Triumphant in demise; Flat Tail Brewing owners win more than half a $ Million in story of embezzlement and betrayal
Flat Tail Brewing co-owners allege fraud, embezzlement, and betrayal by their partners that led to the Corvallis, Oregon brewery’s closure. An explosive lawsuit has recently uncovered this previously untold story.
Remember Flat Tail Brewing? The Corvallis brewery that was once a darling of the Oregon craft beer renaissance, and young 22 year old brewer/co-owner Dave Marliave lauded as the up and coming beerlebrity of the still nascent craft beer movement. The brewery coasted to a quiet end in 2020 during the pandemic, but their demise started much sooner with an alleged fraud and money laundering scheme that was only recently brought into the light after an extended court battle. For the first time, Dave Marliave is talking about what happened and in typical fashion, speaking truth to power and damn the consequences.
The final days of Flat Tail Brewing as told by founding brewer and face of the company, Dave Marliave, were brought about by a personal and professional betrayal by fellow business partners and former friends. The story is now only beginning to come out, as last month a judge and jury awarded David and Emma Marliave, and Christopher and Monee Johnston, more than half a million dollars. But even in victory, Dave Marliave paints a picture of a career and a brewery destined for greatness, snatched away by greed and deceit. One cannot help but wonder what could have been?
A young Dave Marliave circa 2011
“When I started Flat Tail I was brought in to just run the brewery side, I had just turned 22 at the time and was obviously just thrilled to have that kind of opportunity. And part of that excitement was knowing that I would be partnering with two different couples that had tremendous industry experience,” says Dave Marliave.
Flat Tail Brewing was founded by two married couples; Mark Martin and Laura Bryngelson from Calapooia Brewing, and Ian and Tonya Duncan. The Duncans had a number of successful bars and restaurants in Benton county with a great track record. A young and hungry Dave Marliave seemed like the perfect fit to lead the brewery. Through years of sweat equity, Marliave and his wife Emma would become owners, and Mark and Laura would sell their stake to Christopher and Monee Johnston.
Flat Tail Brewing opened in 2010, right at the time when the craft beer boom was just getting started, before the flood of new breweries began launching in Oregon. Even though there was no hype at the time, Flat Tail Brewing found immediate support in the college town where they leaned on being a sports bar with experimental beers. By 2013 it was clear that the U.S. was in a craft beer renaissance, the largest beer competition in the world, Great American Beer Festival, was receiving a record number of entries. That same year Marliave decided to enter Flat Tail beers for the first time, and came home with a silver medal for their Kolsch and a bronze for their Belgo-American IPA, instantly putting the brewery on the map as one to watch. The brewery was featured in local and national publications, “best of” lists, and Dave became a regular on The Brewing Network.
“Walking on that stage for GABF, that was one of the best days of my fuckin’ life,” says Marliave with pride and a bit of sadness about the better days before it all went awry. “I got married that year, we put a 15bbl brewhouse in that year. The very last 2 batches we brewed on our original 6bbl system got 2 gabf medals from this tiny shit hole little brewery in Corvallis with a sports bar attached to it. These things were achievements and accomplishments that I dreamed my whole life of making. I thought everything was great!”
New School Beer archive photo of Dave Marliave right after winning two medals at the 2013 Great American Beer Festival
That was the beginning of a three year run that saw Flat Tail outpacing many of the other breweries of the time in both accolades and sales, but that would soon come crashing down all too soon.
“I was thrilled with the direction of the business, but there was never really any money left over,” says Marliave. “And because I was so laser focused on making beer; make more beer, win more medals, open up more markets, I never really thought about why that was.”
In 2018 Flat Tail started experiencing real financial troubles, the increased competition both in downtown Corvallis bars and restaurants and in the wholesale business. That year, Flat Tail’s wholesale partner, General Distributors, GDI Inc., sold to the much larger Columbia Distributing which put some brands into freefall. Marliave wasn’t shy about voicing his displeasure with the new distributor. Flat Tail pulled back, and began self-distributing their own beers to save money. The next year, Marliave publicly went after 10 Barrel Brewing when the corporate Anheuser-Busch/InBev owned brand allegedly stole Flat Tail Brewing’s slogan.
“I stopped taking a paycheck again, which was a normal thing when we weren’t doing well that I wouldn’t take any money,” says Marliave.”We had kind of resigned ourselves to believing that the profit margin just wasn’t there, and there was always a reason there for why there wasnt money left in the bank account.”
But even then, he wasn’t that worried. In 2017 Flat Tail had won another GABF medal, this time a gold in the white hot American Sour category, and there was still a ton of enthusiasm for the brand. He just figured it was time to put his head down and make it work. Then the other shoe dropped.
