$20m suit adds to Pie Face legal woes, Eli Greenblat

The creditors’ report also states that Pie Face Holdings advanced cash to Pie Face USA of $850,000 in the three month period prior to Pie Face’s collapse into voluntary administration. “This payment … may potentially constitute a transaction to defeat creditors but would need to be established via further investigation by a liquidator,’’ the report states.

The Australian
December 23, 2014

$20m suit adds to Pie Face legal woes
Eli Greenblat

Eli%20Greenblat.jpg

THE mountain of lawsuits piling up against collapsed fast-food chain Pie Face just became a lot more menacing after US casino billionaire Steve Wynn launched legal action against the restaurant group demanding more than $20 million as well as compensation and putative damages.

The fresh legal saga, now making it four lawsuits aimed at Pie Face from aggrieved US builders, landlords and investors, highlights the complete breakdown in the business relationship between Mr Wynn and his former partner and Pie Face founder, Wayne Homschek.

Only two years ago Mr Wynn, who is estimated to be worth $US3.2 billion, invested $US15m for a minority 43 per cent stake in Pie Face USA with lofty dreams of rolling out Pie Face in New York followed by hundreds of stores across the country.

Describing Pie Face’s management team at the time as “bright people with a bright concept’’, Mr Wynn seems to have turned from friend to adversary and is now demanding a return of his money as well as damages.

WyPie Investments LLC, a company associated with Mr Wynn, has hit the voluntary administrators of Pie Face in Australia with demands to repay a debt of about $US20.75m ($25m), The Australian has learned, and is backed up by legal action commenced in Delaware on October 3. “We have received a proof of debt from WyPie ­Investments LLC in the amount of approx. $US20.75m,’’ the Pie Face administrators say in their report to creditors. “The claim relates to legal ­action … seeking in general terms, compensatory damages, putative damages, a return to the claimant to the financial position it was in prior to its investment in Pie Face Holdings Inc and associated costs.’’

The administrators also report that they have been advised by Mr Homschek that the claim from WyPie is subject to a counter claim by Pie Face.

There is uncertainty as to the ownership structure of Pie Face’s US arm. When Mr Wynn originally bought a 43 per cent stake in Pie Face USA it was assumed the local Pie Face owned the remaining 57 per cent stake. However, the Pie Face creditors’ report shows Pie Face Holdings only owns 45 per cent of Pie Face USA.

The creditors’ report also states that Pie Face Holdings advanced cash to Pie Face USA of $850,000 in the three month period prior to Pie Face’s collapse into voluntary administration.

“This payment … may potentially constitute a transaction to defeat creditors but would need to be established via further investigation by a liquidator,’’ the report states.

The lawsuit from its one-time US investor comes as Pie Face faces a string of other legal actions relating to its ill-fated expansion into New York in 2011.

This month lawyers for the landlord at Pie Face’s first New York store at 1691 Broadway slapped the fast food chain with a lawsuit claiming $US620,000 in damages for wrecking the premises as it renovated the site. In October, another New York City landlord launched a lawsuit against Pie Face, claiming nearly $US50,000 in unpaid rent after Pie Face abandoned its store at 469 Seventh Avenue, just a few blocks from Madison Square Gardens. Earlier this year a New York builder pitched a lawsuit at Pie Face claiming it was still owed nearly $US120,000 in unpaid bills relating to the fitout of a store near Hell’s Kitchen.

Creditors of Pie Face will meet next Tuesday to vote on a proposal by Mr Homschek to reclaim control of the group via a deed of company arrangement. He has claimed access to a $2m loan from TCA Global Master Fund and a $10m capital raising on Wall Street.

http://www.theaustralian.com.au/business/news/m-suit-adds-to-pie-face-legal-woes/story-e6frg906-1227164641098


Brought to you by WikidFranchise.org

Risks: Australian Competition and Consumer Commission, Encroachment (too many outlets put in territory) , Deceptive business practices, Expands too quickly, Franchisees are pawns in insolvency flip, Franchisees' equity destroyed in unrelated part of trademark system, Hubris, Initial public offering, IPO, Intentional franchisor insolvency creates huge fees for legal, accounting, consulting firms, Lease controlled by franchisor, Lease margins are an important source of franchisor revenue, Predatory business practices, Opportunism Test: If asset ownership were reversed, would decision likely change?, Opportunism: contract creates powers which are used to strip investor value during relationship, Raining litigation, Insolvency, Insolvent trading, Short-term profits to franchisor much higher with cannon fodder investors, Overstatement of sales and profits, Resales (after termination) seen as a profit center, Government investigation, Unpaid government obligations, Appearance of government oversight, Insolvency strips employees' severance payments, Insolvent system renamed and sold to a relative, Comments on article are interesting, When the franchisor tanks, so does the franchisee, No franchisor support, Opposition to fake franchisor insolvency and ownership flip, Brand backlash: franchisees suffer because brand owners screw up, Bootstrapping the assets of a corporation, Fraudulent conversion, Fraud, Fraudulent conveyance, Australia, 20141223 $20m suit

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License