AriZona Suit: Judge Denies Ferolito Profit Request

A New York state court judge has rejected a request for profit distributions from AriZona Beverages by co-founder John Ferolito.

In court with his partner, Domenick “Don” Vultaggio since 2008, when he tried to sell a share of his company to an outside investor, Ferolito had made a motion to compel Vultaggio to distribute some of the profits from the company. Citing a lack of any clause in the ownership agreement about distribution of profits, the court refused the motion, saying the release of the profits would amount to allowing Ferolito to claim damages before the suit’s outcome is decided.

Court documents blacked out the amount Ferolito had requested. The company had sales of more than $600 million in 2007, according to court documents.

According to Ferolito’s motion, the decline of Ferolito and Vultaggio’s relationship began in 1994, when Vultaggio was moved into the corporate office so the two could run the company together. After the two decided they could share the helm, Ferolito left the management up to Vultaggio. After several conflicts around leadership, Ferolito attempted to sell his shares.

Ferolito claims that in response, Vultaggio stopped distributing the profits he was entitled to in an attempt to cause Ferolito financial problems, and force him to sell Vultaggio the shares at a discount price. Because of the type of company AriZona Entities is, and how they funnel their profits, Ferolito was required to pay significant taxes on money he wasn’t earning, which caused him cash flow problems, according to Ferolito.

But Vultaggio says that Ferolito abruptly stopped lending AriZona Entities money, causing the cash flow problems that prevented the company from making profit distributions as it had in the past. According to the court, these claims have some evidence.

What the court says is that, until Ferolito comes up with more evidence to support his claims, he will have to wait until the verdict comes in to get the cash.

Some observers have indicated that pressing Vultaggio to make profit distributions is an effort to force him into buying out Ferolito. Regardless, the company remains frozen between the two men – and the case continues.