SALT LAKE CITY — A XanGo co-founder who accused his partners of corporate looting in a federal lawsuit last week is now the subject of a complaint in state court seeking his ouster from the company.
The Lehi-based multilevel marketer claims Bryan B. Davis for years failed to do his job as XanGo's lead attorney and breached his ethical obligations to the company and his partners, according to a lawsuit filed Monday in 3rd District Court.
The 24-page complaint alleges Davis engaged in inappropriate conduct with distributors and disclosed confidential information about XanGo to employees, distributors and competitors after he was fired last year.
Davis is among six founding members of the company started in 2002. He remains on the XanGo board of directors. He and his partners had a falling out in 2012 and have been fighting over a separation agreement.
XanGo seeks to remove Davis from the board and collect an unspecified amount in compensatory and special damages.
According to a company press release, the board was preparing to sue Davis and the complaint is not a response to his lawsuit filed May 16.
XanGo is an 11-year-old privately owned company built around its mangosteen juices. It has more than 2 million distributors worldwide and reportedly has topped $2 billion in revenue. The company is a major sponsor of Real Salt Lake and has its name emblazoned on the front of the team's jersey.
In his suit, Davis accuses his five partners of asset mismanagement, intimidation and illegal activities from fraud to bribery. He claims CEO and board chairman Aaron Garrity used hundreds of thousands of dollars in company assets for personal expenses and lavish gifts for family and friends.
Davis wants at least $3 million for what he claims is breach of contract and wants a judge to strip corporate executives of their managerial roles.
Garrity implemented a “culture of giving” at XanGo, which Davis says meant those partners and employees in Garrity's good graces had unlimited use of company assets for their <a name="HIT0012"></a>own personal benefit.
Davis claims the founders spent millions of dollars in company money for luxury items, including exotic vacations, country club memberships, chartered jets and construction of a suit room for Garrity.
XanGo says Davis's allegations are unfounded. It contends his lawsuit is an attempt "extort" an unreasonable buyout and embarrass his co-founders.
The company claims in its lawsuit that Davis failed to properly draft XanGo's original operating agreement, using a "cookie cutter" form or a form he found online. A 2007 lawsuit filed against the company by a minority investor arose as a direct result of that failure, XanGo contends.
Davis also failed to properly register XanGo products in Europe, costing the company millions of dollars in sales and leading to legal action in Austria, Germany, Switzerland and Italy, according to the lawsuit.
XanGo also claims Davis was a beneficiary of the very corporate culture he is now criticizing.