From Our Perspective: Business Partners Battle Over Restaurant

Our knowledgeable attorneys give their unique insight in our video series “From Our Perspective,” which takes a closer look at cases won by our attorneys. From time to time, we also share our thoughts on other cases and legal issues.

In this episode, Robinson & Henry Attorney Kit Davlin discusses a recent case he won at jury trial.

The case is about a battle involving the owners of a sushi restaurant in Aurora, Colorado. Our clients started the restaurant, but six months later their business partner pushed them out. Kit explains how Robinson & Henry recovered $3.5 million plus attorney fees for our clients.

Past results afford no guarantee of future results; each matter is different and must be judged on its own merits. Facts are those of an actual Robinson & Henry litigation case.

Question: Kit, tell me more about who we represented and what was the issue of this case?

Kit: Our clients were Chinese immigrants who had invested over six-figures in the founding of the sushi restaurant on the promise of their partner that they would receive 40% of the profits and 40% of the ownership of the restaurant. After the restaurant opened and began to turn a profit, our clients became suspicious of unaccounted for large cash withdrawals being made by their partner. And when they asked for an explanation of that accounting, the partner stopped paying their profit shares, barred them from the restaurant, barred them from talking to the other employees. Unfortunately, they didn’t have any written contracts. Most everything was an oral contract.

Question: You mentioned no written contracts. What were the biggest challenges of this case?

Kit: Not having any written contracts. We had to prove through the statements of the other side, through the actions and behaviors of the parties, and through the limited amount of accounting that we were able to recover that they were in fact partners, and that the money that they had put into the restaurant was an investment and not a loan.

Question: What was the other side’s defense?

Kit: The other side, after they had started the partnership, had formed an LLC that did not name my clients as part of the LLC, and they argued that they didn’t have to admit them as members. They also tried to claim that the investments were in fact loans. This case also saw a rather substantial amount of discovery misconduct. The business had kept a separate accounting ledger that they refused to produce, and then when the court ordered them to produce it, they lost it. The court gave a spoliation instruction to the jury that allowed the jury to infer that the reason it was not produced was because it would’ve been unfavorable to the defendants.

Question: The jury ruled in favor of our client. How substantial was this victory?

Kit: This jury was a full vindication of our client’s position from the very beginning, that they were in fact partners in the restaurant. The jury considered five claims, including breach of contract, civil conspiracy, civil theft, fraudulent concealment, and breach of fiduciary duty. The jury found in our favor on each, and every claim. Additionally, the court also considered additional claims and they found in our favor for promissory estoppel and unjust enrichment.

Question: What were the damages awarded and why?

Kit: The jury considered the profits that had not been paid and the value of the ongoing sushi restaurant. So the 40% of the profits that had been promised, but not paid to our clients, as well as the ongoing value of a functioning profitable sushi restaurant. The jury awarded just over $593,000 to each of our two clients for their share, their 40% share of the restaurant and the profits. Additionally, because the jury found that both the restaurant and the business partner had committed civil theft, that amount is statutorily tripled to $3.5 million, plus attorney’s fees.

Question: If someone is watching and they’re in a similar situation, having a falling out with a business partner, what sort of advice would you give?

Kit: First, please get your contracts in writing. It’s a lot easier to prove what they said down the road. But Colorado recognizes oral contracts. They have the same validity as a written contract, it’s just harder to prove what the parties meant when they made those oral contracts. The main takeaway, I think, is that you don’t have to put up with being cheated. You can stand up for yourself, and we can help you do that, even in court, even through trial, if that’s what it takes.