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Herman Miller Never Technically Acquired Design Within Reach, Lawsuit Claims

Herman Miller bought DWR in 2014, but a lawsuit has uncovered details that suggest the merger wasn't valid.

Herman Miller Never Technically Acquired Design Within Reach, Lawsuit Claims

Photo: via Design Within Reach

Two years ago, when the legendary furniture manufacturer Herman Miller bought the once-troubled retailer Design Within Reach, it was largely seen as a triumph in the world of high-end furniture. Now, a lawsuit against Herman Miller claims that the $154 million merger never actually happened.

The lawsuit was brought by two of the company's shareholders, Andrew Franklin, president of the investment firm UTR, and Charles Almond, who claim that they lost a substantial amount of money in the merger. After Franklin and Almond brought the case to court in 2014, they discovered in the source documents something much larger: a number of technical mistakes made by the company that would make the merger invalid.

The biggest finding in the source documents, Franklin tells Co.Design, was that DWR never successfully carried out a reverse split of its shares when Herman Miller bought it in 2014. That, in effect, makes everything that the company does after the fact invalid, including the merger, Franklin argues. It also means that Herman Miller never technically obtained the 90% of the company's stock needed to complete the deal, he says.

As the Times reports:

Mr. Franklin and another shareholder, Charles Almond, are seeking unspecified damages, but their argument could, in theory, result in the court ordering that the merger be rescinded and DWR essentially carved out of the company. It is a long shot, but it would be a corporate do-over on a large scale.

On February 26, 2016, DWR sent a letter to all its shareholders that admitted to defective corporate acts and said they were working on correcting them. Herman Miller, however, never disclosed this information to its own shareholders, says Franklin. DWR is now a significant part of Herman Miller and is "material" from an accounting, reporting and regulatory standpoint.

Co.Design obtained both the letter, as well as the plaintiff's second amended complaint, which was filed in 2015 after Franklin and Almond discovered the additional details in the source documents. They are being published exclusively on our site.

A representative from Herman Miller declined a request for comment.

Herman Miller's move to acquire Design Within Reach came as the manufacturer was trying to counteract dropping office furniture sales by transitioning into a lifestyle brand. Design Within Reach, the retailer made famous for bringing European design to the U.S. at affordable prices, had just become profitable again. The retailer was trying to redeem itself after battling infringement lawsuits over copycat designs and dropping sales. To many in the design world, the merger seemed like a natural one. The lawsuit will ultimately decide whether the acquisition still stands.

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