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How Poor Structuring and Documentation Led to Litigation
In the recent Washington Court of Appeals case of Wake Up, Inc. v. Roasters Holdings, LLC, 2025 Wash. App. LEXIS 1909 (Wash. Ct. App. 2025), the court tackled a complex post-acquisition dispute involving coffee franchises, multiple LLCs, and allegations of fraud and breach of contract. The decision offers a great reminder of how deal structure, documentation, and post-closing conduct can make or break a transaction.
The Backdrop
Wake Up, a Spokane-based coffee company, entered into a 2020 agreement to acquire Tri-Cities coffee shops operated by Roasters Holdings, LLC. The transaction involved several entities and individuals and was followed by a series of ownership changes. What appeared to be a straightforward acquisition quickly unraveled into litigation. Wake Up alleged that Roasters Holdings failed to deliver on key contractual promises, misrepresented financial details, and improperly transferred assets.
What Went Wrong?
The plaintiffs brought claims for breach of contract, fraud, and unjust enrichment. The court found in their favor, citing:
- Enforceable obligations under the purchase agreement
- Misrepresentation of material facts during negotiations
- Improper handling of franchise rights and assets
- Disregard for corporate formalities, justifying veil piercing
Notably, the court extended liability to the LLCs individual owners and related entities, citing commingling of assets and failure to respect corporate boundaries.
Lessons for Dealmakers
This case illustrates how missteps in deal structure, documentation, and post-closing conduct can escalate into litigation. The court's findings highlight the importance of legal precision and operational discipline throughout a transaction. When buying or selling a business, or advising those who are, these principles are critical:
- Clarity is king: Vague or informal deal terms invite disputes. Every obligation, from asset delivery to franchise rights, should be clearly documented.
- Due diligence is not optional: Representations must be verified, and assets confirmed as transferable and free of encumbrances.
- Corporate structure matters: Multiple LLCs won't shield owners if corporate formalities are ignored.
- Post-closing vigilance pays off: Compliance with post-closing obligations should be monitored and enforced when necessary.
Transparency, clean documentation, and proper LLC management are not just best practices, they're essential safeguards against costly disputes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
