Balcones Dispute Settled, But Bitter Feelings Remain

Balcones Distillery founder Chip Tate. Photo ©2012 by Mark Gillespie.Editor’s note: We have produced a special bonus episode of WhiskyCast this week including the complete interviews with Chip Tate and Greg Allen.

December 6, 2014 – Chip Tate will not return to Balcones Distilling, the Waco, Texas craft distillery he founded and built from the ground up under a freeway bridge into a series of award-winning whiskies. Tate had been scheduled to return to work Friday after a judge ruled in his favor in a dispute with the distillery’s majority owners, who had suspended Tate in August and obtained a restraining order banning him from the distillery or contacting its employees. However, Tate agreed to accept a buyout offer for an undisclosed amount Wednesday covering his 27 percent ownership stake in the distillery and has left the company with plans to build a new distillery of his own.

Whether Tate left voluntarily or was fired by the owners remains a bitter subject for both sides. In separate interviews with WhiskyCast’s Mark Gillespie Friday, Balcones board chairman Greg Allen said the owners fired Tate for cause, while Tate insisted he resigned voluntarily. “This is kind of (like) talking to your girlfriend or whatever and saying I’m kind of wondering about our future…and it’s ‘you can’t break up with me, I break up with you first,” he said. According to Tate, it would be reasonable to assume that his plan to return to Balcones December 5 helped accelerate the buyout discussions, but Allen denied that the timing was the impetus for the settlement. “In any kind of situation like this, enough things come together and it becomes time,” he said. “There have been a lot of things that have gone back and forth, different ideas that have gone back and forth…and it seemed to come together last week, and Tuesday was the day.”

The settlement includes a 16-month non-compete clause banning Tate from distilling any spirits similar to those produced by Balcones during his tenure until March 5, 2016. However, Tate is already looking at sites near his Waco home for what will be called the Tate & Co. Distillery. “Part of it is just to keep it simple, and part of it is to avoid any confusion in the future about who’s going to be working there for a long time,” he laughed. Tate plans to produce “brown spirits” while his non-compete clause is effective, while not being specific about exactly what type of spirits he will produce. However, he plans to start distilling whisky as soon as the settlement agreement allows. “I’m glad to be in a liberated state, free to focus on more positive things…I’m ready to get back to actually making stuff.”

Allen is also ready to move on, now that the management situation has been cleared up. While there have been anti-Balcones protests on various social media platforms since Tate was suspended in August, Allen says sales have grown over that period. “It’s the same team, same process, same product…we’re just going to keep doing what we do. I respect the way people feel, but the reality is October was the biggest sales month we’ve ever had,” he said.

Planning work continues on the new $15 million Balcones distillery to be built in a historic Waco warehouse facility, and Jared Himstedt’s place is secure as the head distiller at Balcones. Himstedt had been working with Tate since the distillery opened, but sided with the distillery’s majority owners when they took action against Tate in July and August over actions they considered detrimental to the company. While Tate did not name names in our November 26 interview in which he said he planned to “set things right” when he returned to Balcones on December 5, he did say “some responsibilities would be reassigned”, and it is likely that Himstedt would have been one of the first employees to be affected.

Tate continues to deny the allegations raised by Balcones in its court filings that he threatened Allen’s life, along with a threat to burn the distillery down, and criticized Balcones for releasing a series of affidavits and memos from Allen and distillery employees this week outlining more specific accusations. Tate called the allegations “slander”, and claims the settlement would still allow him to take legal action against Balcones and its employees since the documents were released after the settlement was signed. Those documents were provided to WhiskyCast Thursday before the interviews with Tate and Allen, and while our interview with Allen addressed the reason for releasing the documents, Allen clarified his comments in a follow-up email.

There were two reasons for providing so much detailed written information to you on Thursday. First, although we had received requests from you and many others about “what happened” at Balcones in the months leading up to the August restraining order, we did not think it was appropriate for Balcones or its employees to talk about anything other than the specific legal questions until the lawsuit was resolved. Now that we have settled, this information release on Thursday was our answer to the question of  “what happened” that has been asked of us so often over the past 120 days. Second, as the material we provided to you shows, much of what has been previously represented is simply not accurate. Some of these misrepresentations are meaningless, however some are important to the Company and are quite personal to the people who work at Balcones and rely on the Company for their livelihood. Since we have access to the actual emails, the texts, the eyewitness testimony that is supported by sworn affidavits, and the tape recordings of specific meetings —  and since none of these items were ever part of Balcones’ court filings — we were confident that people interested in an accurate story would appreciate the opportunity to see these facts.

In our interview, Tate also accused Allen of reneging on an agreement to allow him to take several barrels of maturing whiskey from Balcones that he had laid down for his children after their births. Allen denied any knowledge of the agreement, calling the claim “Textbook Chip,” but said the company would be willing to discuss allowing Tate to acquire some maturing whiskey after a 90-day period following the settlement.

Editor’s note: Balcones has provided WhiskyCast with a copy of the settlement agreement, which is available to view here. We will not post copies of the affidavits and memos provided by Balcones on Thursday outlining allegations against Tate, since they were not filed with the court as part of the lawsuit seeking the restraining order and are not part of the public record, and therefore Tate has not been able to respond to the accusations as part of a legal proceeding. This is consistent with our practice throughout the Balcones dispute of only posting documents filed with the court. 

Links: Balcones Distilling

Mark Gillespie

I'm the host and executive producer of WhiskyCast.

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