Krell founders Dan and Rondi D'Agostino have filed a lawsuit here against private-equity fund KP Capital Partners and current KP-allied Krell executives to regain their management roles at the high-end audio company they founded in 1980.
In their lawsuit, the founders contend they were locked out of the company's Orange, Conn., offices about three months ago in violation of their employment agreements after trying to assert their right to fire a KP-backed executive. They also contend that KP used “fraudulent, overreaching and unconscionable tactics” in “a scheme to usurp the assets of old Krell [owned 100 percent by the D'Agostinos] at a discount, and exert complete control of new Krell, despite only purchasing a minority ownership interest.”
KP Capital Partners, a New York City private-equity fund, purchased a 40 percent stake in Krell Industries in April. Dan and Rondi D'Agostino continued to hold the other 60 percent and were to remain CEO and president, respectively, the suit said. Dan D'Agostino was also to stay on as chief product designer. Both founders also held two of five board seats.
KP executive Ling Kwok, however, “improperly terminated the employment of each of the founders, and effectively terminated their ownership and roles as minority managers, literally locking them out of the company,” the suit said.
In another development, KP filed its own suit against the D'Agostinos, said Walter Schneider, who the company promoted from COO to the position of president. KP's lawsuit “states clearly the reasons this situation has gone sour” and states “some of the misrepresentations that related to the original purchase,” he said. “Obviously some seller's remorse set in.”
Schneider said Krell is “focusing on business and letting the lawyers work on the issues between the investors and the founders. At Krell, he said, “There is stability,” and the company plans to introduce its first Blu-ray player and other products at January's CES.
Separately, Todd Eichenbaum has been promoted to Krell's director of engineering and new product development, Krell said in a written statement. Eichenbaum has been lead engineer on more than 50 Krell products during the past decade, the company said. Peter McKay continues as international sales and marketing VP, and Bill McKiegan remains U.S. sales and marketing VP, Krell said.
For further coverage of the Krell legal battle, visit www.TWICE.com.