12/21/2015 12:47:03 PM

15CV34155

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IN THE CIRCUIT COURT OF THE STATE OF OREGON

FOR THE COUNTY OF MULTNOMAH

RAMZY HATTAR,

Plaintiff,

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Case No.
COMPLAINT
(Injunctive Relief for Breaches of
Fiduciary Duty and of Agreements)

v.

KURT HUFFMAN, an individual; RICK

GENCARELLI, an individual; LARDO
HOLDINGS LLC; and LARDO BAKERY LLC,

NOT SUBJECT TO MANDATORY

ARBITRATION

Defendants.

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Amount of Claim: Injunctive Relief to

Enforce Sale of $1.6 Million

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Plaintiff alleges:
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1.
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In or about 2012, Plaintiff Ramzy Hattar ("Plaintiff), Defendant Kurt Huffman
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("Defendant Huffman") and Defendant Rick Gencarelli ("Defendant Gencarelli") undertook to

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form a business enterprise intended to establish restaurant locations featuring the Lardo brand
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and recipes. Lardo recipes had previously been featured at a popular food cart business operated
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in Portland, Oregon, by Defendant Gencarelli.

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2.
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As is customary in the restaurant business, each location established, though featuring the
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same name and recipes, was to be established as a separate business entity. In mid-2012, in
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accordance with the custom, Plaintiff and Defendants Huffman and Gencarelli organized
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Page 1 - COMPLAINT
KEIX, ALTERMAN & RUNSTEIN, L.L.P.
Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-3531

Facsimile (503) 227-2980

ChefStableLardo LLC, an Oregon limited liability company, in order to establish a Lardo

restaurant on S.E. Hawthorne Boulevard in Portland, Oregon. In late 2012, they organized

ChefStableLardo DT LLC, another Oregon limited liability company, in order to establish a

Lardo restaurant on S.W. Washington Street in Portland, Oregon.

3.

The Operating Agreements for the two companies contained substantially identical

provisions. They provided that Plaintiff was a 10 percent member in return for his contribution

of $50,000.00 and for his future promotion and marketing of the restaurants. They provided that

Defendant Gencarelli was a 45 percent member in return for his services. And, they provided

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that Defendant Huffman was a 45 percent member in return for his services.

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4.

Both Operating Agreements provided further as follows:

Right to Manage. Each member shall have an equal right to

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participate in the day-to-day management of the Company. The

members may delegate primary responsibility for particular
business matters among themselves from time to time as they
determine appropriate. A member holding delegated responsibility
as to any matter shall be the agent of the Company for such matters
and shall solely exercise the authorities given to that member for
such purposes.
Salaries. The salaries and other compensation of the members, if
any, shall be fixed from time to time by a unanimous vote by the
members.
Allocation of Net Profit or Loss. After giving effect to the
special allocations [relating to allocations required by Treasury
regulation], the net profit or net loss of the Company for any fiscal
year, and all items of income, gain, loss, deduction or credit and
any other allocations not otherwise provided for in this agreement,
shall be allocated among the members in accordance with their
respective Ownership Interests.

The members may amend or repeal the provisions of this

Agreement by unanimous agreement set forth in writing or by
action taken at a meeting of members called for that purpose. This
Agreement may not be amended or repealed by oral agreement of
the members.

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Page 2 - COMPLAINT
Kell, Alterman & Runstejn, L.L.P.

Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-353 1

Facsimile (503) 227-2980

5.

ORS chapter 63 also governs the companies, and it contains the following provisions:

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63.155 Duties and standard of conduct. (1) The only fiduciary

duties a member owes to a member-managed limited liability
company and its other members are the duty of loyalty and the
duty of care set forth in subsections (2) and (3) of this section.

(2) A member's duty of loyalty to a member-managed limited

liability company and its other members includes the following:

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(a) To account to the limited liability company and hold for it any
property, profit or benefit derived by the member in the conduct
and winding up of the limited liability company's business or
derived from a use by the member of limited liability company
property, including the appropriation of a limited liability company
opportunity;

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(b) Except as provided in subsections (5) and (6) of this section, to
refrain from dealing with the limited liability company in a manner
adverse to the limited liability company and to refrain from
representing a person with an interest adverse to the limited
liability company, in the conduct or winding up of the limited
liability company's business; and

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(c) To refrain from competing with the limited liability company

in the conduct of the business of the limited liability company
before the dissolution of the limited liability company.

