October 11, 2014 – Embattled Balcones Distilling founder and head distiller Chip Tate is scheduled to be sentenced on October 22 after being found in contempt of court for violating a temporary restraining order issued by 170th District Court Judge Jim Meyer banning him from any involvement in the distillery’s affairs. The ruling came during an October 3 hearing in Waco, Texas, where the majority owners in Balcones Distilling are seeking to enforce a 90-day suspension against Tate issued in August following a series of disputes between Tate and Balcones chairman Greg Allen. The sentencing hearing was originally set for October 7, but was postponed until October 22 according to a court clerk. Judge Meyer is also expected to rule on whether the temporary restraining order should be expanded into a temporary injunction.
The Waco Tribune reports Meyer’s contempt ruling was based on testimony that Tate did not return a computer, hard drive, and mobile phone immediately to Balcones as mandated in the restraining order issued August 22. A forensics expert hired by the distillery testified that Tate deleted files from the devices before returning them, but could not testify under cross-examination whether those files were personal or business-related. Neither Tate nor his attorney, David Clouston, have responded to our requests for information on the contempt hearing.
The contempt ruling was not linked to comments Tate has made on social media, including a Twitter post September 16 to WhiskyCast responding to our story on a Balcones statement regarding the case. The post was deleted within minutes after WhiskyCast’s Mark Gillespie warned Tate that his comment might violate terms of the restraining order banning him from communicating with media and the public on the case. During the October 3 hearing, Judge Meyer warned Tate that his social media activity was walking a “fine line”, according to the Waco Tribune report, which cited Tate’s posts in response to suggestions by his supporters that they organize a boycott of Balcones whiskies until Tate is allowed to return to work. Tate testified that his activity on social media has been limited to responding to questions about the case by referring people to news sources that present both sides of the case.
Tate testified that he is still being paid by the distillery, but insisted that the majority investors “have effectively fired me” by banning him from entering the facility or communicating with employees. Tate holds a 27% interest in the distillery after selling a majority stake last year with a previous investor to the Oklahoma City-based private equity group led by Greg Allen in order to finance a $10 million project to convert a historic Waco warehouse into a new distillery. The investors claim Tate has hurt the expansion project by his failure to appear at board meetings, and have been forced to raise additional funds to cover the now-estimated $15 million dollar cost of the expansion. Tate’s court filings have accused the Allen-led group of trying to mount a hostile takeover of the distillery by diluting Tate’s share without his consent, and cite the company’s bylaws and his employment agreement that state Tate must be present at any board meeting in order for a quorum at which binding actions may be taken.
This story will be updated with additional information as necessary.
Editor’s note: This story was updated to include that neither Tate nor his attorney have responded to our requests for information on the October 7 hearing. Court filings in civil cases only present one side of a story, and should be taken at face value.