By Joe Pinchot
SHARON — A bankruptcy judge has ruled in favor of Quaker Steak & Lube of Sharon and several of its officials in a lawsuit filed by a former franchisee, whose restaurant went out of business last year.
As part of its bankruptcy case, Bono Holdings Inc. and Salone Holdings Inc. of DuBois filed the suit against two Lube companies — Quaker Steak & Lube Franchising Corp. and Lube Holdings Inc. — and six company officials, including founders Gary J. Meszaros and George S. “Jiggs” Warren.
While U.S. Bankruptcy Court Judge Bernard Markovitz, Pittsburgh, is far from a flowery writer, his 28-page opinion gives the Bono/Salone case a good drubbing.
Voicemail messages left after hours Tuesday with Meszaros and Warren were not immediately returned.
“We are extremely disappointed by the court’s decision,” said William K. Labovitz of Lynch Weis, Cranberry Township, attorney for Bono and Salone. “We continue to believe that Quaker Steak & Lube behaved improperly with respect to our clients but, obviously, the judge disagreed with us.”
Labovitz added that a more thorough review of the opinion is required before an appeal decision can be made.
Bono, owned by Larry Salone, opened the Patton Township Lube near State College on Jan. 18, 2006, about six months after Bono and Lube officials signed a franchise agreement.
The restaurant closed Nov. 26.
Salone said Lube officials lied to him about the restaurant’s prospects for profitability; approved too large a restaurant for the State College market; forced him to use a select list of food vendors and menu choices that hurt his chances for profitability; and did not provide adequate training, startup marketing or operational support.
At trial, Bono pressed claims of fraudulent and negligent misrepresentation, breach of contract and conspiracy to defraud and breach the contract.
In their pretrial statement, Lube officials said they told Salone they could not make statements about prospective sales or earnings, and recommended that he speak to other franchisees.
The defendants said Salone never complained they had breached the contract until the suit was filed, and that they lived up to their end of the deal.
The trial was held May 18-20 before Markovitz.
In his opinion filed Tuesday, Markovitz said Bono claimed Lube officials had told him the restaurant would bring in gross revenues of $100,000 a week.
Actual revenues were $80,000 a week in 2006, $61,000 a week in 2007 and $45,000 a week in 2008.
Projections given to Salone concerning revenues were just that, not a representation of historical fact, Markovitz said, who added that he doubted that someone with as much business experience as Salone has would construe the figures as historical fact.
As a projection, the figures were neither true nor false when Salone received them, the judge said.
He added that the figures were given to Salone when he sought to buy stock, not a franchise, calling his reliance on them when considering to buy the franchise “not justifiable.”
Salone also had an accountant prepare an independent sales projection and, in the franchise agreement, said that he did not rely on sales projection figures other than those presented in the agreement, Markovitz said.
In the breach of contract charge, Bono alleged Quaker Steak did not provide sufficient site-selection assistance, training or start-up marketing, not that it did not provide any assistance, Markovitz said.
Quaker Steak officials “made bona fide attempts to fulfill its obligations which arose under the franchise agreement,” Markovitz said.
“It was not until well after the restaurant ‘went south’ and was closed that plaintiffs found fault with defendants’ performance and accused them of not acting in good faith,” the judge said.
A civil conspiracy charge depends on proof that the underlying offense was committed, he said. In this case, fraudulent and negligent misrepresentation and breach of contract were not proven, so there was no conspiracy, he said.
The plaintiffs barely mentioned conspiracy in their pretrial brief, and ignored it in their post-trial brief, Markovitz said.
“This suggests that Count IV (conspiracy) was little more than an afterthought and that plaintiffs were not serious about it.” he said.
The plaintiffs were seeking more than $5 million in lost investments and profits.
