael McDevitt, the non-lawyer owner and CEO of the two companies, as well as his business associates Brendan Connors, Herman Dunst, Paul Intlekofer and Alex Chehansky. Tessemae’s filed the 12-count lawsuit, which includes counts of fraud, racketeering, negligence through legal malpractice and breach of fiduciary duty, in June 2020, claiming a loss of approximately $45 million. The company is seeking a declaratory judgment, unspecified damage, injunctive relief and attorneys’ fees and costs. The defendants moved to dismiss eight counts in the lawsuit, including fraud and racketeering claims, in August 2020.
According to the suit, Vetter first met McDevitt in 2013, and hired him and the Tandem Defendants to “help Tessemae’s grow,” and serve as a point of contact for all business dealings. McDevitt received equity interest in Tessemae’s in exchange for these services.
The company was urged by McDevitt to sign an operating agreement prepared by Tandem Legal’s attorneys in 2014 that the plaintiffs stated led to an increase in McDevitt, Connors and Dunst’s shares in the company over time and gradual dilution of shares owned by original shareholders, the lawsuit alleges. McDevitt told Vetter that it could “claw back” the equity taken by the three men and their investors if a proposed project to increase sales failed, though when the project subsequently failed they ultimately refused to return the equity, according to the lawsuit.
In 2017, McDevitt promised a capital raise that would again require altering Tessemae’s operating agreement — but which would give him “power to force a sale of the company,” the suit states. Tessemae’s soon discovered that McDevitt, Chehansky and Intlekofer made “a number of misrepresentations to potential investors regarding the state of Tessemae’s finances.”
Tessemae’s executives did not sign the agreement and terminated its relationship with the defendants, later filing suit against the group.
The court did agree to dismiss Tessemae’s unjust enrichment claim, and civil conspiracy and tortious interference against defendants McDevitt, Intlekofer and Chehansky, with Russell writing it was a “a naked allegation” that the three men “entered into an agreement to attempt to seize control of the Company.”
Russell also turned down a request to remove McDevitt, Connors, Dunst and Intlekofer as members of the company, citing a lack of removal provision in Tessemae’s operating agreement and failure to present recent or ongoing threat from the defendants. The court also ruled to dismiss Count 1 — violations of the Racketeer Influenced and Corrupt Organizations Act — as it applies to Tandem Legal, but denied its motion to dismiss the count as applied to McDevitt and Tandem Growth.
Additional surviving claims in the lawsuit that were not challenged by the defendant’s motion include negligence through legal malpractice, constructive fraud, breach of fiduciary duty and breach of contract. The lawsuit will now go to trial over the remaining claims.
“We look forward to the opportunity to hold the defendants accountable at trial for the injuries Tessemae’s sustained due to their conduct,” Vetter said.