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(4) A member shall discharge the duties to a member-managed

limited liability company and the other members under this chapter
or under any operating agreement of the limited liability company
and exercise any rights consistent with the obligation of good faith
and fair dealing.

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6.

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In the fall of 2013, the parties took steps to establish a third Lardo restaurant on North

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Williams Avenue in Portland, Oregon ("Lardo North"). Without the knowledge or consent of

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Plaintiff, Defendants Huffman and Gencarelli organized a third Oregon limited liability company

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by the name of Lardo Bakery LLC, in which they combined the Lardo North operations with a

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separate business, Phillippe's Breads. Despite the agreement and representation of Defendants

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Huffman and Gencarelli that Plaintiff was investing and participating in an enterprise intended to

Page 3 - COMPLAINT
Kell, AltERMAN & RUNSTE1N, L.L.P.
Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-3531

Facsimile (503) 227-2980

establish Lardo locations wherever the three members determined they may succeed, Defendants

Huffman and Gencarelli organized Lardo Bakery LLC in a manner which entirely excluded

membership and participation by Plaintiff, thus appropriating for themselves an opportunity of

the business owned by all three parties. At the time of fonnation Defendants Gencarelli and

Huffman also allowed third-parties to invest in Lardo Bakery LLC without consulting or

advising Plaintiff of their intent to do so.

7.

At some time unknown to Plaintiff during 2014, and without the knowledge or consent of

Plaintiff, Defendants Huffman and Gencarelli converted over $200,000 from the funds of

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ChefStableLardo LLC and ChefStableLardo DT LLC for their own use, including funding

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the combined activities of Lardo North and Philippe's Bread. When discovered, they

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represented to Plaintiff that the funds were "guaranteed payments." They had no authority,

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however, to authorize payments or compensation to members without the consent of Plaintiff,

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and their doing so violated the express provisions of the companies' Operating Agreements.

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Defendants used the funds from ChefStableLardo LLC and ChefStableLardo DT LLC to

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pay debts of Lardo Bakery, LLC.

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8.

In or about June 2014, in a further effort to exclude Plaintiff from the business, and

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without the knowledge or consent of Plaintiff, Defendants Huffman and Gencarelli purported to

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amend the Articles and Operating Agreements of ChefStableLardo LLC, and ChefStable

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Lardo DT LLC by falsely reporting to the Oregon Secretary of State that the members

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unanimously agreed to change the companies from member-managed to manager-managed, and

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they further falsely reported that Kurt Huffman was the sole member/manager.

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9.

In or about April 2014, Defendants Huffman and Gencarelli, in an effort to further

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exclude Plaintiff from the benefits of the enterprise, and in breach of their agreement with and

Page 4 - COMPLAINT
Kell, Alterman & Runstein, L.L.P.
Attorneys at Law

520 SW Yamhill, Suite 600

Portland, OR 97204

00246081

Telephone (503) 222-3531

FACSiMfLE (503) 227-2980

representations to Plaintiff, organized a fourth Oregon limited liability company by the name of

Lardo Holdings, and they provided that they, and not Plaintiff, were the sole members of Lardo

Holdings LLC. Thereafter, they purported to transfer all of the intellectual property of Lardo,

including its name, brand, trademark rights, and recipes away from the restaurant companies

organized under the original agreement of the members and to a company owned and controlled

only by Defendants Huffman and Gencarelli.

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When Plaintiff discovered the events described by paragraphs 6 to 9, above, he

complained to the other two members and demanded that they comply with their agreements,

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and that they correct their breaches of the Operating Agreements and of Oregon law. They

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refused to do so, however, except upon unacceptable conditions which required Plaintiff to

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waive certain of his rights under the agreements.

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11.

