A vice president and board member at In-N-Out Burgers Inc. has filed suit against the hamburger chain, claiming that its top management conspired to oust him as part of a broader plan to take control of the company from co-founder Esther Snyder.
The suit filed by executive Richard Boyd claimed he is co-trustee of two trusts holding the majority of the company's shares, which will shift over the next 12 years to Snyder's sole heir, Lynsi Martinez, and give her control of the company. Boyd claimed that Martinez, the 23-year-old granddaughter of Snyder, is trying to speed the succession.
The suit was dismissed at the request of Boyd on Dec. 9, two days after being filed in L.A. Superior Court. His attorney, Philip Heller, a partner at Fagelbaum & Heller LLP, said in a statement that settlement talks were ongoing.
But Heller left open the possibility that the suit might be re-filed at a later date. He declined further comment.
Court papers reveal an internal struggle within In-N-Out Burgers, a 57-year-old private company known for its simple menu and cult following. Inside the Irvine-based company, In-N-Out has been managed in recent years by a group of long-time senior executives and Esther Snyder, now 86.
In a statement on behalf of In-N-Out and its senior executives who had been defendants in the suit, the company's general counsel, Arnold Wensinger, said: "All parties believe that inaccurate statements and accusations have been made and are regrettable. We are pleased that the lawsuit was dismissed." By "all parties," Wensinger referred to the defendants.
Founded in 1948 by Harry and Esther Snyder, In-N-Out opened its first restaurant in Baldwin Park, which is home to its museum, university and some executive offices. Since then, In-N-Out has steadily added restaurants and now has 202, according to its Web site. Despite the growth, it has retained its original menu of pure-beef burgers, fresh-cut fries and shakes made from real ice cream.
"They haven't changed their menu, they haven't tried to expand into new or different areas," said Art Manask, president and chief executive of Arthur M. Manask & Associates, a restaurant consulting firm in Burbank. "They just have done what they do really, really well."
In 1976, Harry Snyder died of cancer. Management fell to the couple's younger son, then-24-year-old Richard Snyder, who expanded In-N-Out to 93 stores. He was killed in a plane crash near Orange County's John Wayne Airport in 1993.
The eldest son, H. Guy Snyder, took over and further expanded the number of units, including new locations in Arizona and Nevada. He died in 1999 from an overdose of painkillers. After his death, Esther Snyder became president of the company. His daughter, Martinez, was the only child of the Snyder brothers.
Around the time of H. Guy Snyder's death, Boyd claims in the suit that he became co-trustee to two trusts created in 1989 that held the majority of company stock. In that role, Boyd had voting control over half the shares. He also is trustee of a third trust established under H. Guy Snyder's name.
The first two trusts outline a plan of succession under which control of the company would be passed gradually to Martinez.
Now a minority shareholder, Martinez would get one-third of the shares of both trusts when she reached the age of 25, one half at 30 and the rest by 35, the suit said. If Martinez died before reaching those ages, control of the company would go to Esther Snyder's siblings, nieces and nephews, but not to Martinez's family, which includes her husband, mother and two half-sisters.
In the suit, Boyd claimed that Martinez and several top executives at In-N-Out have tried to effectively take control against the Snyder family's wishes by forcing him to resign as co-trustee.
If Martinez was successful, Boyd says, he would be replaced as co-trustee by her brother-in-law, Shawn Prince (not a defendant in the case). The other co-trustee is Mark Taylor, another brother-in-law of Martinez. Taylor, according to the suit, has said he wants to become chief executive of In-N-Out and that Esther Snyder, who is "elderly and in poor health," should be placed in a retirement home.
"Over the course of the past five years, Esther Snyder, as president of INO, has been marginalized," Boyd said in the suit. He alleges that Taylor and others at In-N-Out have refused to consult her on business decisions, such as product price increases and the opening of restaurants.
"Esther Snyder has acknowledged to Boyd that the others 'only want me dead,'" he said in the suit.
Since H. Guy Snyder died, the suit alleged that Taylor has used In-N-Out vendors and employees as part of a $2 million remodel of his home, including landscaping and maintenance. In addition, the suit alleged, he has paid them little to no compensation and charged their services to a company construction project.
Last year, according to the suit, Taylor and Roger Kotch, vice president of finance, asked Boyd to resign as co-trustee, but remain as vice president of real estate and development. He refused. When Taylor relayed Boyd's refusal to Martinez, she is said to have replied, "Doesn't that green-eyed monster know what the Snyder family wants?" according to the suit.
Calls to Martinez and Taylor, both individual defendants in the suit, were not returned. Kotch is not a defendant in the suit.
Afterward, according to the suit, Taylor and Kotch excluded him from management meetings and told other employees that Boyd was a "thief and unethical." They hired an outside forensic accountant to investigate the finances of his department.
Grant Thornton LLP and one of its accountants, Lawrence Rosipajla, who conducted the audit of Boyd's department for In-N-Out and is a defendant in the suit, did not return calls to comment.
By September 2005, Taylor, Kotch and a human resources executive gave Boyd written notice that the company would not renew his employment contract, the suit said. The next month, Taylor gave Boyd a notice about an upcoming board meeting to end his employment contract.
Boyd has since been unable to obtain company documents, keys, access codes and security clearances, according to court papers. He had been seeking an undisclosed amount of damages, renewal of his employment agreement, corporate documents and security clearances. He also had sought an injunction prohibiting In-N-Out executives from denying him access to board meetings and from paying company vendors at discount prices for personal projects
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