A trial to determine who will own Kong, which grew out of a Denver auto shop to become a global pet toy valued at a half-billion dollars, got underway Monday.
The three-week proceeding follows more than three years of litigation across two Denver courts and pits Joe Markham, Kong’s founder, against his company, its longtime president and its other co-owner. At stake is millions of dollars and control of the Golden-based business.
“To have this court force Mr. Markham to leave his company is simply wrong and this court should not do it,” his attorney, Billy Jones, said in opening arguments Monday.
Markham is accusing Kong, President KD Decker and co-owner John Nelson of freezing him out of decisions at Kong as part of a long-term plan to take over the business.
“Mr. Nelson and Ms. Decker have engaged in a multiyear scheme to take Mr. Markham’s company away from him and frankly, your honor, they have been somewhat successful,” Jones said. “We need this court to force Ms. Decker and Mr. Nelson to simply play by the rules.”
Decker and Nelson, meanwhile, say they are the reasons Kong is a success today.
“KD’s leadership made Mr. Markham and Mr. Nelson a massive amount of money,” said Michael Carrigan, a lawyer for Decker, who has been president of Kong since 2005.
Caught in the middle of this intra-company dispute is Central Garden & Pet. That company paid $25 million in 2022 for a 10% stake in Markham’s holding company, which owns half of Kong. Central is accused of “clandestinely” buying the stake as the first step in an eventual takeover.
“As exciting as it sounds for this to have been some conspiracy, this was a straightforward business deal,” said Valeri Pappas, an attorney for Central. “Central does not go in and take over companies against their consent. Central has never taken part in a hostile takeover.”
Kong’s origins date to 1970, when Markham, the owner of an auto body shop downtown, got a guard dog named Fritz for the business. When Fritz showed a fondness for the rubber axle stop of a disassembled Volkswagen bus, an idea formed. Kong was incorporated in 1976.
Nelson paid $5 million for a 50% stake in 1999 and the two became 50-50 partners. That arrangement worked until the early 2020s, when Markham felt that Decker and Nelson were making self-enriching decisions without him and trying to push him to sell his 50%.
Markham is asking Judge Chris Baumann to determine that Nelson violated their agreement, so Markham can purchase Nelson’s shares and take over Kong. Nelson is likewise asking Baumann to determine that Markham violated their agreement by selling the minority stake to Central. He wants the Central sale voided and to buy out Markham’s shares in Kong.
“Kong is a great company, it is a huge asset to Colorado, and it should be kept in the hands of the people who built it into what it is today: John Nelson and KD Decker,” Carrigan said.
“It is worth remembering that without Joe Markham, there is no Kong,” Jones countered. “There is no brand, there is no company, there are no sales, there are no toys.”
The physical evidence for the lengthy trial is so extensive that it caused a brief delay at the courthouse security checkpoint Monday morning. Dozens of cardboard boxes containing thousands of transcripts and exhibits had to be wheeled into the courtroom of Baumann, chief judge of the Denver District Court, ahead of the opening day’s 8:30 a.m. start time.
The case involves a baker’s dozen of lawyers spread out across five tables in the courtroom. The judge announced that he had asked the city to turn the room’s air conditioning down to its lowest setting as a result of the large number of jacketed people in the room.
Just before lunch, the trial’s first witness took the stand. One of Markham’s daughters recalled sitting on a living room floor as a child, packaging and shipping Kong toys during the company’s earliest days, when it was run out of a spare room in her grandmother’s home.
“All of my earliest memories involve my dad inventing Kong,” Myndi Rohweder testified.
This story was originally published by BusinessDen.
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