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Legal brawl at Metro Grill

David Larter December 3, 2012 4
The Metro Grill at 301 N. Robinson St. (Photo by David Larter)

The Metro Grill at 301 N. Robinson St. (Photo by David Larter)

Two co-owners of a Fan area bar are accusing their business partner of funneling company profits into another restaurant to keep it afloat.

Richard Masters and Travis Bacile filed suit Nov. 16 against Metro Grill majority owner Tony Hawkins, who also owns the Republic on West Broad Street.

In the suit, Masters and Bacile accuse Hawkins of using money from Metro Grill to prop up the Republic, which filed Chapter 11 bankruptcy and closed briefly in July because it owed $300,000 in back taxes. The partners, who each hold a 20 percent stake in Metro Grill, say that Hawkins has not provided them a profit/loss statement since they bought into the restaurant in April and that he has not paid them their share of the profits.

The suit alleges fraud, breach of contract, negligence and other counts. Masters and Bacile are seeking hundreds of thousands of dollars in damages and the return of their initial investment in the restaurant.

In an interview with BizSense, Hawkins denied that he used any money from Metro to prop up Republic, saying that if there were some influx of money into Republic it would show up in the bankruptcy filings.

Keith Pagano of Pagano & Marks, P.C., who is representing Bacile and Masters, said he had no comment on the lawsuit.

Hawkins said his lawyer will be contacting Pagano next week to seek an out-of-court settlement.

The lawsuit also alleges that employees at Metro Grill have seen their paychecks bounce.

Hawkins entered into a partnership with Bacile and Masters in April.

According to the suit, Masters and Bacile each put in $40,000 to buy Metro Grill at 301 N. Robinson St. when the previous owner, Bob Cox of Conch Republic, put it up for sale. The final purchase price was $175,000, and Hawkins is listed as 60 percent owner and managing partner.

Their suit claims that Hawkins didn’t deal with them in good faith when he solicited money from them and that he did not disclose the almost $300,000 in back taxes owed by his other business.

Hawkins claims the parties agreed at the outset to divvy up the cost of Metro’s renovation and that Bacile and Masters have yet to pay their share.

“We’re running Metro on the funds we have,” Hawkins said. “And the funds we have are my funds. The $40,000 is what they put in to buy the business. The startup money, the build out money: that all comes from me. They want their share of the profit but they haven’t done anything to get a profit. I’m holding the money and they need to pay me before they get it.”

Masters works for Centurion Medical Products in Richmond. Bacile works at Allscripts, a company in Glen Allen. They are seeking the return of their $40,000, an additional $120,000 in damages, and their proportionate share of Metro Grill’s profits since April.

Hawkins purchased the Republic in 2011 from an ownership group led by Richard Lyons, a former partner in Bandito’s and Star-Lite, and co-owned by imprisoned developer Justin French.

When the state tax department padlocked the Republic in July, Hawkins filed for bankruptcy.

According to filings, the bankruptcy is ongoing. The state recently filed a motion asking that the Chapter 11 case be dismissed, alleging that the Republic did not pay sales tax for July, August or September, the months following its bankruptcy filing.

Hawkins said the state’s claim that he had not paid his sales taxes after the filing came from a third party hired by the Commonwealth and that he had already paid the taxes when it was filed.

Hawkins said he expects to be out of bankruptcy in the coming months.

“I was naïve,” he said. “When I bought the business from [Lyons] I bought all of his debt as well and I didn’t know that. And then there was other debt that I didn’t know about that showed up later. That was my mistake and it was a costly one.”

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4 Comments »

  1. Ike December 3, 2012 at 9:20 am - Reply

    For the first half of this article I sympathized for the two minority share owners until Hawkin’s pointed out their money didn’t even cover HALF of purchasing the business. If Hawkins really did pay for the majority of the purchase, the renovations, and the working capital then of course he’s right in saying they don’t deserve a profit yet. Restaurant’s don’t turn profits in the first year…

  2. Brett December 3, 2012 at 9:47 am - Reply

    Juicy. Great story. I can never get enough of the unending restaurant drama the city serves up. Pun intended.

  3. Kevin Anderson December 3, 2012 at 9:03 pm - Reply

    The quote at the end is perplexing, how do you purchase a business without knowing the amount of debt outstanding? Mr. Hawkins should either fire his accountant, learn to read a balance sheet or better yet: both.

  4. Mike December 5, 2012 at 9:19 am - Reply

    Ike: The fact that their investment didn’t cover HALF the cost to purchase is completely irrelevant. The investment corresponds with the ownership percentage, which corresponds with the profit rights percentage. The claims about build out costs, without further information as to what the agreement going in was, are hard to interpret. Same goes for the upfront funding of working capital.

    I find that lack of fundamental business knowledge astounding in the local restaurant world. The fact that these disagreements even occur, the Metros partner disputes, the Republics “what did I purchase?” dispute (nice job blaming Rick) along with basic tax evasion, screams of fundamental business incompetence. Yes, many people know how to develop a product, market it, buy low and sell high (although that is a common problem in restaurants)…but they neglect the difficult stuff that takes certain expertise in areas like valuation, risk mitigation, legal, and accounting.

    I don’t feel sorry for anyone here because obviously there was a lack of due diligence and proper risk management by all parties when they entered the transaction.

    There are lots of good business/restaurant managers in this City…maybe one will take over both of these palces.

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