Long-Simmering Lawsuit

A Benton County man claims in a blockbuster lawsuit that one of Fayetteville’s oldest law firms tried to smear and sully him into accepting a sweetheart financial settlement with his ex-wife and, in the process, wrecked some of his international business deals.

John J. Ryan, a high-level executive for Wal-Mart Stores Inc. from 1995 to 2004, is seeking $20 million in compensatory damages and an undisclosed amount in punitive damages from the defendants — his ex-wife, Paula Jane Ryan, the law firm of Estes, Gramling & Estes PLC and one of its partners, Douglas Gramling.

The plaintiff, according to the lawsuit filed Feb. 11 in Benton County Circuit Court, contends the defendants’ aggressive attempts to pump his associates for damning information throughout his 2010-11 divorce proceedings ultimately harmed his standing in the global world of retail and product sourcing and thus killed lucrative business ventures, particularly in Canada, where he was associated with grocer Danny Ferraro.

In the lawsuit, Ryan’s attorney makes this claim: “Defendants, by and through the use of their unlawful, dishonest, and improper course of conduct, consisting of multiple wrong-doings … substantially damaged the business and financial interests of Ryan, including his legitimate business expectations with Ferraro.”

The lawsuit will play out against a backdrop of long-simmering matrimonial angst and a Ryan bankruptcy of national size and scope.

Depending on how the lawsuit unfolds, there could also be another encounter between attorney John Everett of Fayetteville — who at one point represented Paula Jane Ryan in the divorce and is referenced in the suit — and Ryan’s attorney, Jim Penick of Little Rock, who Everett punched in the head during a contentious September 2012 deposition in an unrelated case.

In the meantime, all six judges in the 19th Judicial District West are expected to recuse, which means a special prosecutor will likely hear the case that pits the 69-year-old law firm against Ryan, an East Coast power player with a jet-set pedigree.

For Ryan, this is the latest legal imbroglio in a four-year span that includes the Ryan vs. Ryan divorce in Benton County, four bankruptcies in the Western District of Arkansas, and a lawsuit in New York County Supreme Court filed against him by olive oil and Feta cheese titans Eric Moscahlaidis and Kyriakos Vergiris, both of Krinos Foods Inc.

Along for the bumpy ride has been Ryan’s ex-wife, Paula Jane Ryan, who had two children with her ex-husband. She expressed anger and dismay that her former spouse of two decades decided to sue her.

“Between my divorce, John’s bankruptcies, and now this most recent lawsuit, the last four years have been very difficult for me and my children,” she said in a prepared statement. “The allegations which John has made in the current case are patently untrue, as will be established in court. I resent that he has so publicly cast both me and Doug Gramling in such a false light.”

Gramling, a Northwest Arkansas native and member of his firm since 1983, expressed similar sentiments.

“The plaintiff has attacked my reputation and honesty,” he said in a prepared statement. “The allegations in the complaint of wrongdoing by me are completely untrue and unfounded, and Mr. Ryan continues to cause unmerited difficulties for his ex-wife, Jane Ryan, as she too has done nothing wrong or improper.”

Ryan’s attorney, Penick, was asked for a statement but did not respond to the request. Ryan, telephoned at the Bentonville office of his current enterprise, Citiwin Holdings Limited, did not return multiple calls seeking comment.

But Everett — who in the suit is said to have used leaked Walmart personnel documents in an attempt to besmirch Ryan during the divorce proceedings — was succinct in his interpretation of Ryan’s most recent filing.

“It’s silly,” Everett said of the $20 million suit. “I guess he’s after money or he’s world-class pissed off at his ex-wife or her attorney.”

 

O Canada

In the complaint, Ryan alleges Gramling communicated to at least one Ryan associate that he knew why Ryan left Walmart in 2004 and that he knew of an affair Ryan allegedly had while still employed at Walmart — information that, according to the suit, would have come from Ryan’s Walmart personnel records.

In the suit, Ryan says that the only known connection between Gramling and Walmart’s general counsel, from where the records presumably came, was Everett, “whose former partner had been Wal-mart’s general counsel,” a reference to Tom Mars, who served in that role from 2002 to 2009, and prior to that, was a partner with Everett in the Fayetteville firm of Everett Shemin Mars & Stills.

While Mars stepped down as general counsel in 2009, before Ryan’s ex-wife filed for divorce, Mars remained at Walmart as chief administrative officer until last year. Everett dismissed the notion that he cozied up to Mars for the personnel records in order to expose Ryan’s purported adultery.

“That’s not true,” Everett said of the suit’s allegation.

Ryan made his reputation at the Mercantile Stores Company Inc., where during the course of a 20-year career there, reached the position of executive vice president for worldwide merchandising and marketing. He joined Walmart in 1995 as an executive vice president with responsibility for global sourcing and supplier development.

According to the suit, he procured everything from caviar to diamonds.

