A trustee looks set to take over the management of the US-based Irish restaurant chain Claddagh after its backer, Supermac's founder Pat McDonagh, won more than $2 million (€1.51 million) in a bitter legal dispute with company president Kevin Blair, writes Seán O'Driscollin New York
A Dayton, Ohio bankruptcy court is expected to order a trustee appointed within the next two weeks. Meanwhile, Mr Blair is almost certain to appeal the $2 million jury award, which will not be made official by a Cincinnati judge until January 3rd. The $2 million comprises $1.5 million in compensatory damages and $500,000 in punitive damages. The jury also ordered that Claddagh return $20 million Mr McDonagh had lent the company, a huge blow to its expansion plans.
The 17-unit restaurant chain was going through an aggressive expansion plan in 2005 when Mr McDonagh refused to add to the $20 million he had already given Mr Blair, claiming that he had given the money as a loan, not as an investment.
A jury at a state court in Cincinnati, Ohio agreed that Mr McDonagh should be compensated for lack of interest earned on the money he had lent to Mr Blair as well as the $500,000 punitive damages.
However, the court did not clarify the ownership of the company.
According to Claddagh's attorney, Ronald Pretekin, this continued lack of clarity on ownership has fed into the separate bankruptcy case taken by creditors against Claddagh.
Last week, a judge in bankruptcy court in Dayton gave the company 30 days to sort out the ownership and management problems or else leave it to the court to appoint a trustee.
Mr Pretekin said that it was highly unlikely that the ownership dispute could be resolved within 30 days and said that the bankruptcy court will now most likely appoint a trustee.
He said he hoped the trustee was financially smart and appreciated that the company had a good reputation and was a going concern.
He noted that the bankruptcy judge last week rejected an eviction claim taken against Claddagh by a landlord of one of its restaurants in Newport, Kentucky, which Mr Pretekin said was an indication that the restaurants were viable.
The bankruptcy petitioners, who Mr Blair claimed were a front for Mr McDonagh, claimed in court that the company was insolvent and blamed Mr Blair for bad decision-making and frivolous spending.
The dispute between Mr Blair and Mr McDonagh erupted after Mr Blair, the former Galway operations manager of the Supermac's fast food chain, opened the Irish-themed US restaurants in 2001 with Mr McDonagh's financial support.
By December 2004 Mr Blair was unable to obtain US financing and wrote to Mr McDonagh claiming that he was "in desperate need" of extra money to keep Claddagh in operation. During 2005, the dispute became much more hostile, with Mr Blair claiming that Mr McDonagh was an investor, not a lender, and was letting the company fall apart.