In 2019 Flat Tail business partner Iain Duncan came up to Dave while he was working in the brewery and said they needed to talk. “He said ‘we have a large amount of back owed taxes,’ and immediately I was super taken aback and shocked, like ‘what do you mean we have a large amount of back owed taxes, why have we not been paying taxes, and how much?!’ and he said ‘I dont know all the details, but I think it's over a hundred thousand dollars.’ I was immediately like, you gotta give me some info man, which quarters, which agencies, when did this happen? And he was like ‘I am going to have Tonya put that together for you’ she did our books from day one, did our payroll processing, bookkeeping everything.”
According to Marliave, the next day the info was not forthcoming and when he confronted Iain about it over the phone he said they needed to meet to explain it in person rather than hand over any documentation that made any sense. To Marliave, that was an immediate red flag.
“The feeling I had when I heard that…you gotta realize this guy wasn’t just my business partner, he was one of my groomsmen. When you are involved with someone in business for a decade, you form a bond no matter what. But when I heard that I was like ‘no, you need to send me this right now, I am not your employee, I am a managing partner of this business’ and it was like a switch flipped. He immediately got angry and started yelling and cussing and that’s when I knew without a doubt something is really wrong, this isnt how this would have gone if we just didnt have the money to pay the taxes.”
A meeting was called between the Marliaves and their four business partners. Everyone had the same question for the Duncans: when, why, what, how much?
“No matter how many times we asked the same question we werent getting any answers. We kept hearing ‘the business doesnt have any money, we arent making money, the pub isnt profitable and hasnt been for months,’ which is completely opposite from everything we have been seeing and hearing,” says Marliave, adding that the meeting ended with Iain saying it was all a witch hunt and that they had to close the business. But the profit and loss statements did not add up, says Marliave.
“We go from Thursday thinking this is a rough time to be a small independent craft brewery, to Friday we are apparently six figures in debt, to Monday hearing that we need to close the business in 4 months. Obviously that wasn’t something we could just say ‘ok, we will close everything and just go bankrupt all of us.’ It’s like no man, we need some answers first.”
The next day Marliave hired a lawyer and began more formally requesting paperwork. Getting few, little, or misleading answers on the status of the books that were run separately by the Duncan’s own payroll firm Duncan Culinary Ventures. Marliave began digging through all of the receipts and old files himself. He couldn’t figure out how a few bad months could turn into hundreds of thousands in losses.
By April the situation had devolved to the point where it was clear there would be no resolution. The Duncans were barely showing up to work, and the other four partners in Flat Tail Brewing requested their resignation, which wasn’t forthcoming, but they eventually obtained.
“That week they canceled our Sysco food account, they took over $20k out of our bank account without any explanation, they sent an email to our landlords shortly after this saying that we wouldnt be renewing our lease, without talking to anyone,” says Marliave, who was still trying to find a way to save the company, this felt like sabotage.
“By that time for a brief window I was granted access to one of the pub bank accounts, I immediately printed all of our statements, and I got ahold of what I found out was the actual company processing our payroll. Because they [the Duncans company] were just sending numbers into a worksheet to another company to actually do the payroll.”
He started adding up statements, and says “I realized that there were hundreds of thousands of dollars in excess transfers from the Flat Tail bank account to Duncan Culinary Ventures which was their payroll company that they owned. And that is when it went from ‘there is something wrong, to oh my god I think our partners are embezzling money from us.’“
Iain Duncan and Dave Marliave were jointly managing members of the company. Flat Tail Brewing was composed of two LLC’s, SNJ Corvallis which ran the brewery side of the operation, and DK3 LLC which ran the pub side of the operations. Marliave says that DK3’s payroll company Duncan Culinary Ventures handled all bookkeeping. But when he finally was able to access the accounts, it was clear that they were transferring money from DK3 to DCV for what was supposed to be payroll wages and taxes, “but we ended up finding out was this was a con that they were running to basically launder that money for their own personal use and their other businesses.”
By June of 2020 Flat Tail Brewing was forced to close, blaming it on the pandemic and losing their lease. But internally SNJ Corvallis decided their only course of action was to walk away and say ‘fuck it’ or fight this in court. They decided to file a lawsuit which has been kept quiet until now.
“I think most of us think what happens when someone robs you is that you sue them, it takes a few months to go through discovery and get your documents etc etc, then you go to trial and whomever is right wins. That is not how things work. It took us 4 years to get to court and actually get in front of a judge and jury. I had to borrow the money from my father.”
