Good Beer Hunting

From Adjunct to Adjudication — Hill Farmstead Associates Sue Tired Hands Over Investments


A lawsuit led by famed brewer Shaun Hill may soon be heard in the U.S. District Court for the Eastern District of Pennsylvania, alleging the founders of Philadelphia-area Tired Hands Brewing withheld earnings off an investment made prior to the brewery’s 2012 opening.

In a complaint removed from Vermont state court to federal court and transferred to Pennsylvania last week, Hill, Alex Peltz, and Mike Ingrassia claim that a $5,000 initial investment made by each for a 0.5% equity stake in the company was not paid back in an agreed upon timeline. It says that when Tired Hands founders Jean Broillet and Julie Foster did offer to repay the investment in 2017, it was for “far below fair market value” for $7,500. Ingrassia is a sales and brewery rep for Hill Farmstead and Peltz is a creative director, graphic designer, and communications specialist who has done work with both companies.

In an email to GBH, Foster said that the case "is being dismissed with prejudice," though as of this article’s publication, there’s no indication of a dismissal on the court’s docket. Attempts to reach Hill were unsuccessful.

By seeking compensatory and punitive damages for an undisclosed amount, the trio claim that Broillet and Foster committed a slew of unlawful acts, including federal securities law fraud, unjust enrichment, foregoing fiduciary duties, and breaches of Pennsylvania and Vermont laws.

At the core of the argument is a claim by Hill, Peltz, and Ingrassia that, when presented with Tired Hands' business plan, it stated that after five years, investors had the opportunity to sell back shares at a 50% increase on the initial investment. Because Tired Hands exceeded its projections, the complaint says, the brewery has been in a position to distribute profits, but has failed to do so in a “regular and reasonable” way.

Through several collaboration beers and Tired Hands' frequent presence at Hill Farmstead’s Festival of Farmhouse Ales, an invitation-only affair curated by Shaun Hill himself, there's at least some obvious semblance of a relationship between Tired Hands ownership and the others. However, the difference of thousands of dollars—or the assumption that much more is due—has pushed the relationship to the brink.

In an email from Aug. 1, 2011, Broillet explains to Hill that "each member shareholder will earn $5,000 in profits over 5 years if we hit even half of our projections." In a previous communication over Gchat, Broillet said he planned to sell no more than 40 shares, equalling 20% of an ownership stake.

"If we meet our projections, the profit sharing will exceed $5,000 in the first three years,” Broillet continued. “Member share holders can also deduct losses from other LLC income, or carry forward losses in the early years to offset tax liability in profitable years."

In all of Tired Hands' full years of production, which started in 2013, it grew from 870 barrels to 11,250 in 2017, according to records kept by the Brewers Association. While there was a 9% and 5% jump in production volume in 2014 and 2015, respectively, Tired Hands made 10,500 BBLs in 2016, a 950% increase from the year before, and then 7% more year-to-year growth for 2017.

Like many of its modern IPA contemporaries, it’s built a reputation on hazy, juicy, hop-forward beers, also helping to popularize “milkshake” IPA. Many of these four-packs of 16-ounce cans sell for $20 on-site, as well as a variety of specialty barrel and mixed-culture creations. The rapid growth and overall business plan of the brewery could suggest why Hill, Peltz, and Ingrassia view their investments as worth more than the base-level $7,500 currently offered.

But the trio’s complaints don’t end there.

Along with worry about receiving what they’re owed financially, they say in their complaint that Broillet and Foster failed to disclose that investors had personal liability for taxes on allocated profits from Tired Hands or that its operating agreement “did not include a customary provision regarding mandatory distributions to cover estimated tax liability.” Ultimately, that led to “redemption provisions” that they say “failed to disclose that an investor's return would be limited to half of their original investment (regardless of the future success or profitability of the business).”

The complaint also singles out Foster, who has a J.D. from University of Pennsylvania and lists her job title as "General Counsel" for Tired Hands for “gross negligence, recklessness, willful misconduct, or knowing violation of law” because of her legal education and background.

Words by Bryan Roth