Paragraphs 4.3.1 and 4.3.2 of the ChefStableLardo LLC Operating Agreement, and

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paragraphs 5.3.1 and 5.3.2 of the ChefStableLardo DT LLC Operating Agreement provide as

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follows:

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4.3.1 [5.3.1] In the event of a split of votes (ten percent (10%) of

the Ownership Interests in favor and ninety percent (90%) of the
Ownership Interests opposed OR forty-five percent (45%) of the
Ownership Interests in favor and fifty-five percent (55%) of the
Ownership Interests opposed) on any matter requiring a vote (a
"deadlock"), the members shall first attempt to resolve the
deadlock through negotiating in good faith for a period of two (2)
weeks. After the expiration of the 2 week negotiation period, a
member of the Ownership Interests (the "Offeror") may deliver to
the other member(s) which holds the other Ownership Interests
(the "Offeree(s)") an offer in writing stating a cash purchase price
(the "Total Purchase Price") attributable to one hundred percent
(100%) of the Ownership Interests in the Company, on the basis of
which the Offeror is willing to purchase the Ownership Interest
then owned by the Offeree(s) (the "Offer"). The Offeree(s) then
shall be obligated either:

(a) to purchase the Ownership Interests of the Offeror in the

Company for cash at a price equal to the amount that the Offeror
would receive if all of the assets of the Company were sold for the

Page 5 - COMPLAINT
KELL, ALTERMAN & RUNSTE1N, L.L.P.
Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-3531

Facsimile (503) 227-2980

Total Purchase Price; or

(b) to sell to the Offeror the Ownership Interests of the Offeree(s)

in the Company for cash at a price equal to the amount that the
Offeree would receive if all of the assets of the Company were sold
for the Total Purchase Price.

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4.3.2 (5.3.2] The Offeree(s) shall give written notice of such

election to the Offeror within thirty (30) days after receipt of the
Offer. Failure of the Offeree(s) to give the Offeror notice that the
Offeree(s) has made an election under Section 4.3.1(a) within such
30 day period shall be conclusively deemed to be an election under
Section 4.3.1(b). The closing of a purchase pursuant hereto shall
be held at a mutually acceptable place and on a mutually
acceptable date not sooner than ninety (90) days nor more than one
hundred and eighty (1 80) days after expiration of the 30 day period
following receipt of the Offer. At such closing, the selling member
or group shall assign to the purchasing member the applicable
Ownership Interests free and clear of all liens and encumbrances of
any nature whatsoever, and shall execute all other documents that
may be reasonably necessary or advisable to effectuate the
transactions contemplated hereby, and the purchasing member
shall pay the purchase price in accordance with Section 7.5. All
recording and transfer costs shall be borne by the purchasing
member.

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12.

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In September 2015, in an effort to resolve the disputes, and in accordance with the

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provisions of the Operating Agreements, Plaintiffs attorney wrote to the attorney for Defendants

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Huffman and Gencarelli inviting them to meet in good faith to resolve the deadlocks of the

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members. They did meet, thereafter, on or about October 6, 2015. They were unable to resolve

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the deadlocks at the meeting, but Defendants Huffman and Gencarelli offered to propose further

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terms of resolution in writing. Nothing from them was forthcoming, however. A true copy of

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Plaintiffs attorney's letter of September 28, 2015, which proposed the resolution meeting is

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attached hereto as Exhibit 1 .

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On October 26, 2015, in accordance with the deadlock resolution provisions of the

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Operating Agreements, Plaintiff sent to the attorney for Defendants Huffman and Gencarelli an

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offer in writing stating a cash purchase price of 100 percent of the companies, free of debt and

Page 6 - COMPLAINT
KELL, ALTERMAN & RUNSTEIN, L.L.P.

Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-3531

Facsimile (503) 227-2980

contingent debt, in the amount of $900,000 for ChefStableLardo LLC, and $700,000 for

ChefStableLardo DT LLC. The written offer allowed Defendants Huffman and Gencarelli the

option to purchase Plaintiffs proportional interests in the companies on those tenns under

subsection (a), or to sell their own proportional interests in the companies to Plaintiff on those

terms under subsection (b). In the event Defendants Huffman and Gencarelli failed to give

Plaintiff written notice of their election within 30 days after receipt, the Operating Agreements

provide that they shall be conclusively deemed to have elected under subsection (b), i.e. an

election to sell their interests to Plaintiff. A true copy of Plaintiff s attorney's letter of October

26, 201 5, is attached hereto as Exhibit 2.

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14.

Defendants Huffman and Gencarelli failed to give written notice of an election within 30

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days of receipt of Plaintiff s offer. Accordingly, on November 30, 2015, Plaintiffs attorney

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wrote to Defendants Huffman's and Gencarelli's attorney, acknowledging his clients' election to

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sell membership interests in the companies to Plaintiff and proposing an escrow to accommodate

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the transfer. A true copy of Plaintiff s attorney's letter of November 30, 201 5 is attached hereto

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as Exhibit 3.

