Brother of CEO who slashed his own pay files suit

Gravity Payments CEO Dan Price drew attention, and plaudits, earlier this year after moving to cut his $1 million salary to boost annual pay for each of his 120 employees to at least $70,000. Now the executive is back in the spotlight over a lawsuit filed by his brother, with whom he founded the company in 2004.

Lucas Price, a shareholder in Gravity Payments, alleges that his brother mismanaged the company. Although initial reporting suggested the suit was sparked by Dan Price's bold pay equity announcement, Gregory Hollon, the lawyer for Lucas Price, told CBS MoneyWatch that is not the case.

"This lawsuit was prepared well before the idea of the $70,000 pay for the entire Gravity Payments workforce surfaced, or was even contemplated, as far as we know," said Hollon of law firm McNaul, Ebel, Nawrot & Helgren.

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Hollon said his client only was notified of the company's intention to boost employee pay only a few days before the plan was announced in April.

"I know that it makes for a more fascinating story if this is about a minority shareholder complaining about all of the employees getting paid too much, but that's not this story. This lawsuit is about issues of misconduct over many years that came to a head well before Dan Price proposed any change to the company's pay structure."

A spokesperson for Gravity Payments did not return calls for comment or respond to emailed questions.

Gravity Payments, which helps businesses process mobile and point-of-sale payments, cleared $6.5 billion in transactions for more than 12,000 businesses in 2014.

Published reports indicate the brothers started the business-to-business services company as Price & Price in 2004 and that Dan Price took over as CEO in 2006. The company was restructured in 2008 and launched as Gravity Payments.

Dan Price's April announcement that the company would raise employee salaries made national headlines, with the executive telling CBS MoneyWatch at the time that his workers "deserve every penny" of the increase. The unusual move comes at a time of rising CEO pay and growing debate over the gap between rich and poor in the U.S.

Mathew Bidwell, a professor of management at the Wharton School of the University of Pennsylvania, said courts are usually reluctant to question a company's leadership on day-to-day management issues. "They call it the 'business judgment' rule, which holds that it is not up to the courts to second-guess what good business practice is."

"But if it's a case where there's an appearance that the majority shareholder is unfairly taking money out of the company to the detriment of the minority shareholder, U.S. courts will step in on behalf of that minority shareholder," Bidwell added.

Despite the legal spat, Gravity Payments is unlikely to lose much of the good will it earned in raising its worker pay.

"This lawsuit will be more of an internal detriment than a public relations problem for the company," said George Arzt, a New York City based public relations and crisis management expert.