Gallery Restaurant Group denies allegations
Posted by Carlos Renteria on
The partners in Gallery Restaurant Group that were sued by other partners claiming the defendants withheld financial records from the plaintiffs have filed a response to the lawsuit denying the allegations.
The complaint filed Oct. 16 in Circuit Court in Duval County by John Shockey and Allison Shockey alleged that their partners, Shawn Lednick and John Valentino, have failed to provide financial reports that are to be used to calculate franchise fees related to Lednick and Valentino opening locations of Burrito Gallery restaurants.
The Shockeys claim that since 2014, when Lednick became the managing member of Gallery Restaurant Group, he has not provided financial reports to members and has not held annual meetings of the company as required by the operating agreement, despite repeated requests.
Through their attorney, H. Leon Holbrook III with Lippes Mathias Wexler Friedman, the plaintiffs deny they have refused to provide the documents. They state the records in question were provided to the Shockeys on June 3 and that additional documents were provided Sept. 23.
The defendants claim that the documents were sent via a Dropbox link to the Shockey's attorney, Austin Hamilton with Jimerson & Birr, but Hamilton never looked in the Dropbox for the documents.
According to the answer, as of Nov. 14, Hamilton still had not looked in the Dropbox link for the documents.
“The sole issue in this case is whether the Defendant has complied with its obligation to produce documents according to the law, which it has done. As shown, it was not necessary for the Plaintiff to file a suit as the Company has produced substantially all of the documents prior to the suit being filed and had expressly agreed in writing to produce almost all of the extensive list of documents that were requested,” the answer states.
Gallery Restaurant Group was formed in 2004 and is the sole owner of Burrito Gallery & Bar, the original Burrito Gallery restaurant Downtown at 21 E. Adams St., and owner of Uptown Market & Deli LLC at 1303 Main St. in Springfield.
According to the complaint filed in October, Gallery Restaurant Group has evolved from owning the original Burrito Gallery and Uptown Market to having its own franchise and real estate divisions.
When the corporation was formed, there were four members: managing member John Shockey, Eddy Escriba, Anthony Allegretti and Marco Monroy.
In 2014, each of the four members gave 5% of their ownership interest so that Shawn Lednick could become a member, restructuring the corporation to comprise five members, each with a 20% interest.
According to the October complaint, at some point John Shockey's membership interest was transferred to him and his wife and they currently hold a 28.125% interest in Gallery Restaurant Group.
On Sept. 3, 2014, Gallery Restaurant Group entered into a license agreement with Brooklyn Burrito Gallery LLC, a corporation owned by Lednick and Valentino, who owns Mellow Mushroom restaurants in Jacksonville.
The agreement allowed the Brooklyn corporation to open a Burrito Gallery restaurant in the Brooklyn area, and up to four more restaurants, with the original Burrito Gallery trademark, intellectual property and proprietary information.
In exchange, all of the restaurants operated by Lednick and Valentino are required to pay a license fee of 4% and an advertising fee of 1% of total gross monthly sales.
The Shockeys provided documents in their lawsuit indicating the license agreement requires each restaurant to submit its sales tax return for each month showing the gross sales reported to the State of Florida for purposes of calculating the license fee.
On Sept. 11, 2014, the five Gallery Restaurant Group partners entered into a consulting agreement with Valentino.
Valentino, in exchange for a $200 per hour fee invoiced monthly, was to assist the original Burrito Gallery and Uptown Market in improving efficiency and profitability.
In addition, Valentino was to receive a 10% interest in Gallery Restaurant Group, derived from a 2% contribution from each member.
The consulting agreement also required Gallery Restaurant Group to pay Valentino performance bonuses in 2014, 2015 and 2016 equal to 25% of the increase in net sales of the original Burrito Gallery and Uptown Market.
Since entering into the license agreement, Burrito Gallery restaurants owned by Lednick and Valentino have opened in Brooklyn, Jacksonville Beach and along Gate Parkway in South Jacksonville.
The case is assigned to Circuit Judge Robert Dees.
By: Max Marbut