I was able to access the document you suggested through PACER. Thank you!
BIG DISCLAIMER: THE FOLLOWING MAY NOT BE ACCURATE. IT’S MY BEST UNDERSTANDING OF EVENTS FROM A QUICK READ OF SOME RELEVANT DOCUMENTS AND SOME INFERENCES. I AM NO LAWYER. THE INFORMATION BELOW COULD BE COMPLETELY WRONG.
It seems (and once again, I am no lawyer) that Brandon Carneiro, one of the original co-founders of SommSelect, sued SommSelect (Carneiro v. Somm, Inc., Case No. SCV-264224) due to a dispute regarding the share price that the Buy-Sell Agreement stipulates that Mr. Carneiro’s shares are worth. It seems that Mr. Carneiro is no longer involved in SommSelect and I suspect that Mr. Carneiro was therefore (per the Buy-Sell Agreement) trying to sell his shares back to SommSelect. I suspect that the Buy-Sell Agreement might say something to the effect of: SommSelect will buy the shares of an equity holder when they leave (I did not read the Buy-Sell Agreement, and I’m just guessing here).
Early this year, following a trial, the jury in the Carneiro Litigation came back
with a verdict finding that the parties used the wrong value to calculate the price of Mr.
Carneiro’s shares under the Buy-Sell Agreement. Instead of the $0.13/share valuation
obtained by an independent third-party selected by the parties, the jury found that the
Company should have used a value of $1.00/share to determine the price for Mr. Carneiro’s
3,940,000 shares of stock. The Debtor continues to contest the validity of the jury verdict
and the claim.
(Doc #24 in the bankruptcy filings)
If my reading is correct, per the verdict in the Carneiro litigation, SommSelect might owe $3,940,000 to Mr. Carneiro (as opposed to the much lower $512,200 that they anticipated) for his shares. From document 3-3 in the filings, it seems that SommSelect’s assets as of June 30 2022 stand at $1,907,982.56, and it seems that Mr. Carneiro started a process to take control of all of SommSelect’s assets as an, at least partial, repayment of this alleged debt. Hence, it seems, that SommSelect might have initiated the Chapter 11 bankruptcy to avoid Mr. Carneiro taking control of all assets and avoid effectively going out of business (since Mr. Carneiro gaining control of all assets might result in SommSelect being unable to fulfill its obligations to customers - send wine that’s been payed for).
In the words of Doc #24:
No judgment has yet been entered in the Carneiro Litigation, which is still
subject to post-trial motions and disputes over the amount and form of the judgment, which
the Superior Court was set to hear on October 5, 2022. However, on July 13, 2022, the
Debtor was notified that the Plaintiff had moved > ex parte > for a prejudgment writ of
attachment against all of the Debtor’s assets that was scheduled to be reviewed by the
Superior Court at 10:30 a.m. on July 14, 2022.
The Debtor filed this case on an emergency basis to prevent the Plaintiff from
attaching all of the Debtor’s assets and elevating its unsecured claim over the claims of
other unsecured creditors.
I’d like to find out more about the Carneiro v. Somm case (Case No. SCV-264224). Just interesting to see behind the curtain a bit here. Can anyone here tell me where to go? I tried going here: https://cmsportal.sonomacourt.org/iportal but it seems to only list case events, not the actual documents, but maybe I missed it.