Family Feud, Bankruptcy Filings, Coronavirus Loom Over $45M Palm Restaurant Sale

The sale of an iconic steakhouse brand was accomplished against the backdrop of a longstanding family feud, bankruptcy filings and the looming threat of an economic shutdown from the coronavirus.

Attorney Paul Singerman led the Berger Singerman legal team who worked through the challenges to execute the $45 million sale of the intellectual property of The Palm restaurants, ownership stakes in more than 20 locations and licensing rights to three others.

U.S. Bankruptcy Chief Judge Caryl Delano in the Middle District of Florida approved the bankruptcy sale March 9.

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Buyer Landry’s Inc., a Houston-based hospitality company led by billionaire Houston Rockets owner Tilman Fertitta, paid $45 million in cash and assumed $23 million in liability for debt such as wages, vendors and supplies.

Berger Singerman Miami partners Christopher Jarvinen, Daniel Lampert and Katherine Amador as well as of counsel Phyllis Bean and associate Elliot Rimon worked with Boca Raton-based partner William Shaheen.

For Singerman, a corporate restructuring attorney for over three decades, this wasn’t the biggest-dollar value transaction he’s handled, but it was undoubtedly one of the most complex.

“The family animosity that interfered with a commercial resolution of the case was profound, and the longstanding feud materially impaired the ability to deliver a commercial solution,” said Singerman, who co-chairs the firm. “All of this against the backdrop of the sale hearing occurring on March 9,” the worst day on Wall Street since the financial crisis.

Landry’s, which was the stalking horse bidder in the bankruptcy sale, originally offered $50 million in cash in February but reduced it after the U.S. recorded its first coronavirus cases and local governments encouraged social distancing and closed nonessential businesses.

The acquisition marks the first time in more than 90 years that The Palm is out of the hands of the Ganzi and Bozzi families. Italian immigrants Pio Bozzi and John Ganzi opened the first location in New York in 1926.

Just One More Restaurant Corp. is the intellectual property owner of The Palm. Before its bankruptcy sale, JOMR was 80% owned by Walter Ganzi Jr. and Bruce Bozzi Sr., the third-generation descendants of the founders. The remaining 20% was owned by Garry Ganzi and sister Claire Breen, who are Walter Ganzi Jr.’s cousins and founder John Ganzi’s grandchildren.

Minority JOMR owners Garry Ganzi and Claire Breen sued the majority partners in the name of JOMR in New York, claiming unpaid royalties.

Walter Ganzi and Bruce Bozzi embarked in 1972 on expanding The Palm across the U.S., forming different companies for each new location. They were the sole owners of the new companies and excluded Garry Ganzi and Claire Breen from the ventures.

The siblings claimed Walter Ganzi and Bruce Bozzi were charging their companies below-market licensing fees to use the Palm name and brand at their new locations.

“The first cousins told Ganzi and Bozzi that they were cutting sweetheart deals in royalty and licensing fees to the restaurants you own,” Singerman said, summarizing their argument. “And that’s wrong. You are putting less money into JOMR than the brand and the licensing fees are worth. Because we own 20% of it and it’s better for you and the restaurants you are operating that you own 100% of to pay a lower fee for licensing and royalties.”

Manhattan Supreme Court Justice Andrea Masley in November 2018 awarded a $120 million judgment to the plaintiffs.

This is where Singerman picked up the case, filing a Chapter 11 petition on behalf of JOMR in March 2019.

The goal was to execute on the massive judgment while preserving The Palm or sell it. The family reached a settlement Oct. 10, but it was upended the following day when Walter Ganzi and Bruce Bozzi filed a Chapter 7 petition.

The bankruptcy filings weren’t consolidated, but Delano presided over both. Singerman and his team were JOMR general counsel and transactional counsel for the Chapter 7 trustee.

“The idea was to combine in a single sale process the intellectual property owned by JOMR and the stock of all The Palm steakhouses throughout the country,” he said. “There was great interest nationally in the brand because The Palm truly is iconic.”

Landry’s has closed the Palm steakhouses in Denver and Philadelphia as well as The Palm Too, the second restaurant to open in New York across the street from the original, according to Singerman.

If the deal hadn’t closed when it did, he doubts it would have closed.

By March 9, the U.S. coronavirus cases hadn’t escalated and widespread closures had not been mandated. The stock market had started its downward spiral but had yet to see the harder plunge of the coming weeks.

“While we were in the courtroom, the Dow was headed for a 2,000-point drop,” Singerman said. ”I am immensely proud of the effort of the Berger Singerman team in bringing and holding this together.”