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Weekly UpdatesAn investor in Dillard's Inc. stock filed a "derivative" lawsuit in Pulaski County Circuit Court last week that accuses the Little Rock retailer's board of directors of mismanagement, breach of fiduciary duty and unjust enrichment.
The complaint filed by Billy K. Betty of Yell County is the second civil lawsuit making similar allegations to be filed in the past several weeks. A Georgia resident, Steven Harben, filed a lawsuit in federal court on May 27 that accuses members of the Dillard family of using the Little Rock department store chain as "if it were a private company."
In both cases, the plaintiffs seek damages in favor of the company--and, indirectly, for its shareholders--rather than for themselves personally.
Berry is represented by James Streett of Russellville and the Braustetter Straneh & Jennings law firm in Nashville, Tenn. Joe P. Leniski Jr. of the Branstetter firm said the derivative suit is different from a class-action in that no class of plaintiffs needs to be certified for the case to move forward and the company itself is a defendant in name only.
A call to Dillard's legal department was not returned Thursday morning.
The defendants in Berry's suit are the 12 directors of Dillard's Inc., including four members of the Dillard family who are also executives of the company: Chairman and CEO William Dillard II, President Alex Dillard and EVPs Mike Dillard and Drue Matheny. William Dillard II, the lawsuit claims, was paid 54 percent more than the median for CEOs of peer companies in the three years leading up to a May 2008 report, "while the average three-year compensation paid to the Company's other executive offers is a staggering 185 percent above the median paid to executives at peer companies."
While Berry also makes general breach of duty allegations against seven other members of the board, he singles out director Warren Stephens, CEO of Stephens Inc. of Little Rock, for a special complaint: that he was personally rewarded for his role in granting "exorbitant compensation" to Dillard family members.
Specifically, the lawsuit complains that Dillard's has kept secret its payment to Stephens Inc. for consultations regarding Dillard's half-ownership of CDI Contractors of Little Rock. In August, Dillard's exercised its option to buy the other half of CDI from the heirs of founder Bill Clark for $9.8 million.
Berry's suit makes note of other payments made by Dillard's to Stephens-owned entities, in addition to the compensation (more than $100,000 a year) Stephens received for serving as a director. Those payments, revealed in Dillard's annual report, include $3 million in advertising fees paid in 2008 to Stephens Media of Las Vegas, the newspaper chain jointly owned by Warren Stephens and his cousins, Witt Stephens Jr. and Elizabeth Stephens Campbell, and $1.07 million in premiums paid in 2008 by Dillard's Inc. and its employees to Stephens Insurance LLC, which is solely owned by Warren Stephens.
Stephens, through a spokesman, declined to comment on the suit.
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