Morgan Watkins, Courier Journal
Braidy Industries’ founder Craig Bouchard filed a lawsuit against the company he formed and several of its stockholders — including a limited liability company owned by Kentucky’s state government.
Bouchard took legal action less than a month after Braidy’s board of directors removed him from his posts as the company’s CEO and board chairman.
The defendants he has named in the case are:
- The company itself, Braidy Industries Inc.
- Braidy board members and stockholders Michael Porter, John Preston, Charles Price and Christopher Schuh
- Commonwealth Seed Capital LLC, the organization through which the state government invested $15 million of public money in Braidy in 2017
- Hannah Management LLC, which Bouchard’s lawsuit says is a Braidy stockholder and is, “on information and belief,” controlled by Price
Bouchard’s lawsuit, a copy of which was obtained by The Courier Journal, claims the defendants breached a company voting agreement by not fulfilling their contractual obligations after Bouchard requested the removal of Porter, Preston, Price and Schuh from Braidy’s board of directors earlier this month.
Bouchard filed the lawsuit Friday in Delaware.
The lawsuit says Bouchard “has the unilateral, unqualified contractual power to cause the removal of Braidy’s Board members” under the company voting agreement, which dates back to February 2018.
The stockholders Bouchard is suing are required to vote to remove board members at Bouchard’s behest, according to the lawsuit. But when he asked them to do so this month, they refused.
The voting agreement also gives Bouchard the power to designate six people to be elected to Braidy’s board, the lawsuit says. The people he designated as directors included Porter, Preston, Price and Schuh, whom he is now suing.
A company spokesperson for Braidy indicated the lawsuit was expected and said the board of directors has concerns about Bouchard’s performance as CEO.
“Mr. Bouchard’s suit is an expected step in the process of removing him from the role of CEO of Braidy. The board of directors was not pleased with the status of financing for the mill in Boyd and Greenup counties, and has other concerns regarding his performance as CEO,” the Braidy spokesperson said in an emailed statement Tuesday.
“Thus, as part of its fiduciary role on behalf of the shareholders, the board voted to take action that it believes will be upheld in court under Delaware law. Mr. Bouchard, as CEO, must be held accountable and the board of directors is willing to do what it takes to ensure that occurs. We intend to get this project built as promptly as possible.”
The Courier Journal also sent a request for comment to the Kentucky Cabinet for Economic Development (because the state owns Commonwealth Seed Capital LLC).
A spokesman responded, saying the cabinet does not comment on matters in litigation.
Braidy’s board of directors removed Bouchard as CEO and chairman on Jan. 28. The company named Braidy executive Tom Modrowski as interim CEO and Price as chairman, and said Bouchard would remain a member of the board.
Bouchard’s lawsuit says the board’s other members voted to remove him “unexpectedly, and without notice or explanation …”
Braidy has been working on plans to build a $1.7 billion aluminum rolling mill near Ashland since 2017.
Construction hasn’t started yet as the company tries to secure sufficient financing. Braidy previously has said it plans to fund the project with a mix of equity and debt.
Last week, Modrowski told state lawmakers Braidy still needs to raise about $500 million in equity for the mill project, which is expected to eventually create around 600 full-time, well-paid jobs in Eastern Kentucky.
He also offered a brief explanation for the leadership shakeup.
“The board made these changes because they want to see more progress, faster,” he said during the public meeting in Frankfort. “We are confident the changes we have made will yield that progress.”
Management from Braidy Industries fielded questions about financing and plan progress for building the new steel mill in Ashland, Kentucky. Louisville Courier Journal
But Bouchard’s lawsuit claims the board’s decision to remove him as CEO and chairman actually jeopardized potential financing.
The lawsuit says Bouchard’s ouster “cut short Mr. Bouchard’s promising negotiations with a private company to finance up to $1.8 billion of mill equipment and building expense” and “came at the very late stage of a global corporation seeking approval of a $60 million investment in the Company, and a strong interest expressed by yet a third investor to begin diligence on a $200 million investment in Braidy.”
The change in leadership led to numerous inquiries about the stability of the company’s plans and prospects, Bouchard’s lawsuit says.
“As the largest owner of Braidy’s Common Stock, Mr. Bouchard has been irreparably harmed by such uncertainty, as have other stockholders who have invested in his vision,” the lawsuit states.
The lawsuit alleges the investment fund considering making a $200 million investment quickly informed Braidy it would wait to see “the dust clear,” while the company looking at making a $60 million investment apparently indicated it was reluctant to move forward without Bouchard holding the reins.
The lawsuit also claims the board’s decision to remove Bouchard as CEO and chairman happened at a time when he was involved “in the late stages of bidding to merge one of the largest aluminum mills in the world into Braidy in a stock swap proposal …”
According to his lawsuit, Bouchard sent a letter to Braidy’s other board members on Feb. 1 asking them to resign immediately to “avoid further adverse impact on the Company, its investors, and the people of Eastern Kentucky.”
Price, who now serves as Braidy’s board chairman, then told Bouchard he and the other directors would not voluntarily resign, Bouchard’s lawsuit says.
In response, Bouchard sent a formal written request to the “stockholder defendants” —Porter, Preston, Price, Schuh, Commonwealth Seed Capital LLC and Hannah Management LLC — asking them to comply with the voting agreement’s requirements by “signing and returning an enclosed Stockholder Action by Written Consent intended to effect the removal” of Porter, Preston, Price and Schuh as directors.
But those defendants have not fulfilled Bouchard’s request, “in breach of their obligations,” according to the lawsuit.
Bouchard’s lawsuit also claims Braidy, as a company, and Preston, as Braidy’s apparent secretary, haven’t complied with other obligations they have under the voting agreement.
Braidy, for example, is supposed to use its best efforts to ensure the rights granted under the agreement are effective, including Bouchard’s right to remove directors, according to the lawsuit.
Through this case, Bouchard is asking the court to:
- Declare that each defendant has breached the voting agreement
- Require various defendants to comply with their respective obligations under the voting agreement and take the necessary actions to remove Porter, Preston, Price and Schuh as directors
- Prohibit the defendants from breaching the agreement again
- Award him “damages, costs, and expenses of this action, including reasonable attorneys’ fees …”
Bouchard discussed the lawsuit and his decision to push for the removal of his fellow Braidy board members in a news release Tuesday.
“We must simply remove these individuals from the board, as they are no longer showing proper judgement,” Bouchard said. “The board members have placed the community of Ashland and North East Kentucky, suffering from job loss and the ensuing opioid crisis, at risk.
“The lawsuit seeks expedited consideration of my request to complete the removal of these board members. I will designate and announce a talented and qualified new board shortly.”