Having just sailed on her company's Alaskan cruise with lesbian rock duo The Indigo Girls, Olivia founder and president Judy Dlugacz is preparing for another trip - this time to San Francisco Superior Court.
Dlugacz is embroiled in a legal battle with Amy Errett, the company's former chief executive officer who was fired in March of this year, as well as three other former top executives, two of whom were fired while the third claims she was forced to resign.
The four senior executives have filed a multi-million dollar lawsuit against Dlugacz and her company. The quartet is seeking more than $30 million as well as the dissolution of Olivia and distribution of the company's assets to its shareholders.
In court documents, the former executives claim that Dlugacz terminated their employment due to jealousy, and since leaving the company, has defamed them, damaging their reputations. The lawsuit also claims that Dlugacz swindled Olivia's cruise customers by "charging unconscionably high rates."
According to the lawsuit, Dlugacz has refused to pay the former executives their severance pay, deferred bonuses owed to them, and has refused to accept several investment offers in order to hide what they claim are excessive and exorbitant salaries Dlugacz and her family members have been paid.
"While portraying herself publicly as a champion of the underrepresented lesbian community, Ms. Dlugacz knowingly and intentionally took advantage of Olivia's monopoly position as the only travel company dedicated to serving that community," states the lawsuit.
Dlugacz in turn has counter sued, claiming in court papers that Errett "committed numerous acts of gross mismanagement" and tried to "wrest control of" Olivia from Dlugacz by orchestrating an "ultimately unsuccessful scheme to buy Olivia for herself." Dlugacz also claims in her suit that Errett "pursued a campaign to besmirch" her reputation.
Dlugacz is seeking an unspecified amount of punitive damages from Errett plus repayment of a $125,000 loan with interest that Olivia awarded to Errett in January 2005.
Heller Ehrman attorney Michael Rugen, who is representing the four former Olivia executives, did not respond to the Bay Area Reporter's request for comment.
Tracy Peterson, Olivia's San Francisco-based press officer, directed inquiries about the lawsuit to Los Angeles-based public relations firm 15 Minutes. Publicist Gabriel E. Serrato-Buelna said Dlugacz was unavailable for comment Tuesday, September 18 due to her being on the Alaskan cruise, which set sail from Vancouver September 9 and arrived in Anchorage Sunday, September 16.
In a statement released to the B.A.R., the company said, "We will not fight this in the media - we will fight it in the court of law."
Olivia's attorney, Michael Bruno with Gordon & Rees, said he could not comment on the litigation "because it is pending." Asked if the case would go before a jury, Bruno would not rule out the possibility that it could be settled out of court. A court ordered case management conference has been scheduled for October 12.
"Of course there is a chance. Ninety percent of cases are settled out of court," said Bruno.
In 1973, Dlugacz and nine partners founded Olivia Records as a music production company focused on building the careers of women musicians. The company produced nearly 40 albums and sold several million records.
Eleven years later Dlugacz became sole owner of the company, and in 1990, she launched its cruise business, chartering ships with the express purposes of offering lesbian vacation packages. Over the next decade Olivia's business took off, and by 2002 Dlugacz decided to hire a CEO to help with the day-to-day operations of the company. Errett was brought on board in February of that year.
Errett brought aboard several senior managers by the summer of that year, including chief financial officer Dianne Dubois; chief technology and operations officer Brad Lande; and chief sales and marketing officer Sabrina Riddle. Errett also become a minority owner of the company through a limited liability company she formed with her partner, called Intrinsic Capital Value. She holds a 20 percent ownership stake in Olivia.
While to outside observers the relationship between the new management team and Dlugacz appeared to be smooth sailing, the lawsuits detail a rocky relationship between the five company executives. By last September the relationship had completely deteriorated, with Errett calling Dlugacz an "idiot and megalomaniac" and Lande complaining Dlugacz's behavior was "counterproductive and exhausting and immature," according to e-mails listed as evidence in Dlugacz's countersuit.
Dlugacz's lawyers point to the e-mails as evidence that Errett and her team plotted against their client. In one e-mail Errett wrote last September she told Lande that, "We need to get her out of here." In another e-mail sent this past February, Errett told Dubois that "D day is coming for" Dlugacz.
In her countersuit, Dlugacz alleges that Errett inflated the company's revenue reports and that "Errett's ill-conceived initiatives lost money, put the company at risk and squandered opportunities to earn money. Conservatively, the business losses proximately caused by her gross mismanagement total in the millions of dollars."
The former executives counter in their lawsuit that it is Dlugacz who has wasted the company's resources and has purposely downgraded the value of the company - they claim Olivia is worth $30 million while Dlugacz claims the company is valued at less than $5.9 million - in order to render their 30 percent equity interest in the company worthless.
Their lawsuit claims that Dlugacz "insisted Olivia pay her excessive compensation" costing the company in some years more than $1 million, and that the company paid for Dlugacz's personal expenses such as vacations and personal travel. The suit also alleges that Dlugacz erroneously listed her partner Rachel Wahba as an Olivia employee in order to receive health benefits, paid her a salary of $150,000, leased her a car, issued her a company credit card, plus provided her with free office space to see her therapy clients.
The suit also claims that Dlugacz overpaid her daughter, Tiffany, a salary of $55,000 last year for working less than 20 hours a week, and extracts high office rents from Olivia through a corporation that Dlugacz and her partner own.
The former employees also charge Dlugacz of hiring her "life coach" - who informed Olivia employees her role was "The Optimizer" - at a cost of $500,000. The lawsuit does not name the person, but charges they used such "harsh and unprofessional management techniques" that employees have threatened their own legal action.
The lawsuit also claims that Olivia hired Lisa Henderson as its general manager this past March "solely because" of her ties to Dlugacz and her life coach and that Henderson told employees she disliked Olivia's travel offerings, left the one Olivia cruise she took early because she "disliked the service," and didn't plan to go on any future trips.
Dlugacz is also charged with hiring several top executives to replace those she fired who live across the country and are flown in several days a week to work in San Francisco at Olivia's expense.
The four contend in their suit that due to the ongoing mismanagement of the company, "it is no longer reasonably practicable to carry on the business of Olivia" and that "dissolution of Olivia is necessary" to protect their minority shareholder rights.