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Sunshine and clouds mixed. High near 30F. Winds light and variable..
Cloudy skies early, then partly cloudy after midnight. Low 12F. Winds light and variable.
Updated: December 27, 2024 @ 3:03 am
Vermont Community Newspaper Group
Reporter
Following competing appeals, the Vermont Supreme Court this month ruled on the years-long legal battle that saw Garret Hirchak pitted against his brothers Tyler and Toby Hirchak over the management of the Morrisville-based auction company acquired from their father.
Both sides appealed an initial January ruling on the three consolidated lawsuits filed by the brothers in January. The Supreme Court’s recent decision affirmed most of the lower court’s original findings, including that Garret violated his fiduciary duties and upheld his dissociation from the limited liability companies that control Thomas Hirchak Company.
It also ruled that Tyler and Toby Hirchak had to buy out Garret’s equity interest in the business for $375,000.
The lower court had determined that Garret and Manufacturing Solutions Inc. — also known as MSI, the company he founded in 1996, and which provided accounting services to the auction house — was entitled to over $500,000 for cash advances made prior to 2020, unpaid compensation between October 2019 and January 2021, and unpaid invoices prior to March 2020.
Superior Court judge Mary Miles Teachout also determined Garret was not entitled to reimbursement for unpaid compensation or unpaid invoices to MSI after March 2020 because he actively prevented his brothers from assessing the business’ finances.
Following her decision, the brothers both filed appeals on multiple grounds but the Supreme Court found there were no grounds to reverse Teachout’s ruling in the case. It did side with Tyler and Toby in determining that the decision to award unpaid compensation should be cut off at March 2020.
Thomas Hirchak founded his eponymous auction company in the 1970s, and each of his sons worked at the business from a young age, according to the Supreme Court ruling. Garret struck out on his own to found MSI and his own development company, while Tyler and Toby stayed on with the family business. The company grew, with Tyler specializing in real estate and Toby in commercial auctions.
In 2015, Thomas Hirchak acquired a piece of property on Bridge Street in Morrisville that he initially intended to use for auctions, but after the zoning permits were acquired by Tyler and Toby, their father sold it to Garret, and he promised his brothers 10 percent of the sale price over 20 years.
In 2018, Garret created two limited liability companies. Through one, he acquired Thomas Hirchak Company’s business assets for $2.7 million, which the brothers paid to their father through monthly $15,000 installments. The other bought the company’s offices and auction sites for $2.2 million, with a $300,000 down payment supplied by Garret.
Toby and Tyler established that they had offered to contribute the down payment by forfeiting the money owed to them for the purchase of the Bridge Street property, but Garret “ignored their offer.”
Garret would later contend that the down payment was a loan, but neither court found contractual evidence of this assertion.
The brothers became equal owners of the two companies but had to earn their compensation through work. They split the company into three divisions: real estate went to Tyler, commercial to Toby and Garret took on the automobile segment.
Tyler and Toby, who had spent their lives working in the family auction business, were not well acquainted with financial management of the business. On Garrett’s advice, all the human resources and administrative work for the auction company was handled through MSI while the property management for its real estate holdings was handled through his development corporation. The brothers set up their payrolls through MSI but crucially agreed to keep financial records at the auction company.
According to the decision, various MSI employees working on behalf of the auction company marked up their charges, but the financial records were kept at Garret’s company, and the other brothers could only access them during regular business hours.
Despite steady business, the auction business faced periodic cash shortfalls, holes which Garret plugged with over $100,000 of his own money without much discussion with his brothers, which the auction business repaid as money became available. The court later determined Garret needed to be repaid the outstanding balance of that money.
By 2020, Tyler and Toby began to grow suspicious of their brother’s management of their shared business’ finances, and suspected he was working for the auction business far less than them and passing off work to his MSI employees. They pushed Garret to move the financial records to the auction business, but he put off a meeting until eventually declining it all together and hiring a lawyer, asking instead to be bought out.
The brothers settled a lawsuit brought by Tyler and Toby to have the books moved Thomas Hirchak Company, with Garret acquiescing to a third-party inspection even as he continued to put fresh infusions of cash into the auction business, loans Tyler and Toby claimed no knowledge of.
After Garret filed suit to terminate the limited liability company that owned Thomas Hirchak Company’s business assets, Tyler and Toby kicked him out of the company and stopped all payments and reimbursements to Garret and MSI. Garret filed a second lawsuit seeking that money and asked to be bought out from the company, while his brothers filed a suit against him to force his removal from the company and accused him of “unjust enrichment.”
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