Albert's Capital Servs., LLC v. Damon's of N. Am., LLC (In re Unique Ventures Grp., LLC)
| Decision Date | 22 January 2020 |
| Docket Number | Case No. 17-20526-TPA,Adversary. No. 19-02013-TPA |
| Parties | IN RE: UNIQUE VENTURES GROUP, LLC, Debtor Albert's Capital Services, LLC, as Plan Administrator, Plaintiff v. Damon's of North America, LLC, et al., Defendants |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania |
Ross M. Bobbitt, Esq., Counsel for Albert's Capital Services, LLC
Joseph Luvara, Esq., Pittsburgh, Counsel for Damon's North America LLC
This Adversary Proceeding presents the issue of which party is the rightful owner of certain assets, which will be referred to hereinafter as the "Damon's Assets.1 " The contenders are the Debtor, Unique Ventures Group, LLC ("Unique"), whose position here is being advocated by its Plan Administrator, and Damon's of North America, LLC ("DNA"). Following a 2-day October trial, the conclusion of post-trial filings and final argument, and for the reasons that will be set forth below, the Court finds that all of the Damon's Assets are rightfully the property of the Unique bankruptcy estate, and will issue a declaratory judgment order accordingly.2
Prior to its bankruptcy filing Unique operated a group of Perkins Restaurants in Western Pennsylvania and Ohio pursuant to franchise contracts it held with the "Perkins" franchisor, Perkins & Marie Callendar's, LLC ("PMC"). Unique was a Pennsylvania limited liability company whose original owners were the Sabatini Limited Partnership, Futures663, LLC, Jack Kuhn, and Carl Baker. Unique was run by a board of directors.
In 2013 there was a bankruptcy case pending in this Court involving Damon's International, Inc. and a number of other related entities. See , Damon's International, Inc. , Case No. 09-27920-JAD. The debtor in that case was also in the restaurant business, franchising various individual restaurant locations under the "Damon's" name. Jeffrey J. Sikirica ("Sikirica") was appointed to act as a Chapter 7 trustee in that case. In August 2013 Sikirica filed a motion in the case seeking to sell substantially all of the remaining assets of that debtor. See , Doc. No. 1697 in Case No. 09-27920.3 An auction was held on September 24, 2013, and Unique was determined to be the high bidder, having submitted a bid in the amount of $825,000. See , Order of September 27, 2013, Doc. No. 1741 in Case No. 09-27920.
The bid of Unique was submitted by Jack Kuhn, who at the time was a member of and the "chairman" of the Unique board of directors. Some of the other Unique board members were unaware for several months thereafter that Kuhn had submitted a bid on behalf of Unique and been successful. When they found out what had happened, these same board members took the position that Kuhn lacked the authority to submit the bid on behalf of Unique and thereafter an attempt was made by Unique to stop the sale. Considerable efforts were expended in that regard, but they were ultimately unsuccessful.
On January 9, 2014, Sikirica filed an Expedited Motion to Enforce Order Authorizing the Sale of Substantially All Remaining Assets Free and Clear of all Liens, Claims and Encumbrances and for Assumption and Assignment of Franchise Agreements in the Damon's International bankruptcy. See , Doc. No. 1790 in Case No. 09-27920. On April 25, 2014, an order was entered by the Bankruptcy Court granting Sikirica's Motion and directing the sale to proceed and be consummated, although giving Unique some additional time to pay the balance of the required payment to Sikirica. See , Order of April 25, 2014, Doc. No. 1840 in Case No. 09-27920.
During the same period of time that Unique was unsuccessfully challenging its obligation to buy the Damon's Assets, other events were occurring. Michael Sabatini ("Sabatini"), a member of the Sabatini Limited Partnership and another board member of Unique, contacted an individual he knew who was affiliated with PMC to discuss the situation. At trial Sabatini testified that he did so because, based on a previous attempt by Unique to acquire some "Kings Restaurant" locations he knew the PMC/Unique franchise agreements contained prohibitions that might negatively impact Unique's purchase of the Damon's Assets. Specifically, Sabatini was informed by the PMC representative he spoke with that PMC would not agree to such a purchase because it prohibited its franchisees from owning competing restaurants, and because Damon's restaurants sold alcohol unlike Perkins restaurants, which were billed as "family" restaurants that did not sell alcohol.