Corvallis was a ghost town in 2020, the pandemic had hollowed out the entire business and the hospitality scene in town. The final straw was a surprise notice from the Flat Tail building landlords that they were being evicted without cause. At that point, Marliave’s plan was to give up the pub/bar part of the building that the Duncans ran, and relaunch the brewery in partnership with 2 Towns Cider as New Spring Brewing. But the surprise eviction, possibly caused by the owners getting cold feet due to the internal company strife and the pandemic, was the final straw for the brewery. They were given 30 days to vacate. If this wasn’t reason enough to give up on craft beer, and the impending lawsuit against their former business partners, then what was? At this point Flat Tail Brewing was toast either way, so why even waste your life spending more money on a fight that the Marliaves may not even win?
“You better believe I thought that every single day. I thought that I would rather be pumping gas than be in this industry any longer. But you have to realize when I was brought in to Flat Tail in my early 20’s, I had already been brewing professionally for 2 years. This is all I have ever known, this is all I ever wanted to do. When I was 16 I realized I wanted to be a lawyer or a psychiatrist, because I think I would be good at those things and I would be able to make enough money to open my own brewery. I was 5 years away from being able to legally drink when I knew I wanted to open a brewery.”
Giving up, is simply not in him. And when they entered into litigation, he couldn’t talk about it with anyone, which put huge stress on him and his relationships.
“It broke me as much as someone can be broken without completely giving up. I’m very transparent about the mental health aspect of it, I was very much on the brink for a long time,” says Marliave.
In response to the lawsuit, the defendants Iain and Tonya Duncan filed 5 counterclaims against the plaintiffs alleging breach of fiduciary duty, accounting, breach of contract, breach of operating agreement, breach of covenant of good faith and fair dealing, and conversion.
Marliave says that in discovery they identified over a hundred thousand dollars of theft from the company in 2012 alone. He says they were taking out hundred thousand dollar bridge loans from loan sharks from 10-40% interest to hide the money taken out of the business. Putting himself, and his family into debt to fight the Duncans in court and reliving the same day-after-day stress for 4 years as the lawsuit crept agonizingly forward was brutal.
Knowing the compound results of the personal hardship and actual dollar amount that went missing from the company, and knowing that he would never be able to talk about it pushed Marliave forward every step of the way.
“It wasnt just ‘the business didnt work out.’ Knowing that if we had those hundreds of thousands of dollars to reinvest in the business instead of having to take loan after loan after loan out, it would have worked, it did work! And knowing that, I could not just let that go, I couldnt just leave that on the table and walk away knowing that we had something and someone took it from us and that we would never be able to tell the truth.”
This matter finally came to trial before a 12 person jury under Judge Joan E. Demarest on June 12, 13, 14, 15, and 16, 2023, Case No. 19CV29021. The jury ruled against Defendants Iain and Tonya Duncan and Duncan Culinary Ventures, Inc. dismissing each of their counterclaims and finding in favor of each of the plaintiffs 9 claims.
The jury awarded the Plaintiffs a total amount of $532,000.00 plus attorney’s fees plus post-judgment interest at the statutory rate of 9% per annum until paid. And further ordered that Defendants Iain Duncan and Tonya Duncan are hereby expelled from DK3, LLC and S&;J Corvallis, LLC. Iain and Tonya Duncan have no rights, including, but not limited to, any monetary or voting rights, in either entity. They have reportedly since filed for bankruptcy.
In the end, Flat Tail Brewing is still dead and the Marliaves lost 4 years fighting for just some of what they were owed and who knows when they will even see that. Even if they don’t see a dime of that money, the biggest prize awarded by the jury was vindication and just maybe a little bit of renewed optimism for this industry and a life-long passion that was nearly extinguished before Marliave even turned 35.
“I spent over 10% of my fucking life on this lawsuit. That is no small thing, but we had to get to the end. If for no other reason than to be able to tell our story and explain what happened,” says Marliave. “Today I am getting it back, I wish I could say ‘yes, I love beer and everything about it!’ But that would be a lie. If anyone knows anything about me in this industry it’s that I can’t keep my fuckin mouth shut, and I can’t lie about it either.”
Flat Tail Brewing will go down in history as a great local success story that imploded in dramatic fashion. But Dave Marliave, the embodiment of Flat Tail Brewing, will be remembered as a true craft beer evangelist who refused to be flattened and never turn tail and run from a fight.
In 2021 Dave Marliave sold the Flat Tail brewhouse to Calapooia Brewing in Albany, Oregon. He then began leasing time on his old brewery to launch his one man brand - New Spring Brewing - a sly spinoff of Flat Tail Brewing that marked a new dawn for the Marliaves unencumbered by past trauma. Today, Dave Marliave works as a veteran brewery consultant at only 35 years of age, releases two new New Spring beers quarterly, and self-distributes the beer himself with only the help of friends and family. There is much of his story left to be told.
