The iconic NYC brand filed for bankruptcy in March.
After 93 years of being family run, Palm Steakhouse is up for sale. A Florida judge told a bankruptcy trustee Monday to find a buyer for the legendary New York brand, which filed for Chapter 11 bankruptcy in early March.
It’s been a contentious and ugly battle over the past few years. In the 1970s, two of the founders’ grandchildren, Walter Ganzi Jr. and Bruce Bozzi Sr., who were part owners of the original location, created a separate company and started expanding. But instead of sharing the profits with family members who held a 20 percent stake, they decided minority owners would reap annual royalty payments of $6,000 per additional restaurant. This led to a lawsuit from the family members claiming they were deprived millions in royalties over the decades as the company short changed passive investors through the flat payment for 21 of the brand’s 24 units annually instead of a percentage of the restaurants’ gross sales.
They filed a lawsuit saying those restaurants were paying less than market rates to license the trademarks, which deprived Palm parent company Just One More Restaurant of revenue it was entitled to.
Earlier in the year, New York State Supreme Court Judge Andrea Masley ordered Just One More Restaurant to pay nearly $120 million to the minority shareholders who accused Ganzi Jr. and Bozzi Sr. of cheating them out of royalties over the past 40 years. Ganzi Jr. and Bozzi Sr. held 80 percent of the business. On the other side of the feud was Ganzi Jr.’s cousins, Claire Breen and Gary Ganzi, the grandchildren of the late John Ganzi, who opened the first Palm in Manhattan in 1926. The legal battle dates back to 2013.
An earlier ruling called for $73 million in restitution to be paid to the cousins, who were not involved in the day-to-day running of the business, or what they would have paid under a royalty rate of 5 percent. Legal fees and interest made up the rest. The payments were reaffirmed by the New York State of Appeals January 25 in a final judgment.
On Monday, the Florida bankruptcy judge approved the hiring of advisers for the families to put the restaurant on the sales block.
Gerard A. McHale, chief restructuring officer of Just One More Restaurant, said in the Chapter 11 filing the company’s total revenue was $177,600 in 2018, with a net income loss of $230,352. It was $234,449 in 2017 with a net income loss of $1.59 million.
In October, Bozzi Sr. and Ganzi Jr. also filed for personal Chapter 7 bankruptcy in Florida as the two largest stakeholders.
Judge Caryl Delano determined Monday it’s time for Palm to be sold so the cousins can collect their judgement. Delano also said a lawyer who worked on Palm’s bankruptcy case can assist in finding a buyer.
“After 93 years of being in the family, Palm will be sold,” Hoguet Newman Regal & Kenney LLP attorney Fred Newman, who represents the cousins, told Crain’s New York Business.
The judge’s ruling calls for full ownership of 18 restaurants and majority ownership of three others. There’s also the licensing of three additional stores.
The two sides have been unable to reach a settlement.
It was an unusual bankruptcy in some ways since, typically, companies are forced into Chapter 11 because they face large judgements against them. In this case, the company was seeking court protection because of an award issued in its favor. The New York judgment canceled the licensing agreements that allowed Bozzi Sr. and Walter Jr.’s restaurants permission to use the Palm intellectual property.
In August, a bankruptcy-court judge lifted a stay so the fees owed Newman and his partners could be determined.
Per Crain’s, Newman has worked on this case for more than six years and collected financial records dating back to the 1970s. He charged $675 per hour for his work.
Palm debuted its original Midtown location in 1926. It drew the Big Apple steakhouse picture of sawdust-covered floors and walls covered with celebrity caricatures. The landmark spot closed four years ago, but there’s currently a Palm Too that operates across from the original on Second Avenue.
When Just One More Restaurant filed for bankruptcy on March 7, the judge called the case, “a textbook example of fiduciary misconduct.” The company’s creditor list was 50 parties long, and the filing said there were liabilities between $10 million and $50 million.