The son of the late Vancouver philanthropist Ed Lynch has filed a lawsuit against Pacific Foods of Oregon, seeking $250 million for allegedly undervaluing Lynch’s share of the company after his death in 2015.
Pacific Foods, which makes soups, broths and hummus, was co-founded by Ed Lynch and his son-in-law, Charles Eggert. Lynch had a 43 percent interest in the closely held company at the time of his death, the lawsuit said.
Lynch had intended for his share of the company to be sold back to Pacific Foods after he died, with the proceeds to be given to his philanthropic foundation, which was represented as plaintiff in the lawsuit by his son, Michael Lynch. The defendants are Pacific Foods, Eggert and others listed as responsible for the valuation.
The lawsuit claims that the value of Pacific Foods was “grossly understated” in 2015. It bases the claim on the fact that the entire company was sold to Campbell’s Soup Co. for $700 million.
“This amount was higher than the 2015 redemption valuation by an order of magnitude,” the lawsuit said. The lawsuit argued that there no changes at Pacific Foods between 2015 and 2017 to justify the price difference.
“(Pacific Foods of Oregon’s) payment of a massively deflated redemption price to the estate for Ed’s shares had the effect of transferring the bulk of the value of Ed’s estate back to the company, to the very significant detriment of the estate and to the great benefit of the remaining shareholders.”
The lawsuit also alleges that Eggert, Pacific Foods and the company that valued the stocks, Moss-Adams, were “aware of their misrepresentations” during the stock pricing and acted in “reckless disregard for the truth.”
In response, Pacific Foods told The Oregonian/OregonLive on Friday that it used a process agreed to by Ed Lynch, and he would have been unhappy with such a lawsuit.
“We followed a valuation process that was agreed to by Ed, and we followed that process to the letter. It required an appraisal by an independent, outside firm which Ed initially retained years ago and which performed an annual appraisal of Pacific Foods for the 17 years preceding his death,” Pacific Foods said in the statement. “We don’t believe Ed would have wanted this conflict and are disheartened by this turn of events.”
Ed Lynch and his wife, Dollie, were prominent philanthropists in Vancouver, donating millions to the Vancouver community.
Both were elected as First Citizens in 1992. Ed Lynch was also given the Vollum Award for Lifetime Philanthropic Achievement.
Gary Berne, Jennifer Wagner and Timothy DeJong represent Michael Lynch in the lawsuit. The defendants are Eggert, the Pacific Foods Board of Directors and LLP Moss Adams. The lawsuit was filed in Multnomah County, Ore.
The date for the beginning of the trial is not yet announced.