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Judge allows the company itself to be added to a plea for a preliminary injunction, but delays hearing the two sides' cases until February

GRAPHIC FILE PHOTO - Dental manufacturing giant A-dec is embroiled in a battle between the heirs to the business and the trustee appointed by the co-founder of the company.

The struggle continues unabated between the heirs to Newberg's top employer and the man who argues he was appointed by the founder of the company to guide the ship.

In late November, attorneys for Brett Baker, trustee of A-dec Inc. founder Ken Austin Jr.'s trust and the contested chairman of the board of directors, appeared in Yamhill County Circuit Court seeking an injunction that would not only keep the opposition from removing him from the board and deny his voting rights, but also from taking the company in a different direction from a business perspective.

The opposition -- primarily Austin's heirs Loni Austin Parrish, A-dec President Scott Parrish, Ken Austin III and Celia Austin – had filed a motion to dismiss the injunction, as well as demanding that Baker name the company itself in seeking the injunction, arguing that the company deserved the right to defend itself against Baker's claims.

Yamhill County Circuit Court Judge Ladd Wiles agreed with the family on the latter point, ordering that A-dec be named in the plea for injunction, but delayed considering the injunction itself until Feb. 7.

"This means that both A-dec and the family shareholders that are party to the litigation will have an opportunity to respond to Mr. Baker's complaint," said company spokesman Jordan Beanblossom.

The judge's order struck a chord with Baker's legal team.

"Mr. Baker's counsel noted on the record that Mr. Baker did not wish to assert any claims against A-dec and did not wish to be added adverse to A-dec in any way," a release from Baker's camp said.

At issue, ultimately, is control of one of the world's largest dental manufacturing companies, one that employs more than 1,000 people locally, 1,300 worldwide and had gross sales topping $375 million in 2018.

The struggle between the two parties hit full stride in September, a few months after the death of Ken Austin Jr., co-founder of the company with his late wife, Joan, in the 1960s. Baker had attempted to name two new directors and dismiss two others, including Scott Parrish. The heirs argued that since Austin's death there had been a "change of control" of the company, including a redistribution of voting shares, that forbade Baker from holding sway over the composition or direction of the board.

Baker responded by seeking relief in the courts, arguing that Ken Austin Jr. had named him trustee of both his and his wife's trusts and with that designation control of what is called the "Class A Voting Common Stock" that allows him to lead the board.

Both parties' counsels appeared before Wiles on Nov. 22 to address, primarily, Baker's claim for injunctive relief.

"For several years prior to his death, Ken Austin considered how the company should be governed after his death and who he wanted to hold the majority voting interest that he held in his own trust," said Thomas Johnson, an attorney for the law firm of Perkins Coie, representing Baker. "Although he loved his two children and he had been very generous to them throughout his lifetime, ultimately he decided to give a trusted colleague, Brett Baker, the authority and the responsibility to vote his majority interest."

Johnson added that his client is only fulfilling the wishes of the elder Austin in the actions he's taken.

"I want to be very clear that Mr. Baker holds no shares in his own name," Johnson said. "Mr. Baker derives no financial benefit from the shares that are held in the trust and he is unpaid in his position as trustee of the Ken Austin Trust."

Johnson explained to Wiles that their contention is that Baker remains a director and Scott Parrish has been removed from the board as of Sept. 25. He adds that Ken Austin Jr. was deliberate in his actions following his wife's death, buying 115 shares from her trust to ensure that he retain the 51 percent of voting stock necessary to control the company. He further argued that the company's articles of incorporation clearly say that owners of Class B non-voting stock, which the heirs hold the majority of, are not allowed to vote on company matters.

"And when Brett Baker walked into that room on Sept. 25, when the different proposals before the shareholders were going to be put to vote, and they were put to vote, when he cast his 51 percent of the Class A shares, acting as the trustee of Ken Austin's Trust, all of those proposals passed," Johnson said. "And he objected when holders of Class B shares attempted to vote those shares."

Matt Donohue, an attorney for the Portland law firm of Holland & Knight and counsel for the heirs, characterized the struggle between the plaintiffs and the defendants in simpler terms.

"A-dec is a family …," he said during the hearing. "The ultimate trial on the merits in this litigation brought by Brett Baker is whether A-dec will remain in family control as its founders and the A-dec bylaws intended or not. Now, we don't know why in the last 18 months of his life, Ken Jr. apparently made changes to some of his trust documents or, more importantly, why Brett Baker never told the family or the company about those changes."

As the case progresses to trial, Donohue said, the defense will reveal the background of how the case came to this point.

"Discovery will show, your honor, that both the defendants and A-dec trusted Brett Baker and relied on him specifically for family succession planning," he said. "And it was not until Ken Austin Jr.'s death that everyone realized there was a fox guarding the hen house."

Donohue insisted that the changes to Austin's trust do not affect the governance of the company and that Loni Parrish and Ken Austin III have now been granted control and voting rights, allowing only them to elect or terminate members of the board and amend the company's bylaws.

"But here today," Dononhue said, "the stakes for the motion for preliminary injunction are equally high because granting the motion today would provide Brett Baker unchecked power that he does not have ... If the court were to grant the motion for a preliminary injunction, Brett Baker will change the bylaws. The entire board of A-dec will be reconstituted. A-dec management will leave. A-dec will lose its identity and its business will be immensely damaged."

Center to Baker's plea for an injunction is that the board of directors be returned to the "status quo," or in other words where it was before there in effect became two boards. Late in the hearing Wiles also wondered whether Donohue's definition of the status quo was one-sided.

"That's your status quo, though," Wiles said. "His version of the status quo is that he's still on the board. … There's two alternate realities going on here. There's two takes on what the status quo is."

Ultimately, the question of who will call the shots on the company's board of director comes to a change of control document formulated years ago and not clarified before the elder Austin's demise.

"Ultimately, if there's no change of control, then Mr. Baker's position is correct," Wiles said.

Donohue argued that if the court determines there was no change of control, that only the original Class A voting shares matter, "then you have to go back and examine the world that existed at the time of Joan's death. Because a change of control would have occurred, in our view, at the time of her death."

In the end, Wiles ordered the hearing delayed to give the company itself time to respond to Baker's plea for temporary injunction, "and then we can get back together again and try to issue a ruling on the preliminary injunction, which as I started off by saying, there's two different realities here."


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