By JACK WEATHERLY
Viking Range Corp. founder Fred E. Carl Jr. and other former top officers of the Greenwood-based company have been sued for $100 million for allegedly not disclosing a design defect that caused the company’s stoves to turn on by themselves.
Middleby Corp. of Elgin, Ill., which bought Viking Range in 2013 for $380 million, and Viking say in the complaint that “had sellers disclosed the truth, Middleby would never have paid anything close to $380 million for VRC, and may not have undertaken the acquisition at all.”
The suit was filed in the Superior Court of Delaware in New Castle County, according to Courthouse News. Efforts to obtain a copy of the complaint in time for this article were not successful. Likewise, efforts to contact Carl failed.
A third-generation builder, Carl in 1987 founded Viking, whose commercial-grade home cook stoves were his designs and became the premier brand in the industry.
At its height, Viking employed about 1,200. When Carl and Little Rock financier Warren Stephens sold the company, its work force had fallen to 700 due to the cratering of new-home construction and drop in annual sales of 50 percent from a prerecession level.
One month after the acquisition, Middleby laid off 20 percent of its Greenwood work force, leaving 560 employees, according to Crain’s Chicago Business.
And Carl — who designed the stoves and made them the centerpiece of the company, transforming downtown Greenwood as he added products — resigned.
Two years later, its work force had dropped to 556, according to a company response to a large-employer survey request by the Mississippi Business Journal.
Carl has since founded another company, C3 Design, which builds high-end modular homes. Efforts to contact Carl for this article were unsuccessful.
Selim A. Bassoul, chairman and chief executive officer, commented in the May release of Middleby’s first-quarter earnings that “at our Residential Kitchen Equipment Group, the first quarter reflects the residual impact of the prior year product recall related to products manufactured during the previous ownership of Viking.”
“Despite this continuing impact, we remain confident about the prospects of the new introductions and anticipate this will support future sales growth. At Viking we have redesigned every product line, including our complete new refrigeration offering.”
Viking Range sells luxury residential cooking products, including ranges, refrigerators, and freezers.
The complaint, according to Courthouse News, contends that the “sellers knew of this issue since at least the spring of 2011, [and] intentionally failed to disclose it to Middleby.”
“This product safety issue has since led to a recall of approximately 60,000 ranges in the United States and Canada. It has also resulted in significant out-of-pocket losses and damage to the brand’s reputation and goodwill that will have an ongoing adverse effect on the sales of Viking products,” Middleby claims.
In addition, Middleby says Viking Range under-accrued projected warranty costs ahead of the acquisition in order to beef up its financial statements, and downplayed its severe customer service issues.
“Middleby has suffered actual out-of-pocket warranty and product adjustment costs related to products manufactured before the acquisition that approach 900 percent of the amount reserved at the time of the acquisition,” the complaint says.
Middleby says VRC’s former executives knowingly misled it about the current and future profitability of the company.
“Had sellers not concealed the truth about VRC’s business, Middleby would have paid tens of millions of dollars less for the company, if they had bought it at all.”
Middleby seeks more than $100 million in punitive damages for fraud and breach of contract, and a declaration holding defendants responsible for indemnifying Middleby for all losses related to the recall.
It is represented by Robert Saunders with Skadden, Arps, Slate, Meagher & Flom in Wilmington, Del..
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