Mendocino Wine Group asked a judge to dismiss a lawsuit by co-founder Paul Dolan, saying the veteran wine executive was fired for leaking confidential financial information to a competitor in which he had an economic interest.
Documents filed last week in Mendocino County Superior Court revealed new details about the mysterious breakup between Dolan and former business partners Thomas and Tim Thornhill, who teamed up in 2004 to buy Parducci Wine Cellars.
An attorney for Dolan, who was fired as president of the Ukiah company in January, denied Tuesday that Dolan caused any harm by sharing information with the partners in his family business, which was considering a merger.
The revelations emerged in responses to a lawsuit filed by Dolan in March contending that he was not paid the full amount for his stake in Mendocino Wine Group.
Thomas Thornhill, CEO of Mendocino Wine Group, issued a statement this week saying that Dolan was fired for cause. As a result, his share of the business was subjected to a discount, Thornhill said.
"We do not believe the case has merit and are seeking dismissal of the lawsuit," Thornhill said in a statement.
In a hand-delivered letter to Dolan dated Jan. 20, Thornhill informed Dolan he was being removed as president. Thornhill said disclosing information to entities in which Dolan had an economic interest created an "indelible conflict of interest."
"Paul, you have acted dishonestly in disclosing MWG confidential and proprietary information to third parties without authorization," Thornhill wrote. "We are deeply disappointed with your actions and have grave concerns that, unless we take immediate remedial action, the company will be further damaged."
Dolan declined to comment. His attorney, Greg Spaulding, said Dolan and the Thornhills were discussing changes to the company for about a year, and that Thomas Thornhill Sr. wanted his son to play a larger role.
"I don't know if he wanted Paul out, but I think he wanted his son to step in and do more of the management, and Paul wasn't thrilled with that," Spaulding said. "Paul considered selling his interest, or buying out or acquiring Mendocino Wine Group."
As a part of due diligence for a possible acquisition, Dolan shared information about Mendocino Wine Group with his family's wineries to see if the companies would be a good match, Spaulding said. In the end, Dolan decided not to go forward with the acquisition, about a month before he was terminated.
"I'm not aware of anything that happened as a result of Paul talking to his winery that caused any harm to Mendocino Wine Group," Spaulding said. "It's not like he went to some competitive winery and gave them a bunch of trade secrets."
Before his ouster, Dolan owned about 30 percent of the company, Spaulding has said. The partnership dissolved in January, triggering a dispute between the partners that brought deputies to the scene.
Dolan was pulled over by deputies as he drove away from the meeting, Spaulding said.
"They apparently had set the police up to pull him over," Spaulding said.
In the Jan. 20 letter, Thornhill instructed Dolan to leave the company's premises immediately, relinquish all of the company's property and return all proprietary information by overnight mail. He was ordered not to contact or communicate with any of the company's employees, bankers — both present and potential lenders — customers, suppliers and distributors.