The investors in a restaurant franchise claim they were duped out of money and stand to lose more thanks to the actions of another group of investors, according to a recent lawsuit.
Elaine Henderson, Jake Henderson, Will Henderson, One-Four Capital, King Capital Investments, Henderson Homes and Development, FML Industries and Poor Kid Real Estate filed a lawsuit Feb. 14 in Jefferson County District Court against MLG F&B Services, Major League Franchise Group, Gregory C. Diaz, Derek Diaz, The Diaz Real Estate Group, Spicewood Villa Partners, Culinary Consultants and Loren Hoffman.
In their complaint, the plaintiffs say they agreed in 2009 to invest in a restaurant that was to be constructed in Beaumont. It was going to be called Major League Grill and was going to be owned by One-Five Major League Wings, according to the complaint.
In return for their investment in the restaurant, the plaintiffs were to receive 10 percent ownership, the suit states.
Another group of investors – Gregory C. Diaz and Derek Diaz of MLG F&B Services and Major League Franchise Group – had also invested in the restaurant. The Diazes had a second company called Major League Franchise Group that they were also directors of, the complaint says.
When the restaurant found a spot to lease, Major League Franchise Group signed as tenant and issued the restaurant’s liquor license – not MLB F&B Services, the plaintiffs claim. Because none of the plaintiffs serve as officers for Major League Franchise Group, they are losing out on the deal, according to the complaint.
In addition, when operating the restaurant, the defendants failed to withhold required federal income tax from employees’ paychecks, the suit states. In turn, the restaurant now faces a substantial unfunded tax liability, the complaint says.
The plaintiffs also invested in a property called Spicewood Villa Partners in Travis County with the defendants. The Spicewood properties would be acquired by The Diaz Real Estate Group, the suit states.
However, after it acquired the Spicewood properties, The Diaz Real Estate Group conveyed only a portion of the properties into its partnership with the plaintiffs, according to the complaint. It hid the fact that the remaining properties had not been transferred to the partnership, the suit states.
The plaintiffs claim they recently discovered that Derek Diaz utilized a portion of the money the plaintiffs invested in the partnership for his own personal use.
On Feb. 7, 2013, The Diaz Real Estate Group threatened to forfeit the plaintiffs’ interest in the Spicewood partnership unless the plaintiffs handed over additional funds, according to the complaint.
The plaintiffs allege common law fraud, breach of fiduciary duties and violations of the Texas Blue Sky Law against the defendants.
They seek actual, punitive and exemplary damages, plus attorneys’ fees, interest and costs. They also want the court to appoint a qualified person to rehabilitate the restaurant and the Spicewood partnership.
The plaintiffs want the court to prohibit the defendants from depriving the plaintiffs of their interest in the restaurant franchise and in the Spicewood partnership.
They will be represented by Robert B. Dunham and Jessica L. Hallmark of Dunham Hallmark in Beaumont.
The case has been assigned to Judge Donald Floyd, 172nd District Court.
Case No. E193-939