A prominent Pacific Northwest lobbying and public affairs firm has filed for Chapter 11 bankruptcy protection amid a bitter legal dispute between estranged co-owners.
Seattle-based Strategies 360 filed a petition Monday evening in U.S. Bankruptcy Court for the Western District of Washington in an effort to stave off what CEO Ron Dotzauer described in court filings as a hostile and humiliating takeover bid by his former business partner, Eric Sorenson.
A legal fight between the two men has been brewing for years over Dotzauer’s failure to pay Sorenson $6 million as part of an agreement to buy out his former 49% ownership stake in the firm, court records show.
The filing, first reported Monday by The Oregonian, is a dramatic airing of strife for one of the region’s preeminent public affairs, political and lobbying firms, which employs about 140 people in 13 states and Washington, D.C.
Dotzauer is a veteran cowboy hat-sporting Democratic political consultant who managed U.S. Sen. Maria Cantwell’s 2000 win over then-incumbent Republican U.S. Sen. Slade Gorton, and who in recent years has been a familiar face on local TV as a political analyst for KING 5 and KOMO 4. A celebration of his 50 years in politics in 2021 included tributes from Gov. Jay Inslee and Lt. Gov. Denny Heck.
Sorenson joined forces with Dotzauer in the early 2000s, merging his then-company, Marketing 360, with Dotzauer’s Northwest Strategies, to form Strategies 360. Dotzauer maintained the majority 51% ownership in the new venture.
The partnership fell apart in 2018, as the owners explored selling the firm to outside investors, according to Sorenson’s version of events.
“We’re not buddies any longer”
Sorenson sued Dotzauer and Strategies 360 in King County Superior Court in July, citing failed promises to pay the debt owed him despite what he said were negotiated extensions of the payment timeline.
His petition asked the court to appoint a receiver, who under Washington law would essentially take over management of the company’s finances and potentially liquidate assets to pay off creditors.
On Oct. 19, King County Superior Court Judge Marshall Ferguson awarded Sorenson a judgment against Strategies 360 and Dotzauer of nearly $6.2 million. He refused a request by Dotzauer’s attorney to stay that order, leading to the likelihood a receiver would be appointed soon, throwing Strategies 360 into turmoil.
In a statement Tuesday, Dotzauer described the Chapter 11 petition as a necessary step that “stops the aggressive action” by Sorenson, allowing the firm to keep operating in “a business-as-usual capacity” while obtaining court approval of a payment plan.
“S360 is financially healthy and is only pursuing Chapter 11 as a targeted strategic tool for resolving this dispute,” Dotzauer said, adding that the day-to-day operations of the firm “will not be impacted in any way.”
The statement referred to Sorenson, who had been Strategies 360’s president until 2018, as “a former employee” and “minority shareholder,” who was “removed from his position due to performance issues.”
Sorenson, in an interview, said he and Dotzauer had been “close partners” for years, but he’d waited long enough for his promised payment and disputed the characterization that his primary motivation was to take over the company.
“After so many broken promises over four years and defaults and saying he essentially doesn’t intend to ever pay me, we’re not buddies any longer, that’s for sure,” he said.
In a June 2022 agreement, Dotzauer pledged to pay $5.6 million by May 1 of this year, but failed to come through, Sorenson said in his lawsuit, which called the dispute “a simple matter of an unpaid debt.”
In its Chapter 11 petition, Strategies 360 listed $48 million in gross revenue in 2022 and more than $33 million so far this year. It listed $8.8 million in assets and $10.7 million in liabilities, with the largest debt the $6.2 million owed to Sorenson.
The filing also disclosed Dotzauer earning more than $724,000 in take home pay over the past year, plus $63,000 in boat and car payments.
The firm was paid more than $3.5 million by federal lobbying clients in 2022, according to data tracked by OpenSecrets, including pharmaceutical companies, tribal casinos and renewable energy firms.
A bitter breakup
When they were looking to sell the firm to outside investors, Sorenson asserts that Dotzauer plotted to edge him out of the lion’s share of profits by diluting the value of his ownership share. He acknowledged in an interview that he was fired by Dotzauer, leading to the agreement to buy out his ownership shares.
In a Nov. 3 court declaration, Sorenson said Strategies 360 was in “deteriorating financial condition” due to Dotzauer’s high compensation, and asserted he “has been siphoning cash out of the business to pay himself when the cash should have been used to pay me as a creditor.”
Dotzauer disputed that characterization in his own court filings, saying Sorenson’s claims were inaccurate and that the firm’s executive compensation to four top executives was less than it was when Sorenson departed in 2018, despite higher revenues.
He also pointed to Sorenson recruiting investors as part of a written plan this summer to push him out and take over Strategies 360.
In an October court declaration, Dotzauer described that plan, which included a reference to a “graceful exit” and retirement party for him, as “a pointed, purposeful insult designed to humiliate me, given that Sorenson knows that I founded S360 and built it into what it is today.”
Some employees of Strategies 360, including its current president, Karen Waters, also filed declarations in the King County lawsuit saying they had worked with Sorenson before and had “no desire” to continue working for the firm if he took it over.
“I believe Mr. Sorenson’s assertion of any form of control over S360 would lead employees – including other employees who are critical to driving S360’s
revenues – to leave the company,” Waters wrote in her declaration.
Sorenson, in the interview, said his primary purpose in filing his lawsuit had not been to force a takeover, but to get the money he is owed while putting the business on a better management footing, saying his plan would have made employees co-owners with equity in the firm.
“I want to protect the company and protect the employees,” he said.
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