Select Comfort suits filed

Litigation over how to conduct the recount of a Select Comfort shareholders' vote has spilled over into a Minnesota court.

Patrick Hopf, a former chairman of the Select Comfort Corp. board, sued the company Thursday in Hennepin County District Court.

He wants Select Comfort to hire an outside firm to recount the votes of shareholders, who narrowly defeated a proposal in late August that would allow a private equity firm to buy a 52.3 percent controlling interest in the company.

Hopf, who holds 73,750 shares, would have become chief executive of the Plymouth-based bedmaker if shareholders had approved the proposal to permit Sterling Partners to buy the shares for 70 cents per share, or $35 million. The day before the shareholders meeting, the stock closed at $2.77 a share.

The Hopf lawsuit was filed after Sterling sued Select Comfort in a Delaware court, where it also is seeking a court order to require that a recount be conducted by a third party. In addition, Sterling wants a Delaware judge to enjoin Select Comfort from terminating the securities purchase agreement between Select and Sterling.

Select Comfort spokeswoman Gabby Nelson on Friday declined to comment on the Hopf suit.

In a Thursday statement, Select Comfort said "claims made by Sterling Partners do not have merit and the company intends to vigorously defend the litigation." It added that it "already has instructed Broadridge Financial Solutions, Inc., to perform a recount of the vote to ensure that all votes were correctly counted."

Broadridge did the original count at a special meeting on Aug. 27, and then Select Comfort General Counsel Mark Kimball announced that the shareholder proposal failed because only 49.94 percent of the shares present and eligible to vote supported the Sterling deal.

Select Comfort's board originally sought the Sterling deal, announced in May, to raise new capital. It continued to support the deal even as its stock price rose this summer and said completing the transaction was linked to negotiating more favorable terms with its lenders.

Hopf attended the shareholders meeting. But after he watched what transpired there, he hired Dorsey & Whitney, Minneapolis, one of the state's largest and highest-profile law firms, to try to force Select Comfort to bring in someone other than Broadridge to do the recount.

"We are simply trying to make sure the recount is done with integrity by an independent and disinterested party to ensure that the final vote reflects the will of the shareholders," Peter Carter, Hopf's attorney, said Friday.

The Hopf suit says that before the shareholders' meeting was convened, the vote tally showed a majority of shareholders supported the Sterling transaction.

"There was confusion during the meeting as to whether shares held in the Select Comfort 401(k) plan were voted as directed by their beneficial owners," the Hopf suit said. Also, the lawsuit notes, some votes were changed during the meeting and "manually calculated by one employee of Broadridge."

The suit also said the proxy materials included a recommendation that shareholders approve adjournment of the special meeting "if necessary or appropriate to solicit additional proxies approving the Sterling transaction."

The suit said shareholders did approve the adjournment proposal, so Hopf contends it was inappropriate for Kimball to rule him out of order when he made a motion to adjourn the special meeting before the vote total was announced.

Select Comfort's stock closed Friday at $3.05 a share, up 6.27 percent.

Liz Fedor • 612-673-7709