BuffBrew shareholders sue, allege ‘brazen fraud’
Onetime CEO exploited law to gain control, according to legal action
Buffalo Bayou Brewing shareholders are accusing former company directors of “brazen fraud” in a lawsuit that contends there is ongoing financial impropriety at the popular Sawyer Yards brewery.
The suit, filed in Delaware Chancery Court this month, by 11 shareholders alleges that onetime CEO William McLucas exploited corporate law and his personal “buddy-buddy” relationships with certain directors to acquire the privately held company in August 2022 without giving shareholders a meaningful chance to weigh in and without the money to pay them.
“McLucas exploited Delaware law on mergers and acquisitions and the Company’s corporate governance failures to accomplish that which he could not have otherwise done: take from Plaintiffs their shares of BuffBrew capital stock through a merger without actually paying Plaintiffs anything,” the lawsuit says.
Under the terms of the merger, the suit says, shareholders were to be paid as much as $3,335 per share.
The suit alleges breach of contract, breach of fiduciary duties and fraud against McLucas and the Houston-based investment firm he founded, WPM Capital Partners. It also accuses several former company directors of breaching their fiduciary duty while serving on a special committee that was set up in November 2021 with a mandate to review the proposal McLucas, then serving on the board of directors, put forward.
Buffalo Bayou Brewing, known as BuffBrew, didn’t immediately respond to a request for comment. McLucas, who became CEO of the company in 2022 and
who the plaintiffs believe is still the top executive, did not respond to requests for comment when contacted through his personal website.
BuffBrew has become one of the city’s most popular breweries since opening in the Rice Military neighborhood in 2011. In 2018, it broke ground on its 28,000-square-foot, threestory beer and food emporium with a rooftop patio featuring skyline views. Its most well-known beers, such as Crush City IPA and Dreamsicle, are carried at H-E-B, Spec’s and other retailers.
But in recent years, the company’s finances have wobbled like an overserved customer. Over the course of 2017 and 2018, the company raised $1 million from about 600 investors on NextSeed, a platform that lets consumers invest in local businesses.
By 2022 the company defaulted on payments to those investors. In both 2020 and 2021, BuffBrew received two loans of roughly $1 million each from the pandemic-era federal Paycheck Protection Program, according to ProPublica; both of those loans were forgiven the year after they were issued.
Meanwhile, Harris County court records show several lawsuits filed against McLucas, WPM Capital and BuffBrew itself for nonpayment of various services. One of them, brought by Pimuro Capital Partners, accuses Buffalo Bayou Brewing of failing to pay about $94,000 in fees after Pimuro was brought in 2021 to help the company get its finances in order.
The most recent lawsuit alleges that the special committee never engaged its own advisers or canvassed the market for other potential bidders, and that the company ignored the advice offered by Pimuro, which had been hired to assist the company with debt collection and reducing expenses. Further, the suit says, shareholders were told that the only alternative to the merger was Chapter 11 bankruptcy.
G. Jonathan Pina, founder and managing member of Pimuro Capital, said that during the roughly 10 months McLucas’s deal was being negotiated, he came to see the transaction as “a mirage that should not be pursued,” and communicated his concerns verbally and in writing to co-founder and then-CEO Rassul Zarinfar as well as the company’s COO, its outside counsel, the board of directors and members of the special committee.
“While this outcome is not at all surprising, it is extremely unfortunate,” Pina said. “The BuffBrew shareholders deserved better stewardship of their invested capital.”