Out to sea: will an ongoing lawsuit by former executives mean stormy weather for Olivia?

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HAVING CHARTED THE CHALLENGING WATERS of lesbian entertainment and travel for 35 years, you'd think business would at last be smooth sailing for Olivia. But for the past several months the brand has found itself in troubled waters after former chief executive officer Amy Errett and three members of her senior management team filed suit against the company, claiming they were unjustly fired or forced to resign in March 2007 by Olivia founder and chairwoman Judy Dlugacz. The plaintiffs--who include Olivia's former chief financial officer Dianne Dubois, chief business development officer Brad Lande, and chief marketing officer Sabrina Riddle--are seeking several million dollars in unpaid severance, bonuses, and stock options. Not surprisingly, Olivia has countersued, claiming in court documents that Errett had "grossly" mismanaged the company during her tenure from 2002 to 2007 and schemed to "wrest control" of the company from Dlugacz.

Since entering their legal battle last year, the two sides have used their legal filings in San Francisco superior court to shoot accusations of smear campaigns, backstabbing, and jealousy back and forth. The fallout has seen a startling and public clash between two ambitious, successful women who approached the rise of Olivia from different sides of the business world.

In the 35 years since Dlugacz cofounded Olivia in 1973, she has produced more than 40 albums (which have collectively sold over a million copies); hundreds of entertainment events, including four sold-out concerts at Carnegie Hall; the PBS documentary The Changer: A Record of the Times; and an HBO comedy special with comedian Suzanne Westenhoefer. That success, compounded by the creation of Olivia's lesbian-focused travel business, has earned Dlugacz the iconic status of pioneer and visionary within the lesbian community.

Errett lays claim to different successes. After earning her MBA in finance from the University of Pennsylvania's respected Wharton School, Errett founded the international strategic consulting company the Spectrem Group, where she served as CEO and chairwoman. In 2000 she joined the senior management team at E*Trade, which is where she was working when Dlugacz talked her into joining Olivia two years later. Errett currently serves as "entrepreneur-in-residence" for the venture capital firm Trinity Ventures in Menlo Park, Calif.

Beyond the spectacle, the lawsuit has been a cause of concern for those who travel on Olivia's voyages. Numerous postings expressing worry about the future of the company and its financial health have appeared on Olivia.com message boards, particularly after the plaintiffs sought to force the company to dissolve in their initial filings. In a legal victory for Dlugacz, however, that request was dismissed by the San Francisco superior court in October and is no longer part of the suit, allowing the company to stay intact and operating.

According to Errett's lawyer Michael Rugen, the dissolution request was not an act of "ill will" but simply "a procedural method" to try to force Dlugacz to pay the former executives a "fair buyout for their shares." Errett, Riddle, Lande, and Dubois currently own some 30% of Olivia's shares, with Dlugacz controlling the remaining balance.

Rugen tells The Advocate that his clients "never had any desire" to stop the company from operating with their dissolution request. Any thought that they're "trying to destroy Olivia is so far from the truth. Our clients are very proud of the company that they helped to build," he says. "And they still think it is an important institution and certainly hope Olivia will continue to thrive." Rugen adds, however, that while the former employees would prefer to settle out of court, they "intend to pursue their case through to trial, if necessary."

Although Olivia's lawyer Brian Maschler declined to comment on specifics, he's "confident" that all will be resolved "favorably." Errett and Lande turned down our requests for interviews, and Dubois and Riddle did not reply.

Dlugacz, for her part, acknowledges some challenges, but she's still bullish about the company's future. "This is a time of transition and invention at Olivia," she said in a written statement to The Advocate. "We believe that the future lies in what we do best, providing travel and entertainment experiences for lesbians."

Because it is a privately held company, Olivia's financial statements are not a matter of public record. Dlugacz does offer that the new website, advertisements, and partnerships created under Errett's leadership "generated so little revenue" for Olivia "that combined they did not pay for even 10% of the cost of the website, much less the numerous other initiatives being pursued."

Consequently, she says it eventually became clear to her that the company was "overspending in areas where we had no expertise or revenue potential--like a new website. In many ways we were off course pursuing a strategy that was 'old bubble burst.com'--spend, build, spend some more, and hope someone will pay you for it," she explains. "Like many dot-com companies' experience, the promise of great revenues never materialized."