After leaving Walmart in 2004, Ryan became associated with a variety of companies including Brand Neue Corp., Spice Depot, Nature’s Wonder-Canada, Elite Cosmetics-Canada, and Luma Vue.

A big part of the Canadian venture was Danny Ferraro, the grocer who, according to the suit, and in partnership with Ryan, landed an $80 million supply contract with Shenzhen Richful Solar Energy Technology Co. and Guangzou Original LED Lighting Products Co. Ltd.

In the suit, Ryan says big deals like that would have kept rolling in, had it not been for the alleged antics of Gramling and the complicity of Paula Jane Ryan.

According to the suit, Gramling put immense pressure on Ferraro to travel down from Canada to Arkansas and speak ill of Ryan in a divorce deposition, but Ferraro refused. According to Ryan’s suit, Gramling did the same thing to Declan Walsh, an associate in Ireland, and Harvey Feinman, a businessman in Boca Raton, Fla. The ex-wife, according to the suit, knew that the alleged harassment was taking place.

In summation, Ryan calls Gramling’s alleged campaign of terror a vendetta instituted to “harass and coerce a financial settlement out of Ryan through threats, apparent bribes, and invasion of Ryan’s privacy and business associations.”

According to the suit, Ferraro wearied of the Arkansas drama and cut ties with Ryan in March 2011. By telephone, the Northwest Arkansas Business Journal contacted Ferraro in British Columbia, but he did not comment.

 

You Have Been Served

If Ryan’s latest lawsuit represents a bit of bad blood between him and his former wife, it’s easy to see where that bad blood came from. In the initial 2010 complaint for divorce, Paula Jane Ryan claimed that her husand had become “verbally abusive to the plaintiff and the plaintiff’s children, treated plaintiff with such contempt and rudeness, including the establishment of an inappropriate relationship with another woman.”

In his countersuit, Ryan claimed that his spouse “offered such general indignities to the person of the defendant as did render defendant’s condition in life intolerable,” and argued that he was entitled to a divorce.

Among other things, the proceedings featured a tug of war over a deferred compensation package from Walmart, a pair of $40,000 earrings, and Ryan’s passport, which at one point had been seized so that he could not leave the country.

On Aug. 25, 2011, a Benton County process server named Frankie Hart tailed Ryan and his alleged mistress to the Walmart Neighborhood Market on South 8th Street in Rogers. Hart’s mission was to serve a subpoena to compel the alleged mistress to appear in court for a deposition, and the subpoena was served at the behest of Everett, who by that time had taken over as lead attorney representing Paula Jane Ryan in the Ryan vs. Ryan divorce.

The process server, according to an affidavit filed with the court, followed Ryan and his alleged mistress into the grocery store. The process server approached the alleged mistress, and after greeting her placed a subpoena in her grocery basket and said, “You have been served.”

According to Hart’s affidavit, he then left the grocery store and, soon thereafter, Ryan came storming out, the subpoena in his hand and yelling, “Sir, you just served the wrong person,” before throwing the subpoena to the ground.

 

Boca and Bankruptcy

The Ryan case is likely to generate a flurry of motions and produce reams of paperwork in the form of discovery and depositions, and it is unclear how long it will take for the case to be adjudicated.

What is known is that as the case develops in Benton County, additional cases will progress in bankruptcy court, where last year Ryan filed a Ch. 11 petition for himself as well as for two of his companies — M & J Development LLC, and W & J Development LLC — for total debt of about $17.7 million and total assets of about $3.7 million.

Ryan’s liabilities are tied to real estate, loans, unpaid taxes, the divorce settlement, car notes and lawsuits, according to the bankruptcy records. One of Ryan’s largest unsecured creditors is businessman Harvey Feinman, who lives in the lush, beachfront resort city of Boca Raton, Fla. At some point, Feinman loaned Ryan, or one of his business interests, $2 million, but did not get the return he was looking for. When reached recently by telephone, Feinman expressed regret at how his venture with Ryan turned out.

“I wish things had ended better,” Feinman said. “It’s ancient history and it’s sad.”

When contacted recently by telephone, Kyriakos Vergiris, the New York-based Greek foods magnate who loaned one of Ryan’s companies, Luma Vue, $250,000 in 2011, had little to say.

“It has nothing to do with you — bye,” Vergiris said, shortly before hanging up the telephone.

While Ryan went global in his post-Walmart career, he continued to live in Northwest Arkansas, where among other properties he owns an 11,595-SF mansion at Pinnacle Country Club and a 4,138-SF getaway on Beaver Lake.

Frank Sharum, owner of Fort Smith-based Sharum’s Garden Center, said he did the landscaping on both properties — and never got paid. Sharum is listed in the bankruptcy records as being owed $47,000 in unsecured debt.

“I heard he was making money and he lived like he was making money,” Sharum said. “I call it the Brandon Barber theory — you want to live the life off of everybody else.”