Finding itself in the dilemma of either proceeding with the purchase of the Damon's Assets from Sikirica that would likely result in a termination of their franchise agreements with PMC, or not proceeding with such sale and risk violating the bankruptcy court order directing it to do so, the Unique board sought the advice of the company's attorney, Ronald Conway ("Conway"). Conway suggested the creation of a new entity to receive the Damon's Assets as a means of forestalling any objection by PMC. Based on the trial testimony the Unique board members apparently agreed to such an approach, although no board meeting minutes or formal board resolution to that effect was introduced into evidence.
Prior to the creation of any such entity, however, Sikirica filed a Report of Sale on June 27, 2014 at Doc. No. 1865 in Case No. 09-27920. The Report of Sale stated that Unique had paid the required purchase price and it included as an exhibit a "Bill of Sale" dated June 27, 2014 showing that on that date Sikirica, as trustee for Damon's Restaurants. Inc., conveyed to "Unique ... or its assigns" all of his right, title and interest in various assets, including the following:
... intellectual property of any kind or nature, including, but not limited to e-mail addresses, e-mail inventory, web site or sites, registered copy rights or trademarks containing or referencing in whole or in part the name or designation of Damon or Damon's, all existing contracts ..., any other active or executory contracts ...
Report of Sale , Exhibit A. In other words, all of the Damon's Assets were conveyed "as is, where is" to Unique on June 27, 2014, pursuant to the bankruptcy court orders in Case No. 09-27920.
Also included as an exhibit to the Report of Sale was an "Assignment and Assumption Agreement" dated June 27, 2014, signed by both Sikirica and by Kuhn as "Chairman of the Board" of Unique, which included the following provisions:
Report of Sale , Exhibit B (emphasis in original). Again, therefore, all of Sikirica's rights in all of the Damon's Assets were clearly assigned to Unique on June 27, 2014. It should also be noted that, despite the language in Paragraph 3 of the Assignment and Assumption Agreement, nothing was done within 30 days to record anything with the United States Patent and Trademark Office ("USPTO") to indicate that any of the registered Damon's trademarks as set forth therein had been assigned to Unique or anyone else. (The four trademarks identified in Paragraph 3 of the Assignment and Assumption Agreement are a subset of the Damon's Assets and will be referred to hereinafter as the "Damon's Trademarks").
DNA, was incorporated by Conway on July 14, 2014, more than two weeks after the transfer of Damon's Assets to Unique. DNA was incorporated as a single-member Pennsylvania limited liability company. That single member was Michael Rusnock.
Michael Rusnock ("M. Rusnock") was a minority owner of Futures 663, LLC, and was the son of Joseph Rusnock ("J. Rusnock"), who was one of the larger owners of Futures 663, LLC, and a board member of Unique. M. Rusnock had been employed by Unique for a number of years. He started out in a position where he gathered documents, provided administrative help, and provided technical support. Eventually his position became that of a "legal liaison" for Unique working closely with Conway. In his various duties with Unique, M. Rusnock earned the confidence of the Unique members and when DNA was created, it was decided to identify him as the sole member of the new entity, but with the understanding that the real beneficial owners of the new entity would be the board members of Unique. See Trial Transcript , 32:14 - 33:3, October 7, 2019 (Doc. No. 161). M. Rusnock testified that Conway had referred to his role at DNA as in effect being a "trustee," but there was no written agreement to that effect. Id. at 38:24-25.
After the creation of DNA there was never a documented assignment or transfer of any of the Damon's Assets from Unique to DNA. Additionally, DNA never made any sort of payment to Unique for the Damon Assets. A draft of a promissory note from DNA to Unique was prepared by Conway at one point, and it apparently would have been at least in part in consideration for the Damon's Assets, among...
To continue reading
Request your trial
- Roggio v. Roggio (In re Roggio)
-
NVR, Inc. v. Majestic Hills, L.L.C.
...case and further delay NVR's non-alter-ego claims against the DeNardos and the other Defendants. See In re Unique Ventures Grp., LLC, 612 B.R. 667, 679-80 (Bankr. W.D. Pa. 2020) (“[T]here is a split in authority as to whether a bankruptcy trustee may pursue an alter ego claim under [11 U.S.......