SALT LAKE CITY — Another federal class action lawsuit was filed this week against Overstock.com and two former executives, alleging acts of deceptive financial reporting and misleading investors.
And in an unrelated case, Utah-based Traeger Grills has won preliminary injunctive relief in both of its lawsuits accusing competitor Danson, and members of the Traeger family, of brand infringements.
Overstock investor Michael Chambers filed the action Tuesday in U.S. District Court claiming that “defendants misled investors by falsely telling them that Overstock’s blockchain and retail operations were performing at or even above revised guidance, and that the future was bright for the company’s retail segment.”
The complaint is similar to another federal suit, filed late last month and like that action, names Overstock as well as former CEO Patrick Byrne and former Chief Financial Officer Greg Iverson as defendants.
In the complaint, Chambers said the alleged falsifications led to stock price increases, and subsequent devaluation, that caused financial harm to himself and other investors. He described Byrne as “a man of international intrigue” whose “antics have resulted in share price volatility and investor losses.”
Chambers also outlines a series of events connected with a cryptocurrency trading platform called tZero, in which Overstock is a major investor. He alleges an Overstock plan to pay an investor dividend in cryptocurrency tokens was a scheme to orchestrate a “short squeeze” on short sellers. Short selling is an investment strategy in which profits are made when a company’s stock value goes down.
An Overstock spokesman said the company plans to defend itself in court against the allegations and expects to be victorious.
“The company disagrees with the plaintiff’s allegations,” an Overstock spokesman said in a statement. “We will vigorously defend the lawsuit and we expect to win.”
Overstock’s market value has reeled since mercurial figurehead and longtime CEO Byrne resigned in late August following news stories, and statements from Byrne that detailed his alleged involvement in covert, international government investigations. Over three days in mid-September, Byrne divested almost 5 million shares of stock in the company he remade in the 1990s, and then Iverson resigned. After hitting a three month low of $11.19 on Sept. 18, the day after Iverson announced his departure, the stock saw a slight recovery, but at the end of regular trading Thursday was down to $10.85 per share, a price that falls well below the company’s 2002 IPO per share value of about $13.
Traeger wins injunctive relief
In July, Traeger filed civil lawsuits against Arizona-based Dansons, the maker of Pit Boss and Louisiana Grills, as well as Joe, Brian and Mark Traeger. The suits in Arizona and Florida allege that Dansons has been conducting a multiyear campaign to promote its grills as if they were Traeger’s, thereby confusing consumers and damaging Traeger Grills and its employees, according to the complaint.
On Tuesday, the Florida court enjoined Joe, Brian and Mark Traeger from “using, or publishing, in any manner the Traeger name used as a trademark and images of the Traeger Barn located in Mount Angel, Oregon, that bear the Traeger name, in connection with the advertising, marketing, or sale of wood pellet grills and associated products.”
Last Friday, an Arizona court similarly enjoined Dansons from using the Traeger name and imagery (including of the Traeger Barn and of Joseph and Brian Traeger), publishing statements affiliating Joe and Brian Traeger with Dansons, or communicating a public endorsement by Joe and Brian Traeger in the advertising, marketing, or sale of wood pellet grills and associated products, including the recently-announced “Founders Series” grills.
Traeger CEO Jeremy Andrus said he was pleased with the courts’ findings but noted the decision to pursue a legal remedy in the matter was one made reluctantly.
“We are pleased that federal courts in both Florida and Arizona have enjoined Dansons, and Joe, Brian and Mark Traeger, from continuing to engage in their harmful conduct and further confusing the market,” Andrus said in a statement. “Traeger Grills has pursued this litigation reluctantly and is merely enforcing Joe’s, Brian’s and Mark’s longstanding agreements not to use their names, likeness and reputations to confuse consumers by promoting other wood pellet grills as if they were genuine Traegers.
“We will continue to take the actions necessary to pursue this reasonable and limited relief on a permanent basis to protect our brand.”
Joe Traeger is the man credited with innovating the pellet grill, an outdoor cooker that uses processed, compressed wood pellets that feed a fire from an automated hopper. Traeger adapted the technique from pellet-fired wood stoves in the ’80s and went on to build a family-run business that sold for some $12.4 million in 2006 to a new corporate parent. According to the Traeger complaint, $9 million of that went to secure “the exclusive and perpetual right to use the Traeger name, likenesses and reputation in the wood pellet grill industry,” which transferred to Andrus and Trilantic Partners when they purchased the company in 2014.
Since acquiring the company, Andrus and his team have grown Traeger’s annual revenues from about $70 million in 2014, to over $400 million currently.