Sheehan & Associates, P.L.C.

Lawsuit against ePrize investors dismissed over statute of repose

Former executives at the Internet marketing company ePrize LLC, based in Pleasant Ridge, say they weren't paid due compensation when a majority stake in the company was sold to a private equity group, Catterton Partners Corp., in 2012. The value of the sale was estimated at $100 million, and an appeal is expected after a judge in Oakland County recently dismissed a lawsuit brought by the former executives.

The case illustrates some of the concerns investors and business owners may have when planning the sale of a business or some of its assets. Let's consider a few of the main factors in this particular case.

The plaintiffs reportedly worked for ePrize about four years ago, and they say they had shares in either ePrize or ePrize Holdings LLC. Since the sale of the majority stake in ePrize, the holding company has become Crackerjack Holdings, and ePrize's successor company is Crackerjack LLC. The defendants, who are investors in Crackerjack, took issue with the fact that a number of the plaintiffs had shares in ePrize Holdings and not ePrize.

The defendants also asked that the lawsuit be dismissed because, according to a statute of repose, the plaintiffs were beyond the three-year limit to file their claim. On that point, the judge agreed.

For their part, the plaintiffs say they were unaware of a number recapitalization deals that were finalized in 2009, so the plaintiffs were in turn not aware that they had cause to take legal action to receive compensation for their shares.

A representative of the plaintiffs also referred to prior Supreme Court decisions that say a limiting statute like the one in question doesn't begin to apply until the plaintiff experiences damages. In this case, the plaintiffs say their damages started when the majority stake was sold in 2012.

As this case illustrates, technicalities can play a big role in business litigation, and to ensure the best outcome, Michigan business owners and investors will want to have an experienced legal team on their side.

Source: Crain's Detroit Business, "Judge dismisses lawsuit against Linkner, Gilbert, and other ePrize investors," Chad Halcom, Oct. 9, 2013

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