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15.

Defendants Huffman and Gencarelli, however, have denied and refused their obligation

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to sell their interests in the companies to Plaintiff. They continue to operate the companies, and

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the Defendant companies, without participation by Plaintiff, and they are stonewalling Plaintiff

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and withholding all information about the affairs of the companies, the Defendant companies,

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and about the continuing affairs of Lardo restaurants. Defendants have breached the tenns of the

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Operating Agreements for ChefStableLardo LLC and ChefStableLardo DT LLC.

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16.

Plaintiff has no adequate remedy at law.

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Page 7 - COMPLAINT
KELL, ALTERMAN & RUNSTEIN, L.L.P.
Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-3531

Facsimile (503) 227-2980

17.
Paragraph 1 1.3 of the ChefStableLardo LLC Operating Agreement, and paragraph 12.3

of the ChefStableLardo DT LLC Operating Agreement provide that in the event of any action

for injunctive relief, the party substantially prevailing shall be entitled to costs and attorney fees

as determined by the judge.

WHEREFORE, Plaintiff prays for judgment and decree as follows:

(a)

Ordering and directing Defendants Huffman and Gencarelli to assign and convey

to Plaintiff all of their membership interests in ChefStableLardo LLC and ChefStableLardo

DT LLC in accordance with paragraphs 4 and 5, respectively, of their Operating Agreements,

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and in accordance with the terms and conditions of Exhibit 3 to this Complaint;
(b)

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For a preliminary injunction directing Defendants Huffman and Gencarelli to turn

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over to Plaintiff the management and control of all affairs of ChefStableLardo LLC and

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ChefStable DT LLC to Plaintiff during the pendency of this action;

(c)

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In the alternative to section (b), for a preliminary injunction prohibiting

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Defendants Huffman and Gencarelli from distributing any funds of ChefStableLardo LLC, and

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ChefStable Lardo DT LLC, except for salaries, expenses and supplies incurred in the normal

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course of business, and further prohibiting Defendants Huffman and Gencarelli from using any

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funds or assets of the companies in the defense of this action, and ordering them to provide to

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Plaintiff complete, accurate and timely infonnation regarding the affairs and operation of the

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companies, including, without limitations, all daily, weekly and monthly banking and expense

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records;
(d)

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For a judgment and decree ordering Defendants Huffman and Gencarelli to

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convey to Plaintiff a 10 percent interest in Lardo Holdings LLC, Lardo Bakery LLC, and in any

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other business entity operating a Lardo location with full rights of participation in management,

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and with Operating Agreements governing these entities on terms and conditions substantially

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Page 8 - COMPLAINT
KELL, ALTERMAN & RUNSTE1N, L.L.P.

Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

0024608!

Telephone (503) 222-353 1

Facsimile (503) 227-2980

identical to the Operating Agreements of ChefStableLardo LLC and ChefStableLardo DT

LLC;
(e)

For a declaration that ChefStableLardo LLC and ChefStableLardo DT LLC,

Lardo Bakery LLC, and any other entity organized by Defendants Huffman or Gencarelli, and

Plaintiff owning or operating any Lardo restaurant location shall equally have all rights to the

Lardo name, trademark rights, recipes, and related Lardo intellectual property, free of any claim

or right of Lardo Holdings LLC;

(f)

For Plaintiff s costs and reasonable attorney fees incurred herein; and

(g)

For such other or further relief as may be just.

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Dated this 21st day of December, 2015.

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KELL, ALTERMAN & RUNSTEfN, L.L.P.

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s/Dennis Steinman
Dennis Steinman, OSB #954250
Scott J. Aldworth, OSB #1 13123
Telephone: (503) 222-3531
Fax: (503)227-2980
dsteinman@kelrun.com
Of Attorneys for Plaintiff

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Trial Attorney: Dennis Steinman

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Page 9 - COMPLAINT
KELL, ALTERMAN & RUNSTEIN, L.L.P.

Attorneys at Law
520 SW Yamhill, Suite 600
Portland, OR 97204

00246081

Telephone (503) 222-353 1

Facsimile (503) 